The Economics of Energy Security

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About this Event

03 Mar 2010 @ 12:45

This event is part of the ESB series on the 'Future of Energy'.

The audio and video for this event is off the record, however you can download the PowerPoint slides in PDF format below.

Powerpoint
Download the PowerPoint Presentation in PDF format here

About the Event:

“Technological Innovation is transforming our energy systems and challenging our assumptions about energy security”(Professor Dieter Helm, IIEA March 2010)

Speaking at the fourth lecture in the IIEA energy security series Dieter Helm outlined the economics of energy security in front of a capacity institute audience. In his speech he outlined why energy security policy matters and offered an analysis of current EU policy on the issue. He concluded with a discussion of the “new Economic realities” with the potential to drastically alter the terms of the current security of supply debate. Amongst the economic variables listed where non-Conventional gas, Smart Technologies and electric cars, the cost of wind power and the Economic Depression.

Professor Helm charted the rise of energy security to the top of the EU policy agenda in recent years. Excess supply in Europe for most of the 80’s and 90’s meant that energy security was largely absent from this agenda. He posited that an energy system largely built in the 1970’s was now unfit for purpose and required significant investment to bring it up to speed. The need for energy infrastructure replacement and modernisation was further heightened by the challenge of decarbonising European according to Professor Helm.

Professor Helm challenged the audience to view energy in a holistic fashion as a system of constiuent parts working together and postulated that a narrow liberalization approach could not deliver security of supply on its own. He outlined the dimensions of energy security which require the state to assume a lead role . An asymmetry of costs and the complementarity between networks and the economy impairs the market’s ability to deliver energy security on its own. A fully-liberalised competitive market will not deliver the excess capacity needed for energy security.

He stressed the need for an adequate system of incentives to encourage investment in sufficient new capacity, encourage construction of networks and meet the challenge of decarbonisation.

He stressed that a fully-liberalised competitive European energy market requires a pre-existing interconnected network to become a reality. In his opinion, unbundling and the separation of transmission from generation has improved the possibility of an integrated European grid infrastructure.

He encouraged a longer term perspective for EU ambitions to deploy renewable energy

Professor Helm outlined the new economic realities governing energy policy. Technological innovation has raised the possibility of exploiting Non-Conventional Gas sources for the first time. The US has very large reserves of gas allowing it the option of radically reducing imports and also more rapidly decarbonising the US economy by switching from coal to gas. US demand for LNG should be radically reduced. He highlighted the potential for this discovery to significantly reduce gas prices and improve security of gas supply in the long-term.

Technological change was the second “game changer” highlighted by Professor Helm. In his opinion, Smart meters will revolutionise the consumption of energy and a system of Electric vehicles significantly improves the stability of the electricity system.

Finally, Professor Helm concluded with the proposition that the economic depression will keep energy prices, demand and cost of capital lower in the medium to long term.

About the Speaker:

Dieter Helm is an economist specialising in utilities, infrastructure, regulation and the environment, and concentrates on the energy, water and transport sectors in Britain and Europe. He is Professor of Energy Policy at the University of Oxford and a Fellow of New College, Oxford. He holds a number of advisory board appointments, including Chairman of the Academic Panel, Department of Environment, Food and Rural Affairs and member of the Advisory Panel on Energy and Climate Security, Department for Energy and Climate Change. He is a member of the expert panel for the Department of Transport's Review of the Regulation of Airports. He was a member of the DTI's Sustainable Energy Policy Advisory Board from 2002 to 2007, of the Prime Minister's Council of Science and Technology from 2004 to 2007, and of the DTI's Energy Advisory Panel from 1993 to 2003.

http://www.dieterhelm.co.uk/

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