9. Energy security should not, in our view, be seen
in such simple terms. We believe the key criterion should not
be self-sufficiency, but effective risk management. Pure
self-sufficiency would be an enormously expensive aim, even if
it were practicable. The United Kingdom and Europe will inevitably
be reliant on world markets, as the Green Paper shows. This should
not be seen as a weaknessenergy trade, like other forms
of trade, is beneficial to producers and consumers alike and should
be welcomed, not rejected. But this does not mean that it is without
risks. The aim of energy security policy should be to understand,
reduce, and mitigate those risks, rather than to attempt the impossible,
of avoiding risk entirely.
10. Sometimes, it will be possible to identify risk
clearly and take specific protective measures. More commonly,
the nature and scale of the risks will be uncertain, so the protective
measures will need to be generic. Risk management from this perspective
has three main elements:
of fuels, of the sources of those fuels, and of the transit routes,
to avoid over-dependence on any particular source;
so that the system can respond quickly to any disruption;
via the existence of stocks, alternative sources which can be
expanded in an emergency, and so on.
Diversity and flexibility, in particular, are characteristic
of competitive markets. We believe there is no fundamental incompatibility
between energy market competition and security, although, for
the reasons given, we believe the Government will have to set
the framework within which the market operates.
Energy security needs to be redefined for liberalised
energy markets. We recommend that the focus should be on risk
management and that the main tools should be diversity, flexibility
and the availability of back-up, not central planning or self-sufficiency.