Dieter Helm slams Europe’s predictive energy policies

A damning indictment on European energy policy was delivered at a conference by Dieter Helm, Professor of Energy Policy at Oxford University.

At the energy debate in London organised by The Economist magazine, Helm said that Europe had failed on all three counts of the so-called energy trilemma of decarbonisation, security of supply and affordability and competitiveness.

On decarbonisation, he said that there hasn’t “been a single blip in global emissions from 1990 through to today”.

On security of supply in Europe, he said: “We have the threat of interruption of gas supplies through Ukraine. That may not be an immediate issue for British customers but it sure is a very substantive issue for the European ones, and energy policy is at the heart of the geopolitics of Europe. We now have for the first time since the fall of the Berlin Wall and the collapse of the Soviet Union, one major leader who does not accept the boundaries of the countries of Europe.

“That may not matter too much here [in the UK], but if you’re in Poland or any of the frontline states, this is a serious security issue and it’s an energy issue par excellence.”

And on competitiveness and affordability, he said: “There is hardly any energy-intensive investment taking place in Europe at all now, whereas there is a complete different situation in the United States and elsewhere.”

He laid the blame for Europe’s investment inertia on “the mid-years of the last decade, when the current energy and climate policies of Europe were set.

He said these policies had been made on the assumption that oil and gas prices were going to double, with the result that “America would be lumbered with lots and lots of imported oil and gas while Europe would be moving into competitive renewables”.

Yet Helm stated that “almost all of that turned out to be nonsense. Shale gas came along and the US is well on the way to a serious degree of energy independence within the next couple of decades”.

'A deadly way of constructing energy policy'

“That completely transforms the position of the renewables in Europe, where now we have to recognise that we have more than enough fossil fuels to fry the planet many times over. There is no good reason for assuming necessarily that oil and gas prices are going to rocket up by a factor of two, therefore – and this is a really painful issue for European policymakers – that subsidies to the current renewables are likely to be permanent.”

“Knowing the future is a very deadly way of constructing energy and climate policy,” he said. “All of the artefacts of European energy policy are based on assumptions made 10 years ago by the leading politicians in Europe.”

And he said that any chance of a rethink on those policies of a decade ago were almost hopeless.  “Once a policy is committed and politicians have nailed themselves to the mast, the incentives to reinforce that policy are very powerful.”

Talking about the UK, he said “every single major investment in the electricity sector in this country going forward is being determined by the state, on state-backed contracts and the state is picking the technologies. Whether it be picking technologies through feed-in tariffs or designing auctions which happen to be the right kind of length for a new gas station, or another auction which happens to be right for demand side and then another auction that happens to be right for existing power stations that might have their life renewed.

“This is a sadly a one-way track towards greater and greater determination. We have basically decided in this country that the market will not deliver the investment programme… so we’ve brought the state in.”

And he warned: “One shouldn’t kid oneself that this is a gradual intervention, a temporary one that will give way to a return to markets. The temporary has a horrible tendency to become the permanent.”

Helm then asked the audience: “Are we inevitably committed to this?” To which he answered: “Of course not. There’s nothing rocket science about energy policy and climate policy but you do have to be clear about what the questions are that you wish to answer.

“And the questions ought to be very straightforward: do you want to decarbonise? In which case, you need carbon price. And if you’re not prepared to have a carbon price that reflects the cost of carbon, then you’re not prepared to decarbonise, which is the lesson of what we’ve been doing since 1990.

“If you want security, don’t try to doctor the capacity auctions to produce the technologies you would like.”