The Energy White Paper: Meeting the Challenge was published on 23 May 2007. It identifies two long-term energy challenges faced by the UK: first, tackling climate change by reducing carbon dioxide emissions both within the UK and abroad, and second, ensuring secure, clean and affordable energy as the UK becomes increasingly dependent on imported fuel. The White Paper sets out the Government’s international and domestic energy strategy to respond to these long term energy challenges.
Specifically, the Energy White Paper is directed towards delivering four energy policy goals:
- to put the UK on a path to cutting CO2 emissions by some 60% by about 2050, with real progress by 2020;
- to maintain the reliability of energy supplies;
- to promote competitive markets in the UK and beyond;
- to ensure that every home is adequately and affordably heated.
Below, a brief analysis of the Energy White Paper is given with reference to uncertainity and risk, and to the role of modelling and simulation in formulating energy policy. For those who would like to read the Energy White Paper, it can be found on the BERR website.In October 2006, the Industrial Mathematics KTN, ran a workshop on Uncertainty and Risk in Energy Supply, and it continues to monitor opportunities for the use of mathematics in the energy sector.
Managing uncertainty and risk
Discussion of uncertainty and risk runs throughout the 343 pages of the Energy White Paper as it sets out conditions to stimulate and allow energy users, generators, and investors to respond to the challenges posed by energy demand, the changing profile of energy sources, and the impact of climate change as addressed in the Stern Review (October 2006). Given the uncertainties involved, the White Paper recognises the need for more flexible and responsive decision-making and planning to reduce uncertainties and reap benefit from shorter planning horizons. It also recognises the need for a supportive investment environment for the larger risks involved when it is necessary to make longer term investment decisions under considerable uncertainty.
The government's approach to electricity generation is exemplified by the statement: "Given the(se) risks and uncertainties about the way the world and energy markets may develop, it is very difficult to predict which composition of the fuel mix or share of each technology in the mix is most appropriate to minimise the risks and costs associated with achieving our energy goals. For this reason, we believe companies are better placed to weigh up this complex range of interrelated factors affecting the profitability of investing in electricity generation (including how these factors might evolve over time). Providing firms with a portfolio of options offers a hedge against risks like technology failure or over-dependence on a limited range of fuel supplies."
Based on the principle that independently regulated, competitive energy markets are the most cost-effective and efficient way of delivering its objectives, the Energy Review Report (2006) identified a number of areas where the policy and regulatory framework governing energy markets needs to be strengthened, and these form key elements of the strategy presented in the Energy White Paper:
- international framework to tackle climate change
- legally binding carbon targets for the whole UK economy, progressively reducing emissions
- progress in achieving fully competitive and transparent international markets
- energy saving through better information, incentives and regulation
- support for low carbon technologies
- better conditions for investment
A cursory concordance analysis of text in the 343 pages of the Energy White Paper reveals the strength of its intent ("we will": 253 occurrences) and commitment (commit*: 200). The analysis of selected other (partial) words also provides an indication of its emphasis: weather: 4; climat: 340; risk: 145; likel: 97; probab: 9; uncertain: 90; strateg: 225; objective: 56; plan: 522; project: 371; predict: 23; forecast: 9; behav: 27; mathematics: 3 (education); simulat: 2; model: 118; scenario: 63; carbon: 1004; energy: 1917. For more details contact Melvin Brown.
It is interesting that the word "climate" appears some 340 times in the White Paper, while "weather" appears 4 times. Weather is the specific condition of the atmosphere at a particular place and time, whereas climate is the average of weather over space and time. The modelling of climate differs from that of weather in at least two significant ways [L. A. Smith PNAS 2002 99 Suppl.1: 2487-2492]. First, climate modelling resembles extrapolation where weather/seasonal modelling more closely resembles interpolation. Second, in the weather/seasonal time scales we have a forecast-verification archive with which to adjust for model inadequacy; by its very nature, no such archive can exist for climate. Herein lies one of the challenges of developing a strategy for responding to forecasts of climate change and the changes in weather that they may imply. In this context, the Stern Review (October 2006) is significant in concluding that the long-term cost of inaction would be far higher than the cost of tackling climate change now; it also makes clear that the costs are lowest if nations act together.
Modelling and simulation
Modelling has played a significant role in the preparation of the Energy White paper. A prominent approach is that of scenario and sensitivity analysis, in which impact of a variety of energy supply and demand evolutions are examined to tease out and gain insight into the implications of energy policy. It is important to realise that such scenarios are not forecasts.
Energy White Paper draws on the work of the UKERC Energy Systems and Modelling Programme, which uses the MARKAL and MACRO-MARKAL energy systems models. MARKAL (MARKet ALlocation) is a widely applied bottom-up, dynamic, linear programming (LP) optimisation model. The UK MARKAL model, as a partial equilibrium energy system and technologically detailed model, is well suited to investigating the cost and physical trade-offs between long-term divergent energy scenarios. The general equilibrium MARKAL-Macro model is a hybrid that seeks to maintain the technological and sectoral detail of a bottom-up optimisation approach, along with the responsiveness of demands and the assessment of economy-wide implications.
If you would like to comment upon or discuss issues arising from the above material, particularly relating to the role of mathematics, please contact Melvin Brown.
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