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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

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

Dieter Helm, New College, Oxford

Wednesday, October 21st 2009

The questions
The Questions

  • What’s the problem?

  • What’s the threat?

  • What are we doing?

  • What are the solutions?

What s the problem
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...

What s the threat
What’s the threat?

  • Peak oil and demand

  • Russia and gas supplies

  • The investment challenge

  • The climate change challenge

Threat no 1 peak oil
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

Peak oil demand ever up
Peak Oil: demand ever up

Economic growth projections

(% yoy)



Global population 6bn→ 9bn by 2050

Peak oil proven reserves
Peak Oil – proven reserves

Proved oil reserves end 2008 – thousand million barrels







Source: BP Statistical Review of World Energy 2009

Threat no 2 russia gazprom and the ukraine
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”

Russian Pipelines

Source: US Energy Information Administration, 2007

The european pipelines
The European pipelines

  • The special relationship Germany-Russia and Nord Stream

  • Ukraine, storage and instability

  • Nabucco – the Caspian gas can go north or west

Threat no 3 the investment challenge
Threat no. 3: The investment challenge

  • The capacity crunch

  • The technology crunch

The capacity crunch
The capacity crunch

  • Legacy of the 1970s

Electricity demand




  • Massive excess supplies in 1980s and 1990s

  • And... North Sea oil and gas...

  • Now... we need...

  • 30-35GW replacement capacity

  • Importing gas (and oil)

The technology crunch
The technology crunch

  • Decarbonisation

    • Existing technologies

    • New technologies

  • Application of IT to grids

  • Smart meters

  • Electrification of transport

So what are we doing
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

What should we do
What should we do?

  • Very large investment programme needed

    • Design the market for investment

    • Capacity markets

    • Long term contracts

  • And.....

  • Decarbonise

    • Large scale supplies

    • New technologies

Nuclear ccs and renewables
Nuclear, CCS and Renewables

  • The economics of nuclear

  • Making CCS work – to deal with coal

  • Renewables and technical change

In a couple of decades
In a couple of decades....

  • Electrification of transport

  • Batteries

  • Smart meters and smart grids

  • And lots of technical surprises.....

So what do we do
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...

What will happen
What will happen?

  • An energy crisis – unless the recession continues

  • Price spikes and volatility

  • And much economic cost...

  • CO2  as climate change continues

Further information http www dieterhelm co uk publications
Further information:

  • 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