It All Boils Down to Money: The Framework of Existing Energy Policy Is Collapsing. but to Invent a More Up-to-Date One Needs Realistic Aims and Money, Not Just Optimistic Targets. (Energy)

Article excerpt

After two decades of benign neglect of energy policy, a series of developments at the turn of the century conspired to force a rethink of energy policy in the United States and Europe. Governments had become used to low fossil-fuel prices and the idea that energy security could be left largely to market forces. The first jolt came when, against expectations, oil prices tripled, and gas prices followed. The US and Europe were very exposed, the former dependent on Middle Eastern oil imports, the latter increasingly reliant on Russian gas. In Britain, a few farmers and lorry drivers picketing oil refineries almost brought the country to a standstill.

The second problem was the increasingly apparent inability of conventional energy policy to stem the rises in [CO.sub.2] emissions. Governments seemed unwilling to confront motorists and energy users with the consequences and the inevitability of yet higher prices. The third problem was the emergence of doubts about the stability of liberalised electricity and gas markets. That perhaps the most advanced economy in the world--California--could be brought to its knees with a sharp rise in prices and power cuts came as a shock. Might not others who had followed a similar path also be vulnerable? The collapse of Enron, a credit crunch for the US electricity industry, and the failure of British Energy, the nuclear power generator, reinforced these worries.

For the past two decades, the British economy has benefited from the North Sea. Its tax revenues have been boosted and the postwar problem of balance of payments crises has been in abeyance. Britain has had the luxury of energy riches. Now that breathing space is coining to an end. Gas will not only be the dominant fuel for electricity generation (as well as a direct energy source), but will be imported from Russia and Norway. And Britain has no powerful counterparts to the Russian producer and distributor Gazprom. Nor is the gas infrastructure built to withstand the extra loads from imported sources.

The environmental luxury of the 1990s -- of falling [CO.sub.2] emissions because of the coal industry's decline -- has also gone. There can be no more easy gains. The gradual closure of nuclear power stations will require a 20 per cent increase in non-carbon generation just to keep [CO.sub.2] emissions at the same level. The Royal Commission on Environmental Pollution's keen target of a 60 per cent reduction by 2050 looks daunting.

The final British feature is that most of our energy infrastructure is old. All non-gas power stations will need replacing over the next two decades, and the electricity transmission and distribution networks will need attention, too.

In response to these problems, the European Commission published Towards a European Strategy for the Security of Energy Supply in 2000, the US National Energy Policy Development Group published Reliable, Affordable and Environmentally Sound Energy for America's Future in 2001, and Britain's Performance and Innovation Unit (PIU) published The Energy Review in 2002. The European and US papers are almost interchangeable: both highlight [CO.sub.2] emissions and import dependence. The PIU looks to a similar agenda. There is agreement over what questions need to be addressed. The answers are proving more difficult.

The political instinct is to try to please as many people as possible, and that means trying to achieve energy network security, a reduction of [CO.sub.2], and what the Prime Minister high-lighted in his foreword to the PIU report -- "cheap energy". Faced with these fundamental challenges, the government's response has been to convince itself that imports of gas are not a sufficiently serious or -- more importantly -- immediate issue to require action. Instead, it has taken comfort in the advice of the PIU that the networks are adequate and up to the task, at least for the next few years. It has also convinced itself that the problems in California and Norway could not happen here. …