By Andreas Markoulakis and Eleanya Nduka, University of Warwick
Energy security plays an increasingly important role in policy decisions. In the UK, energy security is mentioned explicitly as a parameter to be addressed in the Clean Power 2030 Action Plan and the British energy security strategy .
Nonetheless, we know very little about energy security and energy preferences at the household level, since energy security is usually centred on analysis across countries. In our paper, we empirically examine how preferences for three energy sources (renewables, nuclear, and shale gas) are affected by different dimensions (facets) of energy security.
The facets we examine are vulnerability (capturing concerns on supply security and development), affordability (higher future prices), reliability (power cuts) and imports dependency (being dependent on international energy sources).
The novelty of our approach lies in disentangling the impact of energy security facets. This allows for a comprehensive overview of energy security that can be very informative to policymakers.
We utilise UK household data and an ordered logistic econometric model to estimate the support, opposition and neutrality of preferences to examine the hypothesis that lower concern levels for energy security are associated with weaker support for all energy sources. We remain agnostic concerning how this hypothesis might vary across each facet and for each source.
Our findings reveal a common pattern that emerges. Figure 1 shows that there is a decline in support as households become less concerned about vulnerability, but the rate of this decline is more pronounced for nuclear (7.9 pp) and shale gas (7pp) than renewables (3.9pp). Notice also that households are becoming increasingly neutral towards all sources as security concerns decline.
Affordability only has a small impact on shale gas, where support is falling by 6.8pp, and no impact on other sources. Regarding reliability, this decline in support is also detected for nuclear and shale gas, but not for renewable energy, where instead a small rise occurs (3.8pp), reflecting a strong backing from UK population.
Fig. 1: Energy vulnerability impact
Concerns about imports dependency are reflected primarily on shale gas and nuclear support, whereas support for renewables is affected much less. Still, a small decline for two levels is detected.
Moreover, when households are very/fairly concerned, a divergence arises with respect to the source generating the concern. Concerns for oil dependence boost all three sources but, in contrast, concerns about gas and electricity imports boost support for nuclear and shale gas but does not affect renewables.
Ultimately, this implies that UK households view all sources as hedges against security supply challenges, but to varying degrees.
There is wide variability in the impact of energy security facets. Surprisingly, affordability has a very limited impact, likely due to the steep discounting of the future, but this could mask people’s ignorance of higher energy costs for the green transition.
Concerns about energy imports are detected, but mostly for nuclear and shale gas. This is likely to mean that households view both these sources as hedges against import risks. This is partly supported at the policy level, at least for nuclear power.
On shale gas, given the moratorium and the lack of knowledge about the energy source at the household level, there is a rise in support given high concerns about oil and gas imports, and we should note that gas is still used in the electricity mix in the UK.
The impact of energy security facets follows a non-linear path exhibiting threshold effects, i.e., the impact is detected below a concern level. This mirrors findings in behavioural economics.
We report more results such as how support is distributed across the UK for each energy source. For more details, you can read our paper in full.
This blog was produced as a result of an internal webinar for UKERC, which spoke to the findings of the paper.