helm talks - energy - lecture 3
TRANSCRIPT
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AGENDA• The switch from horse and manpower to coal and electricity
• Early days and local municipal supply companies
• Nationalisation and rate of return regulation
• The great European vertically integrated monopolies
• Privatisation and liberalisation
• NETA and its failures
• Electricity in 2000: living with the legacy
• Return of the state: the U-turn, back to capacity
• The vertical structures and their 20th century justifications
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FROM HORSE & MANPOWER TO COAL• The steam engine and the industrial revolution
• Steam and electricity generation
• Coal, coal mining and geopolitical advantage
• Early twentieth century dominance of coal
• Location of power stations in the coal fields
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THE EARLY DAYS AND LOCAL MUNICIPAL SUPPLY COMPANIES• Municipalities started with water, sewerage and transport
• Street lighting and crime privatisation
• Local power stations and intermittency
• Global re-industrialisation
• The coming of the grid in the 1920s
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NATIONALISATION AND PLANNING• Nationalisation in UK and France incorporated storage
integration, planning and centralisation
• Elsewhere in Europe municipalities remained entrenched
• The 2 principles: state ownership and statutory monopoly
• Planning electricity generation and transmission and distribution of supply
• In the UK the bulk supply tariff
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THE VERTICALLY INTEGRATED MONOPOLIES
EDF RWE CEGB
NCB COAL MINES
CEGB
AREA BOARDS
CUSTOMERS
POWER STATIONS
SHOPS NETWORKS AND BILLING
STANDING CHARGES AND UNITS
+ +
BULK SUPPLY TARIFF
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PRIVATISATION AND LIBERALISATION• Thatcher on ownership and competition
• Power and the break up of the CEGB
• Coal strikes in 1980/81 and then 1984/85
• The great break up argument: Lord Marshall vs. Thatcher and the nuclear option
• Long slow road to liberalisation
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THE NEW STRUCTURES
Competitive break up of NCB
Power Gen National Power British Energy New independent
CCGTs
RECs
Cost-through Regulated supply prices, gradual liberalisation
Pool and capacity mechanisms
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GRADUAL STEPS• Gas first
• Illegal to burn in power stations until 1990
• National Power and PowerGen split from CEGB and then taken over
• The Great Consolidation
EDF RWE E.ON
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LIBERALISATION, NETA AND CAPACITY• Gradual liberalisation in supply
• The great NETA experiment
• The last gasp of the pure competitive commodity model
• Abandoning capacity mechanisms
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SUMMARY – ELECTRICITY IN 2000• The 1998 liberalisation of retail supplies
• NETA and the end of the Pool
• RECs subject to multiple takeovers
• Power, National Power and British Energy passing into European hands with widespread consolidation
And still…..• Vertical integration largely intact• Wholesale markets dominant , based upon marginal costs • Little storage • Positive demand side
All about to be transformed.
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SUMMARY – ALL CHANGE• Wholesale market and vertical integration
• Zero marginal cost and capacity auctions
• Passive demand active demand
• No storage storage
From the 20th Century vertical integration
21st century break-up
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