Home Business News Euromonitor’s first-ever Global Energy Vulnerability Index highlights international risk of energy shocks

Euromonitor’s first-ever Global Energy Vulnerability Index highlights international risk of energy shocks

by LLB staff reporter
3rd Aug 23 5:55 am

Market research company Euromonitor International has released its first-ever Global Energy Vulnerability Index, as part of its ‘New Economic Reality: Rising Energy Pressures’ report, revealing individual countries’ exposure to energy shocks.

The Global Energy Vulnerability Index 2023 is designed to help leaders and businesses assess and benchmark a country’s energy security, providing insights into potential risks, challenges and opportunities in the markets where they operate or plan to expand into in the future.

Euromonitor International used six groups of indicators to measure each country’s level of energy vulnerability:

  1. Energy self-sufficiency (30% of total score (TS)),
  2. Alternatives to fossils (35% TS),
  3. Energy reserves potential (10% TS),
  4. Energy accessibility (5% TS),
  5. Energy efficiency (10% TS), and
  6. Economic resilience (10% TS)

Norway, Canada, Australia and the US rank at the top of the index due to their strong energy self-sufficiency, ample energy resources, diverse energy mix and high economic resilience.

At the other end of the table¸ Belarus and Lebanon rank at the bottom as both countries lack energy resources and struggle with poor energy efficiency and economic uncertainty.

Singapore and Hong Kong also rank among the bottom 10 performers because of heavy reliance on energy imports despite their good score in energy efficiency and economic stability. The smaller size of Singapore and Hong Kong also limits renewables capacity, adding to the city-states’ weaknesses.

Aleksandra Svidler, Consultant for Economies at Euromonitor International, said: “Understanding a country or a region’s vulnerability to energy shocks will inform business strategy and enable an optimal plan for energy sourcing, as well as help to identify the white spaces for investment.

“Overall, economies that are heavily reliant on imports, with low adoption of renewables, weak energy efficiency and economic instability are more vulnerable to energy risks.

“Many African countries continue to grapple with underdeveloped infrastructure, poor access to reliable and affordable energy and low investment while developing Asian economies continue to struggle with low self-sufficiency rates, high dependency on fossil fuels and limited access to capital.”

Svidler added, that European countries also face challenges ahead. “Although many European countries are better positioned to weather disruptions due to the rising renewables adoption and better access to capital, the region’s high reliance on energy imports raises its exposure to energy shocks.”

Euromonitor International selected six groups of indicators to measure each country’s energy vulnerability known as pillars. Low energy self-sufficiency, due to the weak domestic energy production and high reliance on imports, raises the exposure of an economy to disruptions in energy supply, global price shocks and geopolitical risks. High reliance on a single external energy supplier particularly undermines an economy’s energy security.

Alternatives to fossils pillar reflects the diversification of an energy mix away from fossil fuels by investing in alternative sources, such as green renewables or nuclear power, which can help to raise energy security, reduce exposure to global energy price and supply shocks, and enhance sustainability.

Energy reserves potential helps to assess the future availability of energy resources at current production rates. Reserves of oil, gas and coal can play a key role in boosting energy self-sufficiency of a country. Yet, high resource potential does not necessarily guarantee sufficient future supply due to economical, technological and environmental constraints.

Energy accessibility pillar illustrates the reliability and adequacy of power supply in a country and points to the state of energy infrastructure. Lack of access to power and underdeveloped energy infrastructure can lead to significant social and economic challenges.

Energy efficiency indicates the amount of energy needed to provide goods and services. Higher energy efficiency can help to reduce energy consumption, and therefore reduce costs and reliance on imports, boost competitiveness and environmental benefits.

Countries with greater economic resilience are better equipped to withstand energy price and supply fluctuations, as available mechanisms and reserves allow them to manage energy market shocks. Meanwhile, higher economic freedom fosters investment in innovation and diversification.

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