Switch on to investment and bring power to the people

Switch on to investment and bring power to the people

Mar 11 - Herald, The; Glasgow (UK)

FEW things would be more disruptive of life as we know it than widespread, unpredictable power blackouts. Unwiring the wired generation could send whole economies into a spin.

Late last August, a major power cut disrupted the transport system and affected nearly half a million customers in London. Little more than a week later further cuts hit 200,000 people in the West Midlands. For once, neither incident could be blamed on extreme weather conditions.

Around the same time, a vast tract of the eastern United States and Canada, including New York, parts of southern Sweden and eastern Denmark, and Italy all endured major blackouts.

The power failure across the Atlantic hit more than a hundred power plants, thousands of miles of transmission lines, and tens of millions of homes and businesses.

Could these diverse incidents all have had a common cause? As more of the global power industry has been privatised and prices to consumers have fallen under the ensuing competitive pressures, is investment failing to keep pace? Are we all keeping the lights on more cheaply today by risking having periods when there will be no lights at all in future?

Last night, in the first of a new series of drama documentaries, If...the Lights Go Out, the BBC raised the prospect of more frequent power cuts in the UK from 2006. The energy economist Dr Dieter Helm, who has long advised the UK government on energy policy, claimed a clapped-out generation system and an increasingly heavy dependence on imported gas from unstable regions of the world meant there was now little insurance against more frequent power cuts.

Government remains dismissive of what it regards as needless scaremongering. Even the prime minister found time at his weekly Commons questions to condemn the programme for being "speculative".

But while he was speaking, the trade and industry select committee was warning that there is currently a danger of "insufficient investment in the network to replace, in a planned and orderly way, equipment which is reaching the end of its life." Pointing to a new low-point in generating plant margins last year, the MPs were also concerned that market forces might not ensure "adequate generating capacity" in future. The power industry had already brought back into service most of the mothballed plant it could restart quickly. However, a number of Magnox nuclear stations were due to be phased out over the next few years.

"So, unless extra capacity is constructed soon, the plant margin may decrease again," the report warns. That's the very nub of this issue. We are all using more power. Domestic UK consumption was up by nearly a fifth in the 1990s alone. We are also paying less for it, with the wholesale price of electricity falling so low last year that some of the least competitive generators quit the market in disgust.

While investment in the various power grids around Britain has been higher since privatisation than it was before, most of the pylons and wires were built between the late 1950s and early 1970s. Like much of our water infrastructure, they are about to reach the end of their design life.

Some owners of wires businesses, like Scottish & Southern Energy, are facing rival investment calls, like building new transmission lines to plug renewable sources of generation, like wind farms, in the more remote parts of Britain, into the mainstream grid.

This isn't just a UK problem. "It is apparent that in various countries not enough has been invested in power grids recently," claims Pier Nabuurs, chief executive of the Dutch power industry consultancy KEMA, which now has an office in Scotland. "Growing demand coupled with power trading means that grids are operating under much heavier loads," he adds.

In generation, the problem is more complex. Our remaining fossil and nuclear power stations are heading for decommissioning over the next two decades, with no commitment to replace any of them. Power generation investment since privatisation has almost all gone into smaller gas-fired stations. Gas could account for 60% of all generation by 2010, with half of that gas being imported from distant countries like Russia and Algeria. But even the dash for gas has slowed to a crawl.

Plant margins - the amount of spare generating capacity available at times of peak demand - have been shrinking. Generators are reluctant to invest in any replacement capacity when wholesale prices have been so low. The government's ambitious targets for renewable sources of power, like wind, especially here in Scotland, have further complicated decision-making.

In a market-driven, regulated power industry, in business to make a profit, no one has clear responsibility for ensuring the lights stay on or the authority to take the big strategic decisions that ensure that happens. In theory, as supply and demand get increasingly out of sync, that should be reflected in the prevailing price we pay for electricity. Rising power prices should encourage more investment in both generation capacity and new wires.

If that theory fails, the BBC's scenario of more blackouts may indeed turn the nation's screens blank.