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This newsletter is published during a period of global financial upheaval, turbulent energy
prices and concerns over security of supply and climate change, some of which are touched on
below. EPRG is dedicated not only to address pressing current and future policy issues but
also to undertake more fundamental research. Our members continue to advise at UK
government and European Commission level, and our conferences attract people from
business and industry, as well as from governments around the world.
The EPRG Update gives details of our latest working papers. We publish around 30 papers
each year in our peer-reviewed series. We have recently published a second book in the
Supergen Research project.
The Energy Policy Research Forum plays a vital role in our interaction with our stakeholders
whose support increases the scope of our research and the impact of our research findings.
The re-launched website makes our work accessible to everyone. If you would like more
information on the EPRG or the Energy Policy Forum, please do get in touch with us. All
contact details are available on our website.
David Newbery
Research Director
HIGHLIGHT OF THIS ISSUE
In September 2008 a special edition of the
Energy Journal was produced in honour of
Professor David Newbery. On the 12 and 13
September 2008 a Dinner and Conference
was also held in his honour with
presentations from the authors of papers in
the Journal
Read full details in Page 2
Issue 2
May 2009 NEWSLETTERNEWSLETTER
In February 2009, the Research Papers in Economics (RePEc) ranked the
Faculty of Economics, University of Cambridge as the top institution in the
field of Energy Economics. David Newbery is ranked as the top author.
The RePEc rankings are based on data about authors who have registered
with the RePEc Author Service, institutions listed on EDIRC, bibliographic data
collected by RePEc, citation analysis performed by CitEc and popularity data
compiled by LogEc. For Energy Economics, these are 621 authors affiliated with 859
institutions.
http://ideas.repec.org/top/top.ene.html
Inside This Issue…
� EPRG research associate prizes
� European gas security after the crisis
� New book published
� Conference and special issue in honour
of David Newbery
� Developing country projects
� Smart metering
� Staff news
� New EPRG website launched!
� Focus on people
� New students
EPRG top of RePEc’s Energy Economics Ranking
Research Director’s Message Research News
DECC Report—Smart
meter roll-out: Risk
and Optimism Bias
(12.5.09)
EPRG Working Paper
Update Jan—March
2009 available (6.5.09)
Energy Journal reviews
EPRG book (6.5.09)
Michael Pollitt’s report
for Ofgem on Fixed
Line Telecoms
Regulations (04.2009)
European Gas Security
after the Crisis
(23.4.09)
EPRG Submissions to
the Environmental
Audit Committee
(2.3.09)
David Newbery’s
response to the launch
of the UK government’s
consultation on the
Severn Barrage
(25.2.09)
David Newbery and the
EPRG are featured in
the latest edition of
Research Horizons
(6.2.09)
Conference and Special Issue in Honour of David Newbery
The Energy Journal Special Issue
∗ Introduction Richard J. Green and Michael G. Pollitt
∗ Personal Reflections on David Newbery Richard Gilbert
∗ Lessons Learned from Electricity Market Liberalization Paul L. Joskow
∗ Some Applied Economics of Utility Regulation Stephen Littlechild
∗ The Future of Electricity (and Gas) Regulation in a Low-carbon Policy World
Michael G. Pollitt
∗ Electricity Wholesale Markets: Designs Now and in a Low-carbon Future Richard J. Green
∗ The Future of Retail Energy Markets Catherine Waddams Price
∗ Markets vs. Regulation: A Role for Indicative Energy Planning Ignacio J. Pérez-Arriaga and Pedro Linares
∗ Learning by Doing with Constrained Growth Rates: An Application to Energy
Technology Policy Karsten Neuhoff
New Book Published
In July 2008, the second
Supergen Futurenet book
was published by
Cambridge University
Press. Delivering a Low-
Carbon Electricity System:
Technologies, Economics
and Policy, edited by
Michael Grubb, Tooraj
Jamasb and Michael G.
Pollitt, contains
contributions from many of
the members of the
Supergen Consortium of UK
universities.
The book analyses the
social, technological,
economic and political
issues that affect the
attempt to create a low-
carbon electricity sector
and assesses the main
instruments for achieving
this aim.
European Gas Security after the Crisis
Despite the highly diversified nature of the
European gas supply, dependence on
Russian gas is much higher in central and
eastern Europe than the EU average.
To off-set this dependency, the EU needs
a single gas market that allows non-
Russian gas reaching the EU in Western
Europe to be commercialised in Russia-
dependent countries, through long-term
contracts and short-term transactions. In
normal circumstances, with the huge flow
of gas from east to west, there are
numerous opportunities for swaps,
virtually moving gas eastwards -from
Western Europe to the Czech Republic,
Austria, Hungary, Poland or Slovakia.
There is an urgent need for well-
functioning market in transmission
pipeline capacity rights supported by an
equally well functioning market in storage
capacity. The European third gas directive
together with the initiative of the
European energy regulators to promote
market integration will facilitate a move in
this direction.
However, the recent gas crisis
demonstrated that gas could also flow
from west to east physically by reversing
the pipes that move Russian gas from east
to west. For two weeks in January gas and
LNG imported from Western Europe flowed
across France to
Eastern Europe.
Gas companies
and regulators are
now showing
substantial
interest in
increasing the
capacity to reverse
pipeline flow at a
modest cost of
around €1M per compressor station.
If Europe gets its gas market in order
there is a good opportunity for Russia-
dependent countries to contract for non-
Russian gas – in most cases without
having to invest in new, expensive import
infrastructure.
This is an excerpt from Pierre Noël,
"EUROPEAN GAS SECURITY AFTER THE
CRISIS", paper submitted to the EU Policy
Seminar on “EU Policy on Russia: The Way
Forward in 2009”, European Commission,
DG Relex & Czech Presidency of the
Council – Brussels 23 April 2009
http://www.eprg.group.cam.ac.uk/
european-gas-security-after-the-crisis/
Pierre Noel
… Continued from Page 1
Prize
Research Assoc
iate Simon
Taylor was awarded
2009
Pilkington Prize
for
Teaching
& Congratulatio
ns to
Fabien Roques who won
the Hans-Juerg
en-Ewers-
Prize for Applie
d Research
in Infrastructure
Economics 2008
Smart Metering: International Lessons and UK Policy
Little did we know when we
started our research on smart
metering that such a complex
and intriguing subject awaited
us. The main aim of our
recently published working
paper, Smart Metering and
Electricity Demand: Technology, Economics
and International Experience (EPRG 0903),
was to provide a comprehensive framework
for assessing the costs and benefits and to
review international experience to date. We
found that international experience suggests
demand response benefits to be a small but
central part of building a business case for a
smart metering rollout particularly due to
avoided peak capacity costs. The experience
of California has been such that the
implementation of time-varying tariffs has
been very effective (an average shift of 13%
at times of critical peak). In Ontario, an
average conservation effect of 6% was
observed in a similar smart price pilot.
The UK government is working towards rolling
out smart metering to all homes by 2020,
although delays have been encountered in the
policy process in deciding on the best
strategy. Total cost estimates from a 2008
government impact assessment range from
£8 billion to £13.4 billion depending on
technology, market structure and rollout
period. None of the options considered yield a
positive net benefit but this is currently being
reviewed in light of further international
experience and cost reductions. We have
submitted our research to the House of Lords
to assist in this review and expect a decision
to be announced on the rollout strategy very
soon. Whichever strategy is adopted, it is
important that the regulatory and policy
framework encourages continued innovation
in smart metering and associated
technologies and services in the years to
come.
Aoife Brophy Haney
Over the past year the TSEC 2 team has
produced several pieces of work for two
projects on International Support for
Domestic Climate Policy.
The first phase of this work began in February
2008 with a kick-off workshop to launch the
project convened with the research
organisation Climate Strategies. The
workshop gathered international participants
from China, India, Brazil, South Africa,
Ghana, the US and Europe to discuss policies
and actions with climate co-benefits in
developing countries.
The ISDCP project resulted in six country
case studies examining the challenges for
domestic implementation of climate policies
in developing countries, and six institutional
papers reviewing mechanisms and
institutional arrangements to facilitate
international support for the implementation
of domestic action. This draws on experience
in other policy areas. Available online at:
http://www.eprg.group.cam.ac.uk/phase-i/
The second phase of the work,
ISDA (International Support for
Domestic Action) focuses on
how the frameworks for technology
development and transfer, as well as financial
flows to developing countries, can be
structured to facilitate the shift to a low-
carbon development trajectory. An initial
workshop for the project was held in
Cambridge during February 2009, discussions
produced three strands of work to be
developed over the following 6 months: the
role of international support for developing
country policies, the use of indicators to
manage implementation of domestic policy
action, and international cooperation for
technology transfer. This involves country
workshops in Ghana, India, Brazil, China and
South Africa. An international meeting in
Bonn during June will bring together
participants in an outreach event for the
project to discuss how domestic policy,
including regulation, subsidies, information
provision and carbon pricing, can be used to
motivate carbon emission reductions.
Sarah Lester
Developing Country Projects: International
Support for Domestic Climate Policies
Staff News
Coming
Yi Jun Lin joined us in
April 2008 to work as
Assistant
Administrator.
Tim Laing joined us in
June 2008 to work as
Research Assistant for
TSEC2 project.
Claire Craig-Nassar
joined us in November
2008 and is working as
Working Paper Editorial
Assistant
Sachi Findlater joined
us in January 2009 to
work as TSEC3
Research Assistant
Adam Rysanek joined
us in March 2009 to
work as TSEC2
Research Assistant
Going
Many thanks to Liz
Hooper, who finishes
as Working Paper
Editor to concentrate
on her PhD at Centre
for Competition Policy,
UEA
William Yu starts a
new position as Head
of Climate Program at
the World Wildlife Fund
in Hong Kong
Livia von Roetteken,
who worked as a
Research Assistant for
TSEC3 for a few
months
Issue 2
May 2009 NEWSLETTERNEWSLETTER
Focus on People
The EPRG launched an updated website at the Winter
Research Seminar in December 2008. The website provides
information on our latest thinking, recent news, our events,
research and publications, and our Energy Policy Forum.
Thanks to all the support provided by the Centre for Applied
Research in Educational Technologies (Caret).
After graduating in economics
and a short stint in consultancy I
joined the EPRG in late 2005 as a
research assistant. Coming to
Cambridge was very exciting.
Soon I immersed myself in
benchmarking the efficiency of
networks and the economics of
incentive regulation. Towards the
end of my year as a research
assistant I successfully applied
for an EPRG PhD studentship
and moved from the Economics
Faculty to the Judge Business
School. Today the end of my
PhD is in sight and both
the Business School and
the EPRG have become
a second home.
The EPRG and in
particular my supervisor
Michael Pollitt have
greatly supported my
research. I came to
realize that few things
are more important for
a graduate student than
a strong research group,
EPRG sponsored PhD students
make substantial contributions to
our research and are full
members of the team. Starting
in October 2008, we are pleased
to welcome
∗ Christian Winzer, who will
work on International Electricity
Trade.
∗ Raphael Heffron, who will
look at The Integration of a
Nuclear Power Plant into Its Local
Environment.
∗ Manos Kitsios, who will
investigate Innovation in Energy
Markets.
“ www.eprg.group.cam.ac.uk
“
Electricity Policy Research Group
Judge Business School
University of Cambridge
Trumpington Street
Cambridge
CB2 1AG
United Kingdom
Contact Details
New Website Launched!
Thomas Triebs
3rd year PhD student
like the EPRG. The group
provided funding, networks and
most importantly an intellectual
framework for my own research
and far beyond.
Other research activities
Winter 2008
Editorial Team: Madie Arm
strong & Yi Jun Lin. Designed by Yi Jun Lin
New Students
Tel: +44 (0)1223 766638
Fax: +44 (0)1223 339701
E-mail: m.armstrong@jbs.cam.ac.uk
Website: www.eprg.group.cam.ac.uk
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