Long-Term Energy Security Planning: A Fuzzy Multi-Criteria Decision Making and Portfolio Optimization Approach

Wang Ying

Abstract

As instability continues to intensify in the Middle East after the Arab Spring, security of energy sources has become one of the main concerns internationally. Various strategies have been proposed aiming to achieve secured supply. However, the lack of comprehensiveness and the inability to handle uncertainty of existing assessment tools restrict them from wide-acceptance. This thesis first proposes a multi-criteria decision making approach using Fuzzy Analytic Hierarchy Process (FAHP) to assess energy security status for a nation. In this section, an Energy Security Index (IES) is introduced to be the indicator. It makes a comprehensive yet clear reference to the current scope of energy security.

Incorporating this approach with an integrated analytical process, the thesis then develops a comprehensive framework to help policy makers in long-term energy security planning. The framework begins by using the proposed index to assess the current energy security level and thus identify the weakness of business-as-usual scenario. Based on its outcome, possible improvement strategies are proposed and compared to seek appropriate remedy. The comparison is conducted with a FAHP model. In the next procedure, the effectiveness of the selected strategy is verified through projecting the coreesponding Energy Security Index (IES) and the detailed plan to reach the estimated energy security level is established through identification of the country’s optimal energy portfolio. If necessary, more iterations can be added in to handle the complexity of the problem. The iterative evaluation process stops when IES of the selected strategy is proven to be the highest comparing to that of all the other possible strategies and the bisness-as-usual case. The estimated improvement is therefore defined and the plan to achieve such goal is established with the optimized energy portfolio.

By building a complete cycle with aforementioned analytical tools to evaluate energy security, this framework not only enhances the validity of the evaluation results, but also accommodates the complexities of the problem and the uncertainties of subjective human judgment. An application of the evaluation framework to Singapore context shows that “Reduce & Replace” strategy should be the strategy to be implemented in the country and 77% improvement in energy security index is expected to be achieved by 2030 comparing to that of the business-as-usual scenario. The strategy is also proven to outdo “Reduce & Restrict” strategy regardless of the amount of budget can be provided.