WORKWEEK

Nick here, excited to bring you another co-authored piece today. Art Lapinsch writes Delphi Zero, a newsletter exploring the intersection of energy, climate, security, and everything in between. 

As we transition from biodiversity month into next month’s topic, infrastructure, this newsletter will explore the hows and whys of energy policy. Energy policy is inextricable from how and whether clean energy infrastructure gets built. I’m excited to share Art’s perspective on the topic, which is informed by his academic studies in European and International Energy Law.

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Ever wonder why energy policy seems so, well, lame? Rest assured, you’re not alone.

Sometimes, it feels like politicians purposefully pick the worst possible policies. Or make them unnecessarily obtuse and hard to understand. But the reality is usually not as black and white. This newsletter will provide a bit of nuance and help you understand how energy policy comes to be (hint, it doesn’t get dropped down chimneys by a giant white stork).

How Policymaking Works

Why is policymaking one of the highest-leverage tools of the energy transition and climate efforts? 

Because policymaking allows you to write and rewrite the rules of the game. Which game? The game of our lives. 

If you think about it, policies set the rules for everyday life—permissions, prohibitions, subsidies, etc. This impacts how players, including both individuals and organizations, behave during the game. 

An example of a hypothetical policymaking sequence looks like this:

1. Policy Objective: Reduce Greenhouse Gas (GHG) emissions from transportation by 95%.
2. Policy Instrument: Prohibit selling combustion engine vehicles in Belgium starting in 2027.
3. Policy Outcome: Emissions drop by X% between 2027 – 2032.
4. Policy Evaluation: GHG emission reductions between 2027 – 2032 did not meet the policy objective.
5. Rinse & Repeat: Expand prohibitions into different types of vehicles (e.g., marine vessels, commercial airplanes, etc.).

A simpler term for “policy instrument” is “law.” 

To write or rewrite the rules, policymakers introduce new laws or amend existing ones. In 2022, the US Congress passed the Inflation Reduction Act – aka IRA – which is full of different policy instruments to tackle various policy objectives.

Want to reduce residential energy usage? Great, grant $5,000 to every unit that meets Zero Energy Ready (ZER) standards.

Want to re-shore critical supply chains? Fantastic, introduce a tax incentive tied to a domestic sourcing quota.

You get the gist… Want something → Do something. Objective → Instrument. 

The main takeaway is that energy policy and energy law are heavily intertwined.

The Infamous Energy Law and Policy Triangle

Now that you understand the basics of policy making procedures, it might feel like you have even more questions. Like, why can’t politicians get a grip? Why do some energy policy decisions seem to miss the mark (e.g., when Belgium and Germany moved to shutter nuclear power plants in recent years)? Isn’t it obvious what the best option would be?

Meet the bane of energy policy makers’ existence: The Energy Law and Policy Triangle.

• Finance (Economics): What is the impact on the bottom line?
• Environment (Climate): What is the impact on the environment?
• Politics (Energy Security): What is the impact on national security?

Besides looking like a structurally sound pyramid, it is still hard to balance. Prioritize one goal, and the other goals might suffer as a result.

Looking through this lens, it might become a bit clearer why different governments prioritize different energy sources:

The main takeaway here is that the tension between the conflicting priorities of finance, environment, and politics lead to the Energy Trilemma. Each decision comes with a tradeoff.

The 4As of Energy Security

Similarly to peanut butter & jelly and policy & law, a third couple enjoys each other’s company, namely Energy Security and National Security.

Why is that?

Our societies run on energy and electricity. Communication, transportation, and other system-relevant functions like healthcare depend on the uninterrupted flow of electrons. Most places even use electricity to power sewage and drinking water pumps. Think about that for a second.

Grid failure means lights out. Literally and figuratively.

That’s why governments and other stakeholders tasked with grid operation are obsessed with energy security. That’s their #1 mandate. 

During my Energy Law degree, a bureaucrat from the European Union anecdotally shared that you can argue everything in your favor by claiming it is for the benefit of “Security of Supply” – the EU’s term for Energy Security.

You can think of it through its 4As of Energy Security:

• Affordability: Can afford it?
• Availability: Can we find it on the market? (theoretically)
• Accessibility: Can we get it? (practically)
• Acceptability: Can we justify it?

The local and cultural context has a massive impact on evaluating the 4As. 

Geographically speaking, Norway lives on another planet than Saudi Arabia. That’s why the former generates 90%+ of its electricity from hydropower while the latter depends 90%+ on oil. 

Culturally speaking, France and Germany couldn’t be more opposed to their stance on nuclear energy. The former generates 60%+ of its electricity with nuclear fission. At the same time, Germany has phased out its last remaining nuclear power plants after decades of anti-nuclear campaigning.

Another way of thinking about energy security is through the following definition by the researchers Cherp and Jewell: Energy Security = “low vulnerability of critical energy systems.”

1. Low Vulnerability: Broken down into risk (i.e., the nature and source of risk) and resilience (i.e., the system’s adaptability).
2. Critical Energy Systems: Divided into sectoral (primary energy sources, carriers and infrastructure, end-uses) and geographic aspects (global, national, regional).

Today, we can see increasing impacts of climate change on our energy infrastructures, such as the 2021 Texas Power Crisis (driven by extremely cold temperatures) or Europe’s Energy Crisis in 2022 (driven by extreme heat, among many other factors). Pair this reality with the risks of cyberattacks on grid infrastructure, and you begin to appreciate what a gargantuan task policymakers and national security professionals face. 

Robustness of the energy system is the name of the game. With this in mind, let’s summarize: All policy objectives may be equal in the abstract, but in reality, those that protect and promote Energy Security tend to get primacy.

5-Minute MBA in Energy Policy

Next time you analyze energy policy, ask these three questions:

1. Policy Objective: What are they trying to do?
2. Energy Trilemma: What are the tradeoffs in this decision?
3. Energy Security: What’s the (security) context of this decision?

That’s your 5-minute Energy Policy MBA, as easy as ABC.

The net-net

Nick here again. The two primary points I’d want to emphasize in closing from Art’s excellent write-up are as follows.

For one, many stakeholders are involved in designing energy policy and delivering energy. To simplify, there are government policymakers and lawyers, people tasked with overseeing energy delivery, and organizations and people who actually deliver energy. One of the main challenges inherent to the energy transition is that these people, simply put, do not always talk to each other enough. And, as Art illuminates, their primary objectives are rarely aligned.

The robustness of energy systems and energy delivery is a prime example. For local governments and those tasked with overseeing energy delivery, robustness, or more simply, consistency is the utmost key. When you hit the light switch, the lights go on. Full stop. 

As renewable energy penetration in grids increases, it has significant fuel-saving and emissions mitigation benefits. But it also requires everyone involved in the delivery and management of energy to evolve, often in significant ways, to continue to deliver on the robustness quotient. 

Don’t let any paper or preacher convince you that a 100% renewable energy system is easy if we mobilize sufficient resources. No grid anywhere on Earth – absent select ones endowed with divine hydro or geothermal resources – even approaches that distinction today. The path to a carbon-free power sector requires more innovation in energy storage and more deployment of fundamentally hard-to-deploy things like electricity transmission and distribution infrastructure.

At the same time, don’t let anyone convince you that these goals aren’t tenable because they are hard. Solving the energy trilemma is one of the single best problems any of us could take on.