I’m not often one to mix work with pleasure, but I went to the watch ‘The Heretic’ recently, a play about climate change. It got me thinking about the challenges we face in Government when making long-term decisions about how we tackle climate change, whilst dealing with a range of uncertainties about what the future might hold, how technologies might develop and how human behaviour might change.
This problem of uncertainty is equally applicable to Electricity Market Reform. The Government will shortly introduce the Energy Bill into parliament, which will contain a number of provisions to dramatically alter the way the country’s electricity market functions, and by extension the way we produce and consume electricity, for the next few decades. Thinking about the challenge in these terms can be downright scary! But we can’t afford to delay reforms until we know for certain that the market is broken, we need to take bold decisions now to ensure we can keep the lights on for future generations.
I won’t get into the details of the reforms here – DECC has published a number of documents outlining these previously and will provide further information alongside the introduction of the Bill. But one of the key principles behind EMR is the need to maintain flexibility in terms of our future electricity generation mix given the amount of uncertainty we face, but at the same time providing enough certainty to drive the investment needed to bring about the changes we think are necessary. And there is so much uncertainty.
How, for example, can we say with any confidence what the future price of gas will be? Which renewable technologies will mature the quickest and therefore become the most cost-effective? Will CCS work? How will the cost of nuclear change over time? Will a technology that we haven’t even heard of yet come along and blow the rest out of the water – the much sought after silver bullet? And outside the world of energy – what political, economic and technological changes can we expect in coming decades?
I would be interested to know, for example, if 30 years ago or so the advent of offshore wind technology would have even been contemplated, and now the UK has more offshore wind capacity than any other nation.
I don’t pretend to have an answer to this flexibility versus certainty conundrum, but it is clear that it will continue to present a challenge to Government in developing long term energy policy. After spending the majority of this blog raising uncertainty and asking questions, I was tempted to end it by making some predictions about the future of my own. But instead, I thought I would heed the wise advice of Chinese Poet Lao Tzu who once said, “Those who have knowledge, don’t predict. Those who predict, don’t have knowledge.”