The good news for Britain’s energy supply is that the sheer scale of the recession has cut our electricity demand and carbon emissions. An impending energy security crunch has been postponed.The bad news is that the recession will almost certainly delay investment in Britain’s energy infrastructure and encourage complacency.

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For the past two decades we have had ample reserves to absorb the shocks: now the margins are beginning to wear thin. Many of the existing power stations were built in the 1970s or earlier. All the coal-fired stations are more than 30 years old, as are most of the nuclear ones. They are all coming to the end of their lives and their reliability is inevitably beginning to suffer.

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Time is now very short in energy terms. Investment does not fit into neat electoral cycles. With about five years to go if the economy recovers, there are still things that can be done. Our energy policy was designed for the years of energy surpluses and North Sea gas. It is still focused on keeping costs down and sweating assets. What is needed is a radical rethink, with investment the priority. It will take a national effort to prevent a serious crisis in the middle of the next decade.

Without such a redesign, if there is a rapid economic recovery, things could get nasty quite quickly. As energy systems operate closer to the margin, small shocks have large consequences. Today a few demonstrators cannot make any serious impact, and even a prolonged interruption in Russian gas supply can be withstood. But as margins tighten, prices respond disproportionately. Britain has probably already committed itself to higher and more volatile prices.

Dieter Helm, Professor of Energy Policy at the University of Oxford and a Fellow of New College, writing in The Times.

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