Economic Policy Making for Energy Markets

Challenges Have MBAs/social scientists and engineers work together Engineer: I want to build the best gadget Economists: Only build it of the benefits outweigh the costs Acknowledgement: EPRG

Economic Challenge Design/engineer a social system (i.e. policies) such that individual decisions will produce the desired outcome (e.g. reduce CO2 emissions). Examples of systems: – European emissions trading – Feed-in tariffs – Network regulation (my topic)

Energy Policy Objectives Reliable/consistent policy (security of supply) – In South Africa bad policies led to insecure supply Low carbon (allow wind farms to connect to network) Low cost (competition between generators) Reliable energy (provide a return for investment).

UK Challenge Consistent policy: – Politicians want particular system (markets) AND particular outcome (more renewables) which leads to investment uncertainty. – Devise policies that take advantage of UK renewables potential.