Approaches to energy security can be schematized into four categories:
- “Rational choice” approaches1 vs limited information approaches2
- Political dimensions of security3 vs economic dimensions of security4
Subsequently we have one rational choice political approach, one rational choice economic approach, one limited information political approach and one limited information economic approach.
The first approach emphasizes on self-sufficiency of energy demand. Second approach emphasizes on international energy governance, the third – on the process of securitization and the fourth – on market failures including hidden market risks.
While analyzing energy security dimensions, it is important to understand the concept of Willingness to pay for extra-security. They reflect opposing curves: higher the cost for extra security, lower the Willingness to Pay is.
On these grounds, one can argue that energy security is not linear to energy dependency. The latter is one of the angles of energy security. In addition, it is important to understand that energy security policies cannot be disconnected from the Willingness to Pay. If the price is high, and political pressures exist then the Willingness to Pay might increase.
In case of the Baltic region a number of infrastructure projects are prioritized in order to diminish isolation from the rest of the European markets. Hence limiting isolation becomes the main driver for the Willingness to Pay for the new infrastructural projects. Ultimate objective is to find a fair price via competition. Hence, in the hypothesis if the fair price is not found, the Willingness to pay would decrease. A positive political context would also reduce Willingness to Pay.
Interview with International Centre for Defense Studies of Estonia reflects a view by a policy think tank. The view helps to understand the drivers for agenda-setting in energy security, in particular energy diversification. Baltic case represents a particular case due to the infrastructural isolation especially in natural gas supplies.
Obligatory learning material
S. Bhattacharyya, Energy economics, Spinger 2011, pp. 463-483
[Focus on institutional concepts of Willingness to Pay, of market fragmentation (Herfindahl Hirschmann Index), and of import-export dependencies]
Optional learning material
University of Dundeem, Work Package 5 of the Policy for Natural resources project deliverables