The New Energy Paradigm

Citation

Bhattacharyya, S. (2009), "The New Energy Paradigm", International Journal of Energy Sector Management, Vol. 3 No. 2, pp. 222-224. https://doi.org/10.1108/17506220910970623

This edited book contains chapters that are written by specialists in the area who have reflected on the changing nature of the energy industry in the UK and globally and on the policy and governance implications of these changes.

The book is organised in four parts and contains 16 chapters – each part focusing on a specific industry or area. Part 1 deals with the concepts, Part 2 is devoted to oil and gas industry, Part 3 is concerned with electricity while Part 4 focuses on the international policy. Clearly the book covers a large ground and presents a contemporary view of the energy policy.

The concept part starts with a paper by Dieter Helm which has the same title as the book. The chapter introduces the changing environment of energy policy and calls for a paradigm shift. The author argues that the deregulation and privatisation movement of the previous decades has led to asset sweating but the low price regime has eroded the incentive for new capacity addition of the preferred type. Moreover, the markets did not take care of the security of supply issue. In addition the climate change issue has emerged as a new challenge. Consequently, the policies that worked in the previous regime may need to be adapted to the changed environment, thereby needing a paradigm shift. While the chapter is interesting and I have no fundamental disputes with the author, it lacks a clear flow of ideas as the author jumps from the UK context to the international context and returns back to the UK scene. The opening chapter of a book should have been more carefully written.

Part 1 also contains three other chapters: Chapter 2 by John Scott and Gareth Evans on electricity networks – especially on the supply chain of innovations in this area (the title of the chapter is somewhat confusing); Chapter 3 by Dieter Helm and Cameron Hepburn on carbon contracts, and Chapter 4 by Paul Joskow on electricity investments in a competitive market. At least two chapters (on electricity networks and electricity investments) could have been included in Part 3 (which is dedicated to electricity). The logic of putting them here is not evident. Similarly, the conceptual elements in these papers vary widely and the justification of creating a section on concepts is also not clear.

Part 2 of the book starts with a paper by Paul Stevens on the developments in the oil market and the future prospects. The paper was written at a time when oil prices were rising and the security of supply concerns were top on the policy‐makers agenda. The author argued that oil industry was undergoing through a structural change and moving to a high oil‐price era as the cheap oil is coming to an end. While the arguments were valid at the time of writing of the paper, the current low oil price subsequent to the economic meltdown would raise doubts about the future developments indicated in the chapter.

There are three other chapters in this part: Bassam Fattouh discusses the pricing power of OPEC in the context of limited excess capacity. This is followed by a chapter on increasing oil import dependency of the UK due to depletion of the North Sea (by Alex Kemp and Linda Stephen). Anouk Honore and Jonathan Stern discuss the future of gas in the European Union. Clearly, the chapters of this part vary in quality and shelf‐value. Most of the chapters are quite descriptive in nature except the chapter by Kemp and Stephen which relied on some simulation efforts. As some chapters focus on immediate‐term events, their shelf value is limited. However, they provide a understanding of the present issues related to oil and gas industry in general.

Part 3 contains five chapters: Richard Green provides a nice exposition of electricity markets by using simple graphical tools. This chapter could have been included in Part 1 as it mainly deals with the concepts. In fact, this would have been a good complementary chapter in Part 1 supporting Paul Joskow's chapter. Karsten Neuhoff discusses the issues related to the large‐scale deployment of renewable technologies. The chapter discusses five specific issues affecting renewable energy systems, namely an uneven playing field, market barriers, non‐market barriers, lock‐out phenomena and the overall economics of the strategic deployment. It also offers policy options to support renewable energies and concludes that it is in the power of governments to unlock the potentials of these technologies. Chapter 11 focuses on electricity supply adequacy under policy uncertainty while Chapter 12 Catherine Price discusses the effect of deregulation on the consumers. The final chapter on this part provides an overview of nuclear energy (by Malcom Grimston).

Part 4 of the book contains another three chapters on international policy: Fatih Birol discusses the investment requirements of growing energy demand. This paper is based on the World Energy Outlook of 2004 and suggests a huge investment requirement for the energy sector, where a majority share would originate from the developing countries. The estimates have become somewhat dated by now as the recent IEA estimates have increased the requirement by a few more trillions. Scott Barrett discussed the climate change negotiations while the last chapter discusses the twin challenge of energy security and climate change faced by the European Union (by Dieter Helm).

Clearly, the book covers a wide range of subjects, which is its strength. But the quality of the chapters varies and some have less shelf value than others. Normally a book should contain chapters that have an archival value. From this perspective, the book has some weakness. Moreover, the book is more concerned with the developed world and little focus was given to the developing countries although the new paradigm that the book suggests is perhaps applicable globally. Perhaps the title of the book should have reflected the book's developed country bias.

Despite these shortcomings, this is a valuable collection for the libraries, students and researchers of energy policy.