Book reviews

0 Life raft launch systems failed or were operated ineffectively

0 Helicopter evacuation was made im- possible due to fire and smoke

0 Evacuation routes from primary mus- ter points in accommodation were im- passable

0 Communications were lost to other nearby installations and the shore.

Secondary consequences included:

0 Great difficulty was experienced in evacuating from such heights (ie main platform levels)

0 Haphazard collection and pick-up of survivors at sea level was experienced _ ie no plan existed, no pre- designated points were established - hence no equipment such as lifejack- ets, rescue light/beacons were avail- able. (This is not a criticism of the efforts of the rescuers)

0 Most rescue craft were there only by coincidence.

Overall, there is little or nothing in the report of this two-day symposium to reassure us that there will not be furth- er major accidents in the North Sea.

Table 1. UK offshore oil and gas accidents.

Year 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989

employed on installations

9 200 12 100 12 500 10 500 22 000 21 000 21 500 28 700 31 300 29 000 22 300 28 200 29 300 30 700

Number of fatal accidents Installations

16 10 0 7 1 4

11 7

12

3 6

171 2

Vessels 1 1 4 3 3 2 2 2 1 1 0 0 2 1

Number of serious accidents (injuries to persons)

Installations Vessels 50 7 35 5 33 7 39 4 42 3 54 5 37 2 41 6 44 15 85 18 72 29 38 21 73 12 73 12

Notes: The estimated number employed includes construction workers and the personnel of mobile drillings rigs, service vessels, ships, barges and survey teams, and is not directly comparable with numbers shown for previous years.

personnel to have escaped if the perform- ance of the actual evacuation had matched the standard generally accepted by the offshore industry.

The main consequences of the primary event were:

0 Fire prevention systems were knock- ed out

0 All alarm and Public Address systems failed

0 Emergency power systems were only partially effective

0 Control Room was effectively des- troyed

0 Command structure was disrupted - key personnel unavailable

0 Emergency shutdown may not have been fully effective (Not proven)

0 Some muster points/lifeboat stations were rendered untenable (Not one lifeboat was launched)

Gilbert Jenkins

Sunningdale, Berkshire, UK

‘Robert Orrell, Blow Out, R. Hale, UK, 1989.

Generating more heat than light

LEAST-COST PLANNING IN THE GAS INDUSTRY: A study prepared for the Office of Gas Supply

by Ian Brown

Office of Gas Supply, July 1990, pp 34

The title of this paper may confuse some readers, for it is directed at least-cost planning in a very specialist sense; and such confusion typifies a subject which seems to generate (perhaps appropriately) considerably more heat than light. In this paper the presentation itself further compounds the difficulties.

Least-cost planning is defined as ‘meeting the need for energy services with the least costly mix of energy supplies and energy efficiency im- provements’, but the focus is on the last phrase - energy efficiency im-

UTILITIES POLICY July 1991

provements. It refers to provision of demand reducing conservation techni- ques by an energy supplier, usually as an alternative to greater production capacity.

Clearly this booklet is intended for policymakers and practitioners rather than theoreticians, but the lack of any coherent basis for such an approach makes the arguments difficult to assess. The main (implicit) argument for such a process seems to be the existence of market failure - an ironic argument for a newly privatized indus- try when such failure is often a justi- fication for nationalization. In this case the nature of the failure is of two sorts - the failure to reflect social costs (particularly pollution) fully in the in- dustry’s planning, and some failure in consumer’s decisions to implement (or not) energy-saving investment. The latter may occur for a number of

reasons: myopia because of diverg- ence between social and private dis- count rates; unwillingness to invest because of uncertainty about how long the benefit would be enjoyed and whether the cost would be recouped when property is sold; and lack of consumer information.

The paper goes on to discuss how least-cost planning by the industry might alleviate these problems. Most experience to date has been with elec- tricity utilities in the USA, with some least-cost planning in joint gas and electricity utilities and some in gas

companies, and the paper poses two main questions for comparison - be- tween the gas and electricity industries and between US experience and that in the UK. As a collation of experi- ence the paper is helpful, outlining in considerable detail the mechanism of schemes which have been im- plemented or are being developed. However, the failure to identify the underlying justification for least-cost planning makes this evidence some-

357

Book reviews

what disjointed, since these cannot easily be compared with the circum- stances facing British Gas.

Ian Brown (of the UK’s Association for the Conservation of Energy) spends a considerable proportion of the paper discussing the criteria by which any particular least-cost plan- ning investment might be judged. He recommends that the so-called societal test be applied. It is strange to see this social cost-benefit analysis recom- mended in this context - though such an approach would be welcome for all investment. Brown contrasts this with the ‘non participants test’, or no losers test, which stipulates that the invest- ment should only be undertaken if no consumers thereby lose. This is re- miniscent of compensation test argu- ments in welfare economies, but again no reference is made to such relevant theory.

The issue of regulation, crucial to this paper as it was commissioned by OFGAS as part of its regulatory re- view consultative process, appears only at the end. One reason for the involvement of regulatory agencies in the USA is that the rate of return regulation common there gives a clear incentive to firms to boost their capital base, and hence undertake more capital investment than is optimal - despite Brown’s assertion that such regulation is neutral. The difficulty with investment in consumers’ energy efficiency is that it would raise such a company’s costs without affecting its own asset base, and it would much

prefer investment which expanded its own capital stock, and hence allowed increased profits. However the price cap regulation applied in the UK pro- vides different incentives - as Brown notes, these include a bias to boost gas rather than non-gas costs, since the latter can be passed through to con- sumers. Thus, there will be bias against costs incurred to reduce gas commodity costs, including least-cost planning investment.

However, the main problem with much of the discussion of least-cost planning, and with this paper in par- ticular, is that it is viewed partially. If market failure is identified, its nature suggests that there may be more appropriate solutions - eg increased information or using taxation to raise the industry’s private costs to reflect social costs. Even if some kind of subsidy for conservation measures is suitable to remedy inappropriate rates of discount or uncertainty, it is not clear that the fuel supplier should operate such a scheme, when conflict of interest could so easily arise. Moreover, as Brown points out, any such policy may be better im- plemented for all fuels simultaneous- ly, which would suggest third party implementation.

The most startling aspect of this policy is its failure to consider alterna- tive solutions. It seems very odd that an industry which has consistently eschewed any form of price dif- ferentiation in its tariff, including peak load pricing whose significance is

clearly indicated in schedules for con- tract gas and third party carriage, should be subject to measures as clum- sy and draconian as least-cost plan- ning. Much better, surely, to allow consumers to come to their own deci- sions about gas purchase on the basis of tariffs which properly reflect the structure of costs (including externali- ties) than to impose on the industry such a complicated remedy for per- ceived difficulties. Moreover, past ex- perience with fuel conservation poli- cies is not encouraging - the Depart- ment of Energy’s assessment of its own post-1974 conservation campaign suggested that more fuel was often used as a result of seeking such sav- ings. In this context the general enthu- siasm for least-cost planning is hard to comprehend, though (somewhat un- critical) support from the Association for the Conservation of Energy is un- surprising. An incomplete case is not strengthened by a hasty presentation and poor proof reading, which makes the argument difficult to follow in places. This is regrettable since the paper raises important questions, even if somewhat obliquely, and the current interest in such schemes, especially by OFGAS, renders the identification of appropriate answers crucially impor- tant.

Catherine Price University of Leicester

UK

Complete and correct analyses

THE WORLD MARKET FOR HEAVY ELECTRICAL EQUIP- MENT

by Steve Thomas and Francis McGowan

Nuclear Engineering International

Special Publications, UK, 1990, 137pp

Two main features of the heavy elec- trical equipment industry often allure scholars: the collusive relationships

358

among the few, often giant firms which operate within the market, and its property of being a major engine of technical progress in the downstream sector, the electricity supply industry. Therefore, at least two main issues of industrial economics can be dealt with by handling the sector: oligopoly analysis and economics of innovation.

In a rather naive textbook approach a trade-off seems to exist between these two issues; a strongly segmented market, with clear ties among the few

suppliers and absence of foreign com- petition on the domestic markets of each firm, does not seem to be a proper market structure to trigger off innovative process.

As in every naive approach, there is something right in such simplification. As a matter of fact the power equip- ment industry is usually no more con- sidered, up to now, a high technology sector, and it is often called a ‘mature industry’ (if compared to other, more dynamic industries).

But that was not right at the time of nuclear technology expansion, when the sector was called ‘strategic’ and many countries, above all in the EC,

UTILITIES POLICY July 1991