Appraising energy systems

The traditional mainstream perspective on energy systems has been one in which various technologies offer energy at a range of 'levelised costs'. This approach is based on a narrow engineering perspective, focusing on the specific technology in isolation from the broader system. The increasing involvement of private capital in electricity investments has drawn attention to the deficiencies of this perspective. Large investors are interested not only in unit costs, but also in the financial risks associated with using specific technologies within portfolios of different energy investments. Capital cost increases, fuel price volatility and 'regulatory risk' must all be taken into account. Low cost but high risk options can be balanced in a portfolio with low risk options, resulting in lower overall generating costs across the portfolio. This perspective has much to recommend it as a starting point for system level appraisal of energy options.

Within evolving portfolios of energy technologies there is a strong case for policy emphasis on nurturing and maintaining diversity. This means more than having a variety of different options in the portfolio. Diversity must be considered in terms of all of its three sub-properties: variety, balance and disparity. The greatest diversity is then a portfolio that contains a large variety of disparate technologies in balanced quantities. Left to the market, diversity will remain limited. This is problematic where socio-technical regimes routinely favour technologies that enjoy low unit costs in the context of centralised, carbon intensive energy systems. Such technologies do not fundamentally challenge the technical and institutional architecture of the energy system, and consequently 'technology blind' approaches are nothing of the sort. They, in fact, can lead to inertia and lock-in to unsustainable technology choices and portfolios that lack diversity and fail to manage risks efficiently or effectively.

The proposal here is not that governments should analyse energy systems and settle on a single blueprint for the future. The necessary predictive capacity is simply not available to make such an approach workable; moreover decisions taken on this basis would be unlikely to gain the necessary pubic support. Rather there is an urgent need for deliberation about possible system-level scenarios. By considering acceptable future GHG emissions in, say, 2050, it is then possible to 'backcast' from plausible future energy systems to the present and evaluate pathways, for example more centralised or decentralised paths, or with a greater or lesser degrees of demand reduction.

Dutch energy policymakers have done this explicitly in recent years, providing valuable lessons. Backcasting helps to highlight technical, institutional and behavioural problems that will need to be resolved. The process should not be constrained by seeking a single most 'efficient' pathway. Deliberation of this sort will be needed on an ongoing basis throughout the transitions, and prematurely closing down debate would be counterproductive in terms of further engagement, and in terms of remaining open to new and possibly radical opportunities for change.

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