SECURE Project - Security of Energy Considering its Uncertainty, Risk and Economic implications

WP 2 Assessment of the value of energy security improvements for consumers: by sector and by source (for oil, gas and electricity)

 

Objectives

This Work Package looks to enhance the robustness of analysis of trade-offs between changes in welfare costs relating to energy security and implementation of measures that impact on energy security and so to help inform the issue of whether current (or planned) energy security measures reflect public preferences. The objective is to:

  • Derive monetary estimates of the welfare impacts of aspects of energy insecurity

  • Assess the willingness-to-pay by different users and consumers of energy to improve security of supply. The value to consumers of security of supply improvements will be compared in WP4 and WP5 with the costs of these improvements.


Participants: BATH, FEEM, CEPS

Description of work

Work Package 2 will supplement the methodological effort of WP1 with surveys of European stakeholders’ concerns about the security of their energy supply. This information will be gathered by means of consultations with representatives of European industry and consumer associations and by means of direct consumers’ surveys in a few selected countries.  
Under the EXTERNE-POL project, a questionnaire was developed to assist in the valuation of energy security. This was pre-tested, but has not been implemented to date. In the Work Package we plan to update this questionnaire, pretest it and implement it for three countries (UK, Italy and Germany). This will involve four main tasks: 

Task 1: Design of questionnaires

Lead: UBath; CEPS, FEEM

Two questionnaires will be constructed for households and industry energy users. Key design issues are likely to include: separate valuation, or not, of the physical disruption of supply and price variance effects; the specification of the risk reduction to be valued (e.g. by energy source) including the measures that lead to risk change described and their costs;  separation of energy security from concerns over e.g. climate change or distributional consequences of higher energy prices to impact on values; time period relevant to express risk over; how best to convey macro-economic impact in micro-terms; familiarisation with energy security impacts based on e.g. previous experience, and the payment vehicle e.g. higher energy prices. In order to explore these issues we will undertake three focus groups in each country (two each for households and industry) and initial surveys of 50 households and 5 industrial representatives will be carried out to pre-test the draft questionnaires.

Task 2: Implementation of questionnaires to households

Lead: UBath; CEPS

The full surveys will be undertaken in the three countries with a survey size of 400 for each country, using stratified random sampling methods that ensure representation of a range of contexts applicable to the impacts considered. Recruitment will be administered using a sub-contract to a specialist company. It is expected that survey responses will be collected in-person in order to maximise the flexibility of their administration.

Task 3: Implementation of questionnaires to industry

Lead: CEPS; UBath

Questionnaires to industry will similarly be implemented, with appropriate sampling to get a representative sample of different types of firm across sectors. Implementation of questionnaires will be primarily conducted by associations of major industries with energy intensive processes as well as additional direct inquiries with large companies as these have individual business strategies with respect to security of supply. Recruitment will make use of partners’ existing contacts and survey responses will be collected in-person from business representatives.

Task 4: Analysis of results

Lead: UBath; CEPS, FEEM

The survey data collected will be used to estimate the willingness to pay for energy security risk reductions to household and industry groups. The use of econometric methods, using appropriate software packages will be used to explain variation in Willingness To Pay (WTP) across domestic and industrial users. The results will be used in efficiency appraisal of micro-level and macro-level energy security projects and strategies.

Workpackage 2 is carried out under the co-ordination of BATH

Seventh Framework Programme

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