Is a “coherent” energy policy even possible?

In a review of devolved Scottish rural policy conducted in 2006, Jordan and Halpin concluded that the attempt to create a “coherent” approach to rural policy was undermined by the absence of a “unified policy community with shared perceptions”. Put another way, attempts to create a coherent set of policies for “rural people” failed because “rural people” was not a coherent unit. Indeed, the authors went so far as to state that the futile pursuit of coherence through this rural frame was counter-productive, leading to undesirable inefficiencies in other aspects of policy.

We might ask whether the same problem currently applies in energy policy. People often complain that UK energy policy is incoherent, that it pulls in opposite directions. There is an ambition to kill coal by 2025, but 6 out of 7 of the remaining coal plants will be subsidised to at least 2020. The National Infrastructure Commission want to explore the potential for greater use of Demand Side Response, but the same technologies are held back by limitations on their role in the Capacity Market. The Carbon Price Floor seeks to drive an efficient, market-led response to decarbonisation, but has the side effect of delivering inefficient windfalls to existing nuclear power stations. In the face of all of this confusion, commentators often cry out for “coherence”.

The lesson from the paper above is that the appeal to “coherence” often falls foul of some of the same pitfalls as “planning” — it assumes that there is a centralised, consistent, uncontested and comprehensive pool of knowledge from which it would be possible to design an optimum set of coordinated policies. Sometimes, these conditions apply. Most of the time, they do not.

In particular, this pool of knowledge will not occur when the community that is intended as the subject of the “coherent” policies are not in themselves a unified group. With different circumstances and different perspectives, they will benefit unevenly from any policy and so will have different views on good and bad. The pool of knowledge becomes muddied by dispute. The result (according to Jordan and Halpin) is that with an incoherent group, coherent policy becomes unachievable.

The same dynamic is observable in energy, where the actors have directly conflicting interests. Subsidising renewable generators will erode the wholesale price for electricity, undermining the economic viability of thermal plant. Restoring the economic viability of existing thermal plant through further subsidy increases the barriers to entry for new generators, creating medium-term security of supply problems. Subsidising new thermal generators means offering them contracts of such longevity that they contravene carbon targets. Perhaps these contradictions are inherent, not coincidental. The energy sector (which includes consumers) is not “a unified policy community with shared perceptions” and so a “coherent” energy policy may not be just practically difficult but theoretically impossible.

Jordan and Halpin’s response is to suggest that Scottish rural policy adopt a model of “partisan mutual adjustment”, which recognises that policies are overlapping and often in contest. Rather than attempt to resolve all of these conflicts in a single, Panglossian, “coherent” policy framework, the policy maker is encouraged to make marginal adjustments within these contests, watching to see what happens, and moving slowly towards a preferable set of compromises. Conflict between policies is accepted as a necessary condition that can be optimised but not eradicated.

What I think this theory misses is that the aspiration towards coherence could in itself be productive, even if it is ultimately a failure. Some failures are better than others. We move the dial not by exploiting conflicts between policies, but by seeking to rationalise them. But I think this theory does touch on why we might be cautious about responses to the problems of energy policy which propose a winningly simply solution (such as Dieter Helm’s giant capacity auction) — it seems inevitable that without a “unified policy community”, these blunt instruments would entail unforeseen outcomes, which would themselves be tackled through additional measures, and before you know it we’re back at today’s patchwork of policies.

In my experience, energy policy people are, by temperament, planners (I include myself in this group). They are train set people. For their Twitter banner picture, they choose a National Grid technician in Wokingham, surveying with dispassionate authority at an illuminated diagram of the UK. They view the current clutter of energy policies with distaste and want to sweep it away, installing instead a single, simple framework. For those of this disposition, the idea that the optimal state of energy policy might be riddled with conflict will be uncomfortable. But it may be better to be uncomfortably accurate than comfortably irrelevant.

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