As surely as the energy markets have changed over the last 20-30 years of the twentieth century, so can we expect them to change in the coming decades. Those inevitable changes present challenges that both private and public sector decision makers will have to face in the not-so-distant future. Preparing the best information on which to make those decisions is a challenge that we must face today. To accomplish this, there are three basic principles that guide us.
o We cannot manage what we do not measure.
Without strong improvement in the quality of information in energy it will be hard, if not impossible, to assess meaningful policy options. The United States spends $80 million annually for all of the activities of the Energy Information Administration. This is in contrast to an annual energy expenditure of almost $700 Billion. EIA may be the single largest and most visible, but it is not the only activity in the U.S. devoted to understanding energy. However, even if EIA is one twentieth of all of the public and private sector activities combined, the total that is devoted to energy data and analyses would still be only two tenths of one percent of annual energy expenditures. Given the challenges, this is unreasonably small.
o Have the right tool for the job.
The generation of energy market analysis and models that were developed when prices were rising rapidly are not necessarily the kind of models and analyses that are needed today. Price is still a major component of our understanding of energy markets, but the transformation in the markets themselves creates a new set of issues and uncertainties. Looking myopically at energy issues out of the broader context, without considering the full scope of benefits and costs associated with energy will limit the evaluation of meaningful policy options. There is a need for an improved characterization of both technology and behavior in the understanding of the role of energy in a changing world.
o Analysis is for insights
There is need for transparent and open communication between the analysts and between the decision making and analytic communities. Transparency does not equate to simplicity, but to an environment that facilitates an open exchange of information. There must be transparency of assumptions, both implicit and explicit, in both the formulation of the policy questions and in the analysis of those questions. There is substantial room for improvement in the analysis of policy and in developing scenarios that assist decision makers and stakeholders in crafting appropriate solutions. Analysis should provide insights regarding the robustness of results over a range of conditions and possibilities.
