IEEJ：January 2016ｃ○ IEEJ 2016

Special Bulletin
A Japanese Perspective on the International Energy Landscape (256)January 29, 2016

Energy Security and Cybersecurity in New Situation
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, Japan
Energy security is both an old and new issue. As far as energy is a key good indispensable fordaily human activities, stable economic and industrial management, and military and strategic
operations, energy security will remain important for every country, company and person. Energysecurity can be variously defined. Normally, it is defined as “securing the amount of energy required
for stable life, economic and social management at reasonable prices.” More widely, energy security
can be additionally defined as “maintaining the freedom of policy decisions to secure the required
amount of energy and reasonable prices.” The additional definition is important because even if therequired amount of energy is made available at appropriate prices, the loss of the freedom of policy
decisions for the availability may not represent a situation in which energy security is protected.
Energy security has so far surfaced as a key international or national issue on various occasions.
In some past events, large-scale energy supply disruptions caused substantial hikes in internationalenergy prices or physical difficulties in securing energy, developing into problems shaking
international politics and the world economy and forcing countries to give top priority to addressing
energy problems. Typical examples include the first oil crisis triggered by the Arab oil embargo andthe second oil crisis caused by the Iranian Islamic Revolution. In a recent event, a gas dispute
between Russia and Ukraine triggered the disruption of Russian gas supply to Europe.
As these actual problems have been put deep into the memory of stakeholders, energy security
problems have tended to be interpreted as involving supply disruptions in international energy
markets and energy imports. The tendency has been strong for large net energy importers such as
Japan. Therefore, measures to secure imported energy and address energy supply disruptions havebeen given priority among energy security measures. At present, the destabilization of the Middle
East situation and relevant energy supply problems, including the Strait of Hormuz problem, arefrequently attracting attention. As a matter of course, it is important to pay attention seriously tothese kinds of energy security risks and challenges at present and in the future. Given the definitionof energy security, however, risks regarding international markets and imported energy alone should
not be viewed as energy security problems.
Rather, the Great East Japan Earthquake and the Fukushima nuclear power plant accident
clarified that problems involving domestic energy supply system stability are grave energy securityproblems. A situation where grave problems arise in regard to oil, electricity, gas and other key
energy infrastructure and supply systems would be critical for energy security. In this sense, thestability of international markets and energy imports must be secured along with the stability andresilience of energy supply systems for domestic markets.
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IEEJ：January 2016ｃ
○ IEEJ 2016

At present, international energy markets face excessive supply and low prices. In energy
importing countries, people may not feel any serious energy security threat. As a matter of course,
we must take note of the possibility that the present low energy prices would discourage energy
supply investment, lead to a tighter energy supply-demand balance and price hikes in the future orcontribute to destabilizing oil producing countries. Even if there are excessive supply and low prices
in international energy markets, however, any problem involving a domestic energy supply system
may become an energy security problem. In this sense, Japan and other major countries have growninterested in the stable management of domestic energy supply systems and infrastructure (as well asinternational market stability).
In this respect, cybersecurity has recently and rapidly been seen as a significant risk factor forenergy. Cybersecurity has so far focused on attacks on general networks and information technology
systems and the relevant leakage of key personal, government and corporate data and information.
However, cyberattacks have gradually been recognized as a threat to energy, water, transportationand other key social infrastructure, with discussions activated on energy and cybersecurity.
Cyberattacks have actually posed a threat to energy supply systems in the world. In the mostattention-attracting case, a control system of Iran’s uranium enrichment facility was infected withmalware in 2010, causing trouble with a centrifuge. In Canada, the United Kingdom, the UnitedStates, Turkey etc., cyberattacks occurred targeting electricity or oil facilities, disrupting energy
supply.
In response, Western countries, including the United States, have begun to tackle the issue ofcybersecurity and energy security. In view of the importance of stable electricity and other energy
supply in the society and economy for national security, the Department of Energy has taken
leadership in addressing cybersecurity related to energy in cooperation with information companies.
In May 2015, a policy paper for a meeting of energy ministers from the Group of Seven industrial
countries in Hamburg, Germany, clarified that it would be important to address cybersecurity as theUnited States and some others indicated strong interests in the issue. Later, the European Union
enhanced efforts to tackle the cybersecurity issue. In January this year, the European Parliament’s
Internal Market and Consumer Protection Committee approved the Network and Information
Security Directive including the enhancement of cybersecurity measures in the energy field.
This year, Japan will host an annual G-7 summit on May 26 and 27 after a meeting of G-7
energy ministers on May 1. The G-7 deals with important problems in the world and is expected todemonstrate leadership in addressing energy problems in consideration of new domestic and externalmarket environments and situations. While there are many important energy-related viewpoints
including the coexistence of low oil prices and the Middle East’s destabilization, the growing
importance of Asia, and Chinese economic risks and their impacts on energy markets, the G-7 islikely to pay attention to cybersecurity as a challenge to maintain the stability, soundness andresilience of key international and national energy infrastructure and systems. I would like Japan tolead specific and constructive discussions on these problems as the G-7 chair.
Contact: report@tky.ieej.or.jp
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