15 Mar 2009

Estimating Historical Energy Security Costs

Steve Arnold / Anil Markandya / Alistair Hunt

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Energy security is of increasing importance in today’s world, yet little research has been carried out on the costs or benefits of energy security policies. This paper looks at the period after the 1970s to estimate the cost premium of electricity generation due to energy security policies. The cost premium is estimated for France, Germany, Italy and Spain for the period 1980-2000 by estimating actual versus hypothetical lowest cost generation mixes. The cost premium is estimated to be lowest for France, which had a clear energy security policy based on developing nuclear power and reducing reliance on oil and coal.