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Energy Security and Energy Policy – Where will our energy come from?

Energy Security and Energy Policy – Where will our energy come from?. Dieter Helm, New College, Oxford Wednesday, October 21 st 2009. The Questions. What’s the problem? What’s the threat? What are we doing? What are the solutions?. What’s the problem?.

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Energy Security and Energy Policy – Where will our energy come from?

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  1. Energy Security and Energy Policy – Where will our energy come from? Dieter Helm, New College, Oxford Wednesday, October 21st 2009

  2. The Questions • What’s the problem? • What’s the threat? • What are we doing? • What are the solutions?

  3. What’s the problem? Security of supply is a public good • Security is relative risk, price and storage • Security is multidimensional price, quantity and time profiles • Security is multinational European, global And it has to be solved whilst decarbonising...

  4. What’s the threat? • Peak oil and demand • Russia and gas supplies • The investment challenge • The climate change challenge

  5. Threat no. 1: Peak Oil • Too much, not too little • Price not necessarily up • Arctic, Antarctic, Brazil, Mexico, Africa, Iraq etc etc • Lots of coal • Lots of unconventional gas

  6. Peak Oil: demand ever up Economic growth projections (% yoy) 2 1 Global population 6bn→ 9bn by 2050

  7. Peak Oil – proven reserves Proved oil reserves end 2008 – thousand million barrels 142 71 42 754 126 123 Source: BP Statistical Review of World Energy 2009

  8. Threat no. 2: Russia, Gazprom and the Ukraine • Russia as an oil and gas economy • Putin’s regime and Gazprom • Russia’s borders and Russia outside its borders • The Caspian problem • Crimea, Ukraine and “unfinished business”

  9. Russian Pipelines Source: US Energy Information Administration, 2007

  10. The European pipelines • The special relationship Germany-Russia and Nord Stream • Ukraine, storage and instability • Nabucco – the Caspian gas can go north or west

  11. Threat no. 3: The investment challenge • The capacity crunch • The technology crunch

  12. The capacity crunch • Legacy of the 1970s Electricity demand 7% GDP 3%  • Massive excess supplies in 1980s and 1990s • And... North Sea oil and gas... • Now... we need... • 30-35GW replacement capacity • Importing gas (and oil)

  13. The technology crunch • Decarbonisation • Existing technologies • New technologies • Application of IT to grids • Smart meters • Electrification of transport

  14. So what are we doing? • Building windmills • Energy efficiency • EU 2020-20-20 package • UK = 5% - 35% wind by 2020 gas gasgas  gas imports  security

  15. What should we do? • Very large investment programme needed • Design the market for investment • Capacity markets • Long term contracts

  16. And..... • Decarbonise • Large scale supplies • New technologies

  17. Nuclear, CCS and Renewables • The economics of nuclear • Making CCS work – to deal with coal • Renewables and technical change

  18. In a couple of decades.... • Electrification of transport • Batteries • Smart meters and smart grids • And lots of technical surprises.....

  19. So what do we do? • A coherent charging policy • Clear targets for government • Clear delivery institutions • Clear instruments – a price of carbon, a price of security, capacity markets, R&D policy etc etc...

  20. What will happen? • An energy crisis – unless the recession continues • Price spikes and volatility • And much economic cost... • CO2  as climate change continues

  21. Further information:http://www.dieterhelm.co.uk/publications • FORTHCOMING: October 2009: Helm, D. and Hepburn, C. (eds), The Economics and Politics of Climate Change, Oxford University Press. • Delivering a 21st Century Infrastructure for Britain, with James Wardlaw and Ben Caldecott, Policy Exchange, September 2009. • EU climate-change policy—a critique, Smith School Working Paper Series, September 2009 • Environmental challenges in a warming world: consumption, costs and responsibilities, 2009, Tanner Lecture, February 21st. • Georgia, Ukraine and Energy Security, CER Bulletin, February 2009. • Credible Energy Policy, Meeting the challenges of security of supply and climate change, 2008, Policy Exchange • Climate-change Policy—why has so little been achieved, 2008 Oxford Review of Economic Policy, 24:2, 211–238 • Caps and Floors for the EU ETS: a practical carbon price, October 13th 2008 • Meeting the Infrastructure Challenge, May 2008

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