Helm’s Wishful Thinking on Energy Policy: Repeating Past Mistakes, Expecting Different Results

Thu Feb 01 00:00:00 EST 2018
Sean Gammons, George Anstey, and Richard Druce

Following a decade of inquiries into the energy sector, the UK government issued the Helm Review on the cost of energy in the UK in October 2017. Professor Dieter Helm’s remit was broad—encompassing all stages of the value chain. The resulting report runs to 242 pages and has a long list of recommendations. Helm himself cites two main conclusions: (1) that the cost of energy is higher than it needs to be given the government’s policy goals and (2) that the current policy and regulatory framework is not fit for purpose. Perhaps concerned by the quality or quantity of evidence in the Review, the government responded by issuing a call for evidence immediately after its publication.

In this paper, NERA energy experts Sean Gammons, George Anstey, and Richard Druce provide their assessment of the Helm Review. They conclude that much of Helm’s analysis of the historical failings in British energy policy is sound economics. Though it is not particularly novel, much of Helm’s critique deserves to be said again, given that government has repeatedly ignored it. To name one example, Helm argues that the absence of a single multi-sector carbon price has undoubtedly increased the costs of decarbonisation. Helm’s recommendations are not so soundly based, however.

As our experts explain, Helm’s recommendations for future energy policy directly contradict his own analysis of its past failures. Most notably, Helm’s proposal to nationalise the operators of the electricity system flies in the face of his own critique of the panoply of previous government interventions in the sector. Repeating past mistakes and expecting different results is wishful thinking, and does not make good energy policy. The government is therefore right to call for further evidence before acting on Helm’s proposals.