Some Issues in Energy Policy and Planning

In addition to its conventional meaning of “preparing for future situations”, energy planning addresses policy making, in particular in situations where self-regulating markets are perceived as inadequate for reaching given policy goals. A general example for such a situation is given by the presence of non-monetary externalities, that is, costs or benefits that are not included in market interactions themselves. In the energy sector, one of the most important externalities is the environmental impact of energy conversion and use. To internalize externalities, policy making can influence energy market prices by taxes and subsidies, among others. These measures are so-called market instruments. Another group of measures is sometimes called “command and control”. This term refers to rules and regulations such as labeling, building codes, and bans. The choice among several policies and measures aiming at the same outcome depends, among others, on the geographical level (global, national, local) of policy making. While the geographical level refers to the means available to policy makers, policy assessment is an instrument to guide the choice among possible options by evaluating criteria such as effectiveness and side effects. Throughout the energy planning process, uncertainty and its management are important aspects to consider.