Change still races through power lines

Since the inception of public provision in the 1880s, the electricity supply industry (ESI) has assumed a central position in economic life. It was cosseted as an essential public utility. In many countries, it was seen as essential to maintain ownership in the public sector. In others, the ESI operated in the private sector with important rights such as monopoly geographical franchises to prohibit entry by other suppliers.

In this century, the industry's technological trajectory has been exhilarating and, at times, controversial. Power station thermal efficiencies of 10 per cent in 1900 have risen to nearly 40 per cent for coal, 55 per cent for combined-cycle gas turbines and perhaps 75-80 per cent for combined heat and power units. Plant size has risen many orders of magnitude, such that a single power plant can satisfy the demands of Manchester or Sheffield.

Electricity generation once depended on coal and water, but now a wider range of resources is deployed: oil, gas and renewable sources such as wind. The adoption of nuclear power from the 1950s was claimed to herald a bright future and placed the ESI at the heart of public policy-making. But that dream turned sour amid spiralling costs, failure to secure nuclear-waste disposal routes and concerns over public safety.

Change is nothing new to the ESI. Yet this lucid and visionary book by Walt Patterson argues that the global electricity industry is again on the threshold of profound change. He suggests that this stems in part from privatisation and market liberalisation. These developments stimulate competition, reduce labour forces, lower costs, provide new freedoms for fuel and equipment procurement, and give consumers choice of supplier.

Many electricity utilities now also offer gas in dual-fuel supply deals; and some are emerging into genuine multi-utilities through provision of water and telecommunications. New-entrant generators and suppliers are disturbing long-established relationships - even the UK's Trades Union Congress now has a subsidiary supplier. Though the ESI was traditionally based on municipal or national boundaries, liberalisation of electricity markets has encouraged mergers, takeovers and the emergence of global players in electricity. Equally profound changes stem from the growing environmental pressures on the ESI, which accounts for some one-third of global energy use and is a major source of environmental impacts. Acid rain, global warming, visual intrusion from power stations and transmission lines, ash disposal and nuclear-fuel reprocessing highlight the breadth of these impacts. Yet, at the point of use, electricity is clean and highly controllable. An ever-wider range of end-use applications has underpinned continued growth of electricity demand and transformed lifestyles. But growing demand and tougher environmental constraints are not easily reconciled.

The nuclear industry argues that it is well positioned to contribute as nuclear stations emit no carbon dioxide. However, even discounting concerns over public safety, this industry has found it most difficult to prosper. In the past, huge cost overruns from delayed nuclear-plant construction could be passed on to captive consumers shackled by geographical franchises. In addition, nuclear power could count on strong governmental support. In liberalised markets, neither applies. Shareholders, not consumers, bear market risks; and governments, keen to secure a level playing field in liberalised markets, cannot be seen to favour one option over another.

For the future, Patterson foresees a reversal of these ever-larger, centralised electricity supply systems, while acknowledging that rivalry between these old and new orders will be intense. He anticipates continued technological development in favour of much smaller units, as part of decentralised networks located nearer final consumers. There is no need to pick technological winners as the range of attractive technologies is wide.All have smaller unit sizes; are less "lumpy" in terms of their capital requirements; and are experiencing rapid, cost-reducing technological change.

Neither is technological change limited to electricity supply. The efficiency of end-use technologies is rising. In these ways, the ESI could contribute to sustainable development.

Aimed at both lay and specialist readers, Patterson's book is grounded in his impressive understanding of trends in the global industry. It makes compelling reading, contains many powerful insights and is an essential reference in this field.

John Chesshire is a member of the SPRU energy programme, University of Sussex.