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