Debate

Example of Debate Brief

For Energy Policy Course

Fr: Andy Hira

Da: Jan. 21, 09

http://www.energypolicyblog.com/?p=198

CESSA Policy brief on EU Energy Security of Supply: 10 conclusions

September 19th, 2008 by Jean-Michel Glachant, Université Paris-Sud 11

Energy security of supply is an extremely political matter. It involves consideration of international relations, geography and infrastructure control. Despite these realities economics has much to offer improved policy-making for security of supply.

In fact, economists can say a great deal about markets and policy. Markets (e.g., for balancing, storage, reserves and access to cross-border capacity) as well as investment (which is guided by market prices) play a critical role in delivering security of supply, as does public policy (e.g., for energy efficiency, storage obligations, and the fuel mix). Moreover, security of supply can give rise to ‘free-riding’, a phenomenon familiar to economists. Over the past two years, a team of European economists involved in the CESSA research programme have analysed this topic, especially in focusing on gas and nuclear power, and made proposals to improve EU energy security of supply. What follows is a brief summary of their conclusions.

1. Short-term and long-term disequilibria in security of supply are different phenomena.

They must be analysed differently and may need to be addressed with different policy instruments.

Short-term disruptions in energy supply are transitory; they can be caused by a variety of factors (e.g., equipment failure, human error, weather events, crime or accidents). Moreover, the provision of short-term security of supply may have to deal with the problem of free-riding. If one company (or country) invests in improving security, others can free-ride, deriving part of the benefit without paying for it. One measure to protect against such a free-riding could be to charge appropriately for the protective service (e.g., by short...