My interaction with the BIEE goes right back to the early days when the 2nd international meeting of the IAEE was held in my college, Churchill, Cambridge. I was working in the World Bank from 1981-83 but arrived back for the 6th IAEE conference, also held at Churchill College, whose master, Sir William Hawthorne, had succeeded the first master, Sir John Cockroft, both important figures in the energy world. Cockroft famously split the atom, and played a leadership role in the commercial development of nuclear power. It was at his insistence that Windscale be fitted with stack filters that prevented the nuclear disaster causing a worse radiological leak. Hawthorne worked on the early development of jet engines, the precursor to modern Combined Cycle Gas Turbines, and was active on many energy committees, and founding chair in 1974 of the Advisory Council on Energy Conservation.
My interest in energy economics was sparked by an invitation to work with Joe Stiglitz in Stanford in 1976, when the topic of the day was theory of exhaustible resources (Heal and Dasgupta were visiting at the same time), and evaluating risky energy investments (we were supported by EPRI on that topic). I also worked on credible oil import policies (slightly before Kydland and Prescott published their seminal article on policy credibility) but such are the lags in publication that it was not until 1981 that I succeeded in publishing ‘Oil Prices, Cartels and the Problem of Dynamic Inconsistency’ in the Economic Journal. From 1981-83 I worked in the World Bank, primarily on energy related matters (an Energy Assessment mission to Papua New Guinea and then on transport fuel taxation) before returning to Cambridge.
I was lucky to be a speaker at the first BIEE conference in Warwick in December 1995 and to be invited to sum up the second conference, also in Warwick in 1997, both under the impressive leadership of Peter Davies, Gordon MacKerron and Peter Pearson. The first two conferences produced substantial books, although the BIEE now follows academic pressures to encourage its presenters to publish in article format. The first conference reflected on “The UK energy experience – a model or a warning?” while the second conference widened out to international energy experience. Looking back at those first two conferences the tensions between the enthusiasm for leaving energy policy to the market and the irresistible urge of politicians to intervene in such strategic sectors was evident then and remains so now. In the 1990s the UK energy privatization experience was stimulating the European Commission and the World Bank to spread the message that unbundling could unleash competitive forces for efficiency and that incentive regulation could move natural monopolies away from the deadening hand of the state. Nevertheless, market power was an issue in electricity markets, as was the already recognised need to properly price or otherwise address environmental issues. My summing up then contrasted the emphasis in the previous two decades on energy security, the macro consequences of high oil prices, and resource exhaustion with rising concerns over global warming and pollution, and the recognition that politicians are never happy unless they have reasons for intervention – the incoming 1997 Labour Government duly imposed a windfall tax and ordered a review of utility regulation, replacing the old and simple direction of efficiency with new and confusing obligations.
The 1999 BIEE conference was by now firmly fixed in British energy economists’ calendars, and moved to its new home in the delightful setting of St John’s College Oxford with a regular biennial September two-day format. It has retained one of its most appealing features of creating a collegiate atmosphere which allows the British energy community to refresh contacts while welcoming newcomers, it is small enough to be engaging and large enough to be stimulating. Over time my impression is that it has become more academic with less government (particularly civil servant) involvement. That partly reflects the shift of emphasis from oil towards gas, electricity and the environment. One of the appealing features of earlier conferences was the remarkable candor (under the Chatham House rule) of some policy participants in what was really going on – something to strive for in all energy conferences.
These days we are increasingly judged by impact, and naturally the BIEE and its members are no exception. The problem with impact is that it takes time before it becomes apparent, it is often the result of the gradual accumulation of many inputs, and of course no politician would ever admit to being influenced by an academic argument. Yet that impact is there – after trying everything else, sometimes the government makes sensible decisions (or at least admits implicitly that they got it wrong last time round and will have another try, as with Electricity Market Reform and nuclear power). Civil servants and regulators are becoming somewhat better at recognizing the value of studying the experience of other countries, and the BIEE and IAEE provide an excellent platform for providing international evidence. Looking back at the early conferences the international experience of unbundling and liberalizing was high on the agenda, as was the role of markets, risk and market power mitigation in different institutional structures, notably central Europe as it emerged from state socialism. We were then dismantling the electricity Pool, and we are now trying to reestablish some of its virtues, such as a single balancing price, and the quest for liquidity to price contracts for difference. We were then looking at the first energy directives, now we are on the third package with some prospect of completing the tasks described then, although not necessarily with the eventual market design, which remains a work in progress. Capacity markets, nodal pricing, central dispatch and other aspects of the US standard market design remain to be adopted.