In spite of the available returns to scale enjoyed by large networks, writers such as Hughes (1976, 1983) and Hausman & Neufeld (2011) point out that the development of large scale grids and interconnection of municipal utilities in the 1920s was often resisted in the USA, Great Britain and Germany as they threatened vested political and economic interests. For example, in the case of the proposed Giant Power project in Pennsylvania, long distance transmission lines from mine-mouth plants threatened a range of interests.
These included municipal governments who would no longer be able to exercise the degree of control they enjoyed over generator revenues and rail firms that were threatened by the potential loss of custom from the transportation of coal from mines to power generation plants (Hughes 1976). Another example is the ‘Superpower’ project proposed in 1921 to develop an integrated system transmission grid system between Boston and Washington. This promised a 40% reduction in total costs, but also floundered in the face of opposition from utilities operating in the area who could not be convinced that the benefits to them would outweigh their loss of control (Holland &
Neufeld 2009). In these cases, inertia emerging from the political economy context slowed the realization of the engineering ideal and the formation of institutional arrangements to facilitate that.
In 1930s Britain and the USA, state involvement in the power sector and the promotion of larger regional grids was in part as a response to the exigencies of the Great Depression (Hughes 1983; Hausman & Neufeld 2011). In the case of federal government investment in hydropower in the USA such as the TVA and associated developments, the ability of government to mobilize finance to cover the high upfront costs of the generation plants and associated transmission lines, the public ownership of land where these projects would be cited, and the significant public good of cheaper electricity, rural electrification and industrial development in an economically depressed region of the US provided significant justification for state intervention (Hughes 1983).
Even with this significant technical and economic advantages, public good rationale, and federal backing, the development of these hydropower projects encountered significant resistance from private utilities and parts of government hostile to federal government
involvement. Similarly, in Great Britain, the development of the National Grid despite its technical and economic advantages also faced opposition from private ESI utilities and was only enabled by the prevailing political climate during the depression (Hughes 1983).
Notwithstanding increased public investment in the ESI in the USA and Great Britain in the interwar period, private sector generation utilities continued to dominate. This was in contrast to the situation in continental Europe, where public ownership developed earlier (Millward 2011). Again, the evidence points to the predominance of political concerns related in this case to national security. Millward (2011; 2011a) suggests the actual reasons for public ownership of utility industries in continental Europe up to 1939, were related primarily to geo-strategic considerations of territorial integrity and industrial-military capabilities amongst competing, geographically contiguous states:88
“….public ownership was not the prime instrument for dealing with natural monopolies and related dimensions of market failure (for which arms’ length regulation was the most common instrument); nor can its occurrence be found in government policies to avoid worker exploitation…[…]…public enterprise was often an instrument for promoting social and political unification, securing national defense and related strategic considerations, in some instances for promoting economic growth, with regulatory failures and socialist pressures playing a more subsidiary and/or occasional role.” (Millward 2011b: 377)
Techno-economic and public good considerations did seem to get greater purchase when the political environment was favorable. Such as in times of national security or economic crises, or when in the interests of the nation state, private sector vested interests could be more easily overridden. The paradigm example is perhaps the radical upheavals caused by the Russian Revolution in October 1917 and subsequent civil war which led to the opportunity for wholesale reform of the sector:
“Where Russia differed was the collapse of the old regime and its replacement by a new government whose leadership viewed science and technology as essential components in their quest for a socialist society. Only in revolutionary Russia, when the old tsarist power structure and techno structure had been discredited and a revolutionary government explicitly desired to transform society, did the goals of large-scale electrification and of the new political elites successfully converge” (Coopersmith 1993:14)
88 In contrast, as Yergin and Stanislaw (1998) point out, British military power was perceived as being dependent upon sea power, which motivated the public acquisition of a controlling stake British Petroleum, as oil was the energy resource seen as essential to maintain military supremacy.
In the case of the USSR, Coopersmith notes that the electrification plan was out of synch with conventional economic logic, which may have favored a more incremental approach to improving on existing supply arrangements and a greater concentration on large urban load centres. But the engineering ideal of a large-scale centralized system, was aligned with the new structure of political power. The New Economic Plan (adopted in 1921) and subsequently the First Five Year Plan (1928 – 1932), with the objective of promoting rapid industrialization had electrification at its heart (Dobb 1949; Coopersmith 1993).
The technocratic bent of socialism, the ideology of common ownership and modernization, the strategic vision of industrialization and perceived need to bolster military power, propelled wholesale reform of the ESI’s technological, economic and institutional arrangements. Within the Soviet sphere of influence, this pattern of ESI development was to have a lasting effect on the structure of the industry (Williams &
Dubash 2004).
Faith in the private sector as a means of achieving social well being had been shaken by the Great Depression. The post war period (1945 – 1970s) was marked by an increased state intervation and public ownership, and the withdrawal of private capital from the ESI. The perception was that state control of the strategic ‘commanding heights of the economy’ was justified by practical and ideological considerations. Yergin & Stanislaw’s (1998) account of the rationale for nationalization of industries in the case of post war Britain is illustrative:
“…that as private businesses, these industries had underinvested, been inefficient, and lacked scale. As nationalized firms, they would mobilize resources and adapt new technologies, they would be far more efficient, and they would ensure the achievement of the national objectives of economic development and growth, full employment, and justice and equality. They would be the engine of the overall economy, drawing it toward modernization and greater redistribution of income.” (Yergin & Stanislaw 1998:26)
Appeals were thus to technical considerations of efficiency and resource mobilization, but also to the broader public goods of economic growth and modernization, and considerations of social equity. Arguments relating to private monopolies seemed to play a less important role. Again in this case, the dislocation of the political settlement caused by the war and its aftermath, shifted the balance of political and economic power, allowing institutional change in the ESI to take place. In other cases, despite the disruption of war, ESI institutions remained relatively intact, and private regional utilities
continued to operate albeit under tight regulatory control and as part of a regional transmission grids (e.g. in the USA) (Pond 2006; Hausman et al 2008).89
At the same time, these institutional developments were accompanied by the development of civil nuclear power in France, the UK, the USA and the USSR, which served to reinforce both the dominant system design and role of the state in the ESI (Cowan 1990). In many ways nuclear power technology embodied the institutional and techno-economic paradigm that had emerged in the ESI in the 1930s, comprising of large generation units supplying relatively inflexible base-load (Thomas et al 2007). Large upfront capital costs, the risky nature of investments in a new and complex technology, important safety and security aspects, and the perceived strategic nature of the technology necessitated intensive state intervention in the mobilization of capital, and in the development and diffusion of this technology (Damian 1992; Thomas 2010).
Figure 4.9. Global nuclear power fleet cumulative installed capacity and proportion of global electricity consumption (left), and annual change in capacity (right) 1950 - 2013
Source: Worldwatch 2004, 2005; IAEA 2005, 2009, 2010, 2011, 2012, 2013; WNA 2007
There are a number of different factors driving the adoption and relative success of nuclear programmes in different countries. The initial impetus to develop nuclear power was for military purposes, only later did technical and economic considerations come to the fore (Cowan 1990). Many of the countries that adopted nuclear technology, such as
89 Indeed, White et al (1996) comment: “Since passage of the Federal Power and Public Utilities Holding Company Acts in 1935, the electric power industry has remained one of the most tightly regulated sectors of the U.S. economy.
Through lengthy and litigious proceedings, state and federal regulatory commissions adjudicate the prices, capital investments, financial structure, and corporate organization of the 250 investor-owned electrical utilities that principally operate as de jure or de facto franchise monopolies.” (201)
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France, Korea and Japan had relatively limited domestic energy reserves and did so in response to energy crisis of the 1970s (Kessides 2009). But the literature also points to important socio-cultural and political differences in determining the degree to which this technology was deployed in different countries. In France, a more fundamental belief in the role of the state, close collaboration between government and the ESI, was influential in determining the relative success of the nuclear program there. Similar points have been made about Korea, Japan and latterly China. (Jasper 1992; Hadjilambrinos 2000;
Grubler 2010; Valentine & Sovacool 2010). In states with a less powerful central government and poorer coordination between the ESI, technical experts and government such as in Sweden, the UK and the US the nuclear industry fared less well (Cowan 1990; Jasper 1992; Hadjilambrinos 2000; Thomas et al 2007).90