Just over ten years ago, John Major abolished the Department of Energy and consigned it to being no more than a directorate within the Department of Trade and Industry. At the time, this seemed only logical. After all, the bulk of the country's power generation capacity had been privatised (as National Power and Powergen), and the role of the state had apparently diminished to little more than appointing the regulator. The age of energy policy had, it seemed, come to an end.
When Labour came to power in 1997, little seemed to change. True, Labour took steps to protect the UK'S ailing coal industry, mainly through using the planning regime to suspend the "dash for gas" -- the 1990s rush to build cheap and highly profitable gas-fired power stations. But Labour's overriding aim in energy was to increase competition.
Today, though, all eyes are once more on the government as its energy white paper approaches publication. The energy sector will be at the forefront of responding to the huge challenge of global climate change. Moreover the UK's North Sea gas reserves have all but run out, raising the prospect of imminent dependency on gas imported through pipelines thousands of miles long, with inevitable concerns about security of supply. And over the next 20 years, the UK is projected to lose up to half of its existing power stations - posing the question of how to replace them. Energy policy, it seems, is back.
So what is the government trying to do with its energy policy? At present, it has four objectives: environmental sustainability, competitive markets, security of supply and diversity of generation. These, however, tend to point in different directions. Suppose, for example, that the policy tried to leave as much as possible to "competitive markets". Such a policy would include a lot of gas-fired power stations, which are cheap and quick to build, as well as coal-fired stations, which are costly to build but cheap to operate. But the same policy, being based on fossil fuels, would have high greenhouse gas emissions, thus undermining the environmental sustainability objective. It would also leave the country highly dependent on gas imports, thus reducing security of supply.
The challenge is therefore to make clear the order of priority of these objectives. What should happen when they trade off? One answer was provided by the Cabinet Office's Performance and Innovation Unit's Energy Review, published last year. The review suggested that where environmental and economic goals clash, environmental goals "will tend to take precedence".
Most scientists will confirm that climate change is the most serious environmental challenge that the world faces today. Depending on the scale of international commitments, the UK might have to make emissions reductions as steep as 60 per cent or more by 2050. Its present target under the Kyoto treaty -- a 12.5 per cent emissions cut in greenhouse gases by 2012 -- is no more than a first step. There is also a strong case for giving high priority to energy security: as the Californian energy crisis showed, the need to keep the lights on is something that politicians forget at their peril.
We could therefore start by defining the goal of energy policy as "the secure transition to a low-carbon economy, at the lowest possible cost". What would such a goal imply in practice? It would require strong progress on energy efficiency, especially in the domestic sector, with the aim of achieving real reductions in electricity demand by 2020. Lower energy demand leads to lower costs, lower emissions and lower dependence on imported gas.
However, although many energy efficiency technologies can save more than they cost, there are formidable barriers to their implementation. There are as yet no "one-stop shops", for instance, which can advise on the whole range of technologies from efficient condensing boilers to loft insulation. And for …