In 1991 John Wakeham, the British Secretary of State for Energy, abolished his own department and announced the “end of energy policy”.
Gas and electricity were newly privatised, overseen by new economic regulators. A wholesale market was in place and it would take care of everything. Government would have no further role in the energy industry.
It didn’t last long.
Recently we had Acts of Parliament on Energy in 2008, 2010, 2013 and 2016 and a host of other secondary legislation in between. So why, 28 years after privatisation, do we need energy policy now more than ever?
Energy is vital to human life wherever you are. Some remote villagers still walk miles each day to collect firewood. If you have ever had your central heating break-down during a cold spell or had a power cut on a dark evening you will know how much we all depend on energy. The impact on a whole city of a loss of power is described in the fascinating Living without electricity, a Royal Academy of Engineering paper about the Lancaster power outage caused by severe flooding in 2015.
The systems that bring us our energy are largely invisible and go unnoticed by most people, most of the time. They represent a huge investment in infrastructure, built up over many years. Typically electricity network assets last 40-50 years.
Deciding how much maintenance they need and when to replace worn out parts is a complex engineering challenge. If you spend too little for too long then things start to fail and you may never be able to catch up with the backlog.
Deciding which types of new assets to build and when to build them is even more challenging.
I keep a graph showing when the UK’s power stations first came on line. It is labelled with the names of the prime ministers to show just how long lived energy investments are. Our remaining coal fired power stations were built in the 1960s and 70s when Harold Wilson and Edward Heath were in charge. If we invest in the wrong things, we have many years to regret it.
Energy systems are also interconnected. Choices for heating have implications for gas and electricity networks, as will the switch to electric vehicles or hydrogen powered trains.
The businesses that make these investment decisions do so in a market that is regulated, with a complex system of governance ultimately driven by government policy.
Making good energy policy is not easy. The consequences of energy policy often only become apparent long after the decisions were made and the decision makers have moved on.
Recently energy systems have been changing faster than ever before. Four global trends, each disruptive in its own right are happening at the same time. Together they amount to an energy revolution. They are known as the four ‘D’s:
Policy cannot stop these trends. One way or another, our energy systems are going through a transition. It is vital that governments guide the energy industry through this transition. Not to do so would risk huge costs to customers or failure of our energy systems. We can’t ‘leave it to the market’.
Energy is a vital industry undergoing an unprecedented transition. For the foreseeable future government is going to have to guide that transition. We need the best possible energy policy now more than ever before.
