When the state of California was hit by rolling power blackouts two years ago, some commentators at the time daftly blamed it on privatised electricity generation, when of course the real cause was the partial deregulation of power in the state. There was no market incentive for power generation firms to increase production, and ferocious environmental controls and “not in my back yard” planning wrangles also crimped capacity.
Well, looks like we could be headed for a similar fate here in Britain, for the first time since the unlamented 1970s, according to this article. If we have a bad winter in say, 2006, the lights could go out for part of the time.
Not all of this can or should be blamed on the current Labour government. But there is no doubt that its determination to suppress nuclear power, its failure to genuinely liberate energy supply and production, could leave the UK facing a serious problem. The economic consequences could be disastrous.
So when you find yourself brushing your teeth in the dark, think of the insincere, smiling visage of Saint Tony.
Has anybody else thought about not using the word “privatisation” for such schemes, but “perestroika” instead? It means “resturcturing”, but of course without getting rid of government control, and would seem to be a perfect word not only for what was tried with electricity generation in California, but the rails system in the UK.
The problem in California was that the wholesale side of the business was deregulated but the retail side was not. Consequently, when wholesale rates went up the companies could not pass the increases to consumers and then lost a bucket-full of money. BTW the companies were dumb enough to agree to this nonsense and deserved everything they got.
Nuclear power is a much more interesting subject. There are places where nuclear power is widespread and generates little controversy (France and Ontario come to mind). I used to live in downtown Toronto where there is a nuclear reactor conveniently signposted and nobody worried about it. Yet in other places nuclear power is deeply controversial.
The details of the debate are far to much for this forum, but there is a reasonable case to be made that nuclear power is such a great idea given the geopolitical alternatives (oil) that the anti-west left pulled out the stops to prevent it. And I must say they were succesful in most places.
Wind power cost per kWh is currently on par with nuclear power. When the mass manufactured turbines of about 3 – 5 MW peak go into production wind will be on a par with coal. Beyond that size wind will be the cheapest electrical source.
Wind can be easily integrated with the grid up to about 20% of total capacity. To go higher than that storage will be required. Super flywheels will be available when that level is reached.
The main trouble with wind is the same as nuclear. Whacko enviros.
Go figure.
M Simon:
Frankly when it comes to wind power, I’m with the whacko enviros. The idea of thousands of steel turbines cluttering up the countryside is a horrendous thought. Give me nuclear any day.
Cydonia
It turns out there was also market manipulation. Providers of power were deliberately withholding some of it in order to drive prices up. There have been some prosecutions, by the way, as a result.
Johnathan, I think you’re oversimplifying what happened in California to support your own viewpoint on free market economics? I see the Telegraph taking a shot at Gray Davis the other dayt on a similar tack. Obviously its a mess but as with Enron I think events are being stretched for political effect.
I agree with Phil about the complexity of the debate, but I’d love to see a greater enthusiasm for some of the alternative power sources – we could avoid the geopolitical angle and the environmental one.
I can’t agree with you Cydonia re the wind issue.
At least when you build a wind farm you’re not creating waste that will be a problem for thousands of years to come. If we crack safe fusion then maybe Nuclear will be the way forward but for now I think we’re just making trouble for future generations.
Does anyone remember the link posted here a few weeks ago for the machine that turned garbage into oil – maybe thats the way forward?
Hydrogen. I would pay almost anything and suffer almost any inconvenience to be able to stop funding Islam with my purchases of petrol.
The problem in California was unnecessarily exacerbated by the public’s refusal to allow any new power generation plants to be built. Let ’em sweat in the dark.
The problem in California was that the wholesale side of the business was deregulated but the retail side was not. Consequently, when wholesale rates went up the companies could not pass the increases to consumers and then lost a bucket-full of money. BTW the companies were dumb enough to agree to this nonsense and deserved everything they got.
This is completely daft. I’d love to show you the $1000 energy bill (for 1 month) my uncle got from the mess in California. The price gouging was definitely passed onto consumers. What happened in California was the result of unscrupulous power companies joining together to rig the system and drive the prices through the roof because deregulation allowed them to do so. The same thing that’s happening in the case of medical malpractice insurance in the US right now. Complete deregulation is just as much a failure as total state control and over-regulation of the economy. Anything taken to an extreme is a prescription for failure.
The idea that there was complete deregulation of the California electric industry is a complete lie, just like the lie that the British railways were completely privatised. Weren’t there caps at first on the prices that could be charged consumers, during a period of time when there were no caps on the wholesale prices? And wasn’t there only one legal exchange for purchasing electricity on the wholesale market? Doesn’t sound like deregulation to me, which is why I used the term perestroika in my previous comment.
For the record, the nuclear power plant in Toronto is east of the city in Pickering, and another in Bowmanville – 30 and 50 miles out of the downtown.
That said, most of our plants are being reconstructed and refurbished with an unlimited budget, and since they’re off-line, we’ve been threatened with blackouts too.
Our privatization was canceled when our hydro bills went way up (30%), so now we are back to subsidized hydro and supply problems.
When someone figures out how to fix the mess, call our Premier. It appears everywhere is having this problem. Free markets, if done correctly, must be better than state control, however.
For the record, the University of Toronto has a nuclear reactor in downtown Toronto. Here is a map – http://www.chem-eng.toronto.edu/~slopoke/location.html
linden, what happened in California is a classic example of legislators and bureaucrats acting from good intentions and it all go disasterously wrong. To blame it on nebulous conspiracy is just avoidance of the issues.
The California energy crisis was clearly made in California and its interesting that no one (in Cal) seems interested in the real causes. And it all seems set to repeat itself the next time natural gas spikes in price, as they will, because of inelastic supply.
For images of what the wind-turbines look like in a very large scale, check out these photos of the wind turbine farm near Palm Springs, California (about 90mi east of Los Angeles in the desert/mountains). They are a definite eye sore. But, they are out in the middle of the desert, so they aren’t obvious from anyone actually *IN* Palm Springs.
They’ve got some of these wind turbines in the foothills of the Pyrenees and they are hateful. Not only do they disfigure the mountains, but their shape is authoritarian, somehow. They are very nasty things. Nuclear power is best.
I like windmills, used to enjoy driving and flying over the wind farms east of Livermoore in California when I lived there.
Nuclear is probably more sensible though.
On the subject of high bills in CA – 6 months was $80 the year before last which made me laugh in comparison to a UK bill.
The California power mess is what you get with partial deregulation when the regulated industry ducks into a back room with the regulators.
The problem was three-fold. First, and fundamentally, there was no deregulation of production, so in-state generation was stagnated at completely insufficient levels (no new power plants built in 10 years), creating upward pressure on prices.
Second, many retail rates were capped (there was a mish-mash, with some municipal utilities exempted, as I recall), so there was no incentive to reduce demand, or what is often called “conserve” power. I found it particularly droll that the Californians, who are so big on conservation of power, went to great lengths to ensure it didn’t happen in their state. This also created upward price pressure.
Third, the wholesale market was left firmly in the control of the state, with a byzantine power trading system. Perhaps its primary flaw was that it prohibited any forward contracts for power – all wholesale trading had to be done on a daily “spot” basis. Spot power contracts are by far the most expensive.
The Californians had to go out of state for power to meet high demand, and could only buy it through an artificially managed spot market. This made market “manipulation” absurdly easy.
Although I am not sure why it is market manipulation to withhold your goods on the expectation that tomorrow’s price will be higher.
Phil,
k, so it’s not a widely known generator. My bad. Is it part of the supply or just for experiments?
I can’t let M. Simon’s assertions on wind go unchallenged.
Regardless of its dubious economics, wind does not compete with nuclear power, or indeed with any other conventional generating technology. Since it is randomly intermittent, the best it can do is displace peaking generators, like hydro or natural gas. It won’t replace them, since they’ll be needed to cover the times when wind generation is insufficient to meet demand. There’s a good chance they won’t even reduce pollution much, since gas and
coal plants will often be forced into spinning reserve mode (in which the fuel is being burnt to keep the plant ready to run) in case the wind suddenly dies.
Wind hardly effects nuclear generation at all, despite the rhetoric. Nuclear is a baseload generator–it produces rivers of electricity around the clock, and as the name indicates, provides the solid,dependable base generation that our society takes for granted. Wind–being randomly intermittent and often weak–cannot perform as a baseload generator without an equivalently sized storage or backup generating system. And what does that do to its economics?
And on storage: super flywheels, eh? Flywheels have wonderful power densities, but low energy densities. They are ideal for smoothing out momentary fluctuations in the electricity system, but utterly inadequate to providing the days or weeks of backup power that a large-scale wind system would require. We don’t have any storage technologies capable of operating in tandem with a large wind system. Think of building pumped-hydro facilities in every available valley, or thousands of flow battery installations like Regenysys, or a country-wide hydrogen/fuel cell generating infrastructure.
The Danish electricity system operators at Eltra might also disagree with your assertion that wind starts destabilizing the grid at about 20% penetration. Denmark has been experiencing grid instability for some years now due to their wind turbines, and currently experiences regular supply/demand imbalances of 800-1,000 MW, when the wind system over- or under-produces electricity relative to the forecasts. Fortunately for Denmark, they have very large transmission pipes to neighbouring countries relative to the size of the Danish system, and can sink or source energy as required (especially since Norway has loads of fast-responding hydro). Britain has very small transmission pipes for a much larger electrical system, and cannot so easily shed excess electricity or import to make up deficits.
And on economics: Every country with lots of wind subsidizes it in some way. In the US, the wind industry forecasts doom each time the federal government threatens to take away its tax credits. Both in economic and technical terms, wind often looks like a gigantic white elephant.
Tim G, Its been there a long time. I used to walk by the very non-descript building on a regular basis – I lived a few blocks away. This was 10 years ago and no discernable security either.
Its a research reactor, although undoubtably a fair amount of Uranium in it.
Murray, Natural gas is increasingly the fuel of choice for baseline generation. California and the UK are prime examples of almost all new generating capacity being gas. The problem with gas is that supply is inelastic and the stuff is hard to store and transport. Lots of expensive infrastructure required. Not to mention the truly scary security risks presented by bulk LPG carriers.
Something that really suprised me is, depite no nuclear power plants built in the 20 years in the USA the amount of electricity generated from nuclear has been steadily increasing due to improved technologies and efficiencies – more than doubling over the period.
Thanks to Murray for his succinct, informative post, which will lend technological authority to my arguments against wind-power with all the drivelling post-hippy eco-nuts in my area. The couple of wind-farms one passes down at the bottom end of the A30 in Cornwall are intriguing, and almost beautiful in a slightly menacing SF way, but one shudders to contemplate large tracts of land being covered in the damn things.
Hippie eco-nuts would not understand Murray’s argument. It doesn’t fit easily onto a cardboard sign or make a ryhming slogan. It requires logical thinking, which they refuse to do.
But if you could trap one in a room for a while, maybe you could beat it into him …
As Mr. Hartin pointed out:
Third, the wholesale market was left firmly in the control of the state, with a byzantine power trading system. Perhaps its primary flaw was that it prohibited any forward contracts for power – all wholesale trading had to be done on a daily “spot” basis. Spot power contracts are by far the most expensive.
This is almost correct. It wasn’t exactly a spot market but a “day-ahead” market and was quite innovative in that it forced the suppliers to provide their price one day in advance and were not allowed to change it. It’s counter-intuitive, but it leads to lower prices because they know they won’t have a chance to bid again.
The fatal flaw was making it illegal to purchase forward contracts as Mr. Hartin pointed out. The only place they were allowed to buy power was on the day-ahead market making it prime for manipulation and making it impossible for purchasers to mitigate their risks.
California’s deregulation was flawed, to put it mildly.
You’re so funny.
When privatisation (obviously) doesn’t work, the State (!!!) is to blame & you want further privatising.
When one single public stuff happens not to work satisfactorily, then it’s the the very proof the world was awaiting for throwing the State to the garbage.
UK trains = Californian electricity = a total risible mess.
Spare your overrequested neurones & come back to a more pragmatic approach.
Things shared by the common people ought to be run in a public manner.
Kodiak
Kodiak is a communist. Who knew?
D2D,
No, I’m not a communist. Just a faked one. As a matter of fact I was sent here by a libertarian French blog to check if any of you could measure up to ultraleftist contradiction.
But shhhhhhhhhh!
Don’t tell anyone…
Phil Bradley: Yes, natural gas is increasingly used as a baseload fuel, but this seems like quite a gamble, given the volatility of natural gas prices and the need for infrastructure that you mention.
Tony H: Glad to be of service. If you’re interested in learning more, I can supply quite a few references. Try these to start:
Jensen, J.K. (2002). A balancing act – what demands does wind power make on a grid? Renewable Energy World 5:5, p. 56.
ILEX Energy Consulting (October, 2002). Quantifying the System Costs of Additional Renewables in 2020 (080SCARreport_v3_0). Oxford, UK: Department of Trade and Industry (U.K.). 116 p.
Taylor, J. and P. VanDoren (2002). Evaluating the case for renewable energy: is government support warranted? (Policy analysis no. 422). Washington, D.C.: Cato Institute. 15 p.
The sickening thing about the whole situation is that the politicians and media here in California have been using the debacle as an excuse to attack deregulation, despite the fact that deregulation never took place–nor was it even considered. Some years back, the idea of deregulation was popular, so the politicians up in Sacramento used it as a cover to switch from one fascist system to a different equally fascist system. They called it “deregulation,” because the polls told them people wanted deregulation.
T. Hartin got it right… the “deregulation” in California was nothing of the sort. For someone to say
“Complete deregulation is just as much a failure as total state control and over-regulation of the economy.”
and suggest that this is true because of the California experience is to not know what “complete deregulation” is. When a state (California or otherwise) eliminates all barriers to opening power plants and the sale/transfer/etc. of energy, that would be much more like “complete deregulation” than the mishmash of laws enacted _unanimously_ in 1996 by Dems and Reps alike and the _continued_regulation_ that prevents opening of new powerplants today.
Hagler- What sickens me is that of the people who endorsed the “deregulation” bill that was signed into law, the only politicians whose careers ended as a result were Steve Peace (its author) and Pete Wilson (the governor). And even Steve Peace is still involved, to some degree, with politics. As far as I know, none of the senators or assemblymen who voted for this boondoggle ever lost re-election because of it, or suffered later on. Villaraigosa was almost elected Mayor of LA despite his support for this bill, and he stands a decent chance of getting elected in a couple of years as Mayor of LA or possibly Govenor if he seeks it.
“Complete deregulation is just as much a failure as total state control and over-regulation of the economy.”
WAOW !!!!!!!!!!!!!!!!!!!!!!!!!!
Is it sheer hallucination or is it that ideology is fading?
Except Californian electricity, is everything all right regarding the Golden State self-governing?
Is the State busget all right?
How is Gray Davis doing?
Well said to the folk pointing out that total deregulation hadn’t been tried in California. What happened was the worst of both regulation and half-assed privatisation. Result = total screwup.
Complete deregulation and allowing the price mechanism to do its job would have ensured that entrepreneurs in the power businesses would have had a strong incentive to generate enough power to meet wants, and encouraged businesses and households to economise on power.
Kodak – Gray Davis is toast.