did we (the States & Federal gov'ts) make a mistake privatising the electricity industry ?
A look at the past is perhaps somewhat revealing as to that question. A rather long post here
but to answer the question of how we got to where we are:
Going right back to the start, notable points (referring to the Australian context only) both technical and organisational all ultimately lead to where we are now. This is by no means a comprehensive list, it's just whatever was the first or largest at the time and is thus of note:
1888 - First distributed electricity supply in Australia at Tamworth NSW. This was by no means the first use of electricity as such, but it was the first attempt to build a public supply from a centralised source. It was an extremely limited DC system but still, it was distributed electricity.
1895 - Launceston City Council commences public electricity supply from the Duck Reach hydro station. Notable as being the first "no questions asked" supply to anyone who wanted it, for any purpose, with charging based on metered consumption. Prior to that, in most places charges were typically based on the number of lights installed or the capacity of motors.
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By the 1910's electricity was in somewhat common use in city CBD's and selected industries but mostly took the form of small generating facilities, owned either privately or by local government, supplying their immediate surrounds and without connection to anywhere else. Melbourne alone had by some estimates over 100 separate companies at one point, each with their own tiny systems supplying a few streets with power generated from a steam engine.
That approach of small fragmented systems is inefficient both technically and economically, indeed it goes against the very principles underlying the existence of an electricity grid in the first place.
1910 - The privately owned Hydro-Electric Power and Metallurgical Company proposes the building of a then significant hydro station and transmission line in Tasmania and commenced construction.
1911 - The privately owned Victorian Hydro-Electric Company formed with a view to developing hydro generation, transmission and bulk supply in Victoria. The company commenced site surveys etc but no actual construction took place.
1913 - The WA state government proposed a centralised power supply for Perth and commenced construction of the East Perth power station.
1914 - The Mt Lyell Mining & Railway Company, Tasmania, opens the then significant Lake Margaret power station to supply its mine, smelter and the general public of Queenstown. Noting this was the tenth largest company in Australia by capitalisation at the time - for perspective the equivalent company today in purely financial terms is Telstra.
1914 - The privately owned HEPMCo runs out of money with the Tasmanian state government deciding to take over power supply via formation of the Hydro-Electric Department, acquisition of the partly built hydro scheme, and compulsory acquisition of most privately owned electrical undertakings in the state with the notable exceptions of Launceston and Mt Lyell. Of note is the Australian Government issued dire warnings at the time regarding financial risks, the uncertain future use of electricity and so on and opposed the state's actions quite strongly.
May 1916 - The HED opens Waddamana A power station with 2 x 3.5 MW generators and 88kV transmission to Hobart. This marks the beginning of the grid as such in Australia with the first transmission line in operation.
December 1916 - East Perth power station opens with 1 x 4 MW generator, two more being added in 1917.
1918 - Victoria establishes the State Electricity Commission, being the third state government to enter the electricity industry. In doing so the still in existence Victorian Hydro-Electric Company is, for practical purposes, left with nowhere to go having not built anything in its thus far 7 years of existence and with government now taking over the industry.
1919 - Interconnection of the HED and LCC power systems in Tasmania via a new transmission line, creating the first Australian system comprising more than one physically separate generating station. Installation of new 6 MW machine at Waddamana power station.
1922 - New 7.5 MW machine installed at East Perth power station WA.
Tasmania now has 3 power stations in its grid with connection of the pre-existing steam plant at Devonport to the system. Waddamana's capacity is now 49 MW.
1923 - Victorian SEC opens 2 x 15 MW Newport B power station (Newport A being owned by the Victorian Railways for traction supply).
1924 - Yallourn A station opens with 4 x 12.5 MW and transmission to Melbourne. Victoria now has a transmission system and multiple generating sources in operation.
1926 - Municipal Council of Sydney opens Bunnerong A power station using 25 MW units, of which 7 were ultimately installed.
1931 - WA government proposes privatisation of the industry. The plan was abandoned due to lack of a buyer.
1938 - State Electricity Commission of Queensland created but others, notably Brisbane City Council and the privately owned City Electric Light, retain physical assets. SECQ does however force BCC and CEL to work as, effectively, a single entity with physical interconnection of systems implemented by 1940.
1939 - Municipal Council of Sydney opens Bunnerong B using 50 MW units of which 4 were ultimately installed. This was the largest generating unit in the world at the time.
There remained the limit for quite some time, 50 MW machines. That was a global situation with the constraint being down to physical factors not economics or the need for electricity. That resulted in a situation immediately after WW2 of rather a lot of 50 MW units being installed.
1946 - NSW and SA state governments both enter the electricity industry. SA acquires privately owned assets by force (compulsory acquisition).
1955 - First output from the Snowy scheme fed into NSW system.
1959 - NSW and Victoria systems physically interconnected.
Up to that point I think it's fair to say that government ownership had very clearly worked and had beaten private ownership so far as getting it done is concerned. The above list being only the "firsts" or other key points, there's an awful lot left out for simplicity (eg by 1960 Tasmania had 12 stations on the grid, 3 more under construction and another 10 at various stages of investigation and design to be built when required, other states same approach).
Then things started to change and the reasons have a lot to do with technology. Specifically, that generating plant suddenly became a lot bigger as the physical constraints were overcome. In the 1950's 50MW machines were still par for the course globally. Then....
1961 - 2 x 60 MW at Wallerawang B (NSW)
1961 - 2 x 100 MW at Tallawarra B (NSW)
1962 - 2 x 120 MW at Yallourn E (Victoria)
1963 - 2 x 200 MW at Vales Point A (NSW) with another added in 1964.
1966 - 1 x 275 MW at Vales Point A (NSW)
1967 - 350 MW at Munmorah (NSW) with 4 machines ultimately installed
1971 - 500 MW at Liddell (NSW) with 4 machines ultimately installed
1979 - 2 x 660 MW at Vales Point B (NSW)
In the space of less than 20 years the size of individual generating units had gone from 50 MW to 660 MW.
Just one of the two 660 MW units at Vales Point B could of itself generate more power than the 7 machines at Bunnerong A, plus the 4 machines at Bunnerong B, plus the 4 machines at each of Tallawarra A and Wallerawang A combined. One machine, half a power station, generates more than 19 machines at 4 complete power stations combined.
The problem there is that whilst they were officially electricity supply authorities, to considerable extent, especially in NSW, Victoria and Tasmania, they were better described as power station construction authorities in practice. They built power stations first and foremost, supplying electricity was just a way to make use of them.
That is a key distinction and lead directly to where we are today. NSW is the starkest example so it's the one I'll use but to be clear, the problem was not limited to that state.
The increase in size of generating units had lead by the late 1960's to a situation where installed generating plant was growing more quickly than demand, overcoming the historic problem of authorities struggling to build new plant quickly enough to cope with steadily rising consumption.
At first this wasn't a huge problem due to the existence of rather a lot of now work out and technologically outdated plant from the early days of the industry which nobody would argue against closing, indeed the problem had been with trying to keep it operational. Likewise with the Snowy scheme nearing completion, intentionally under-utilising it and allowing the reservoirs to fill was likewise a sensible, logical use of any surplus power that happened to be available. Put those two together and whilst an apparent surplus of supply was emerging, it was easily put to good use.
That approach continued through to the mid-1970's by which time obsolete plant had been shut and water storages were at good levels. That was the point where new construction needed to slow in order to be matched with future demand growth and initially it did just that, new construction did indeed slow down.
But then came the slowdown in demand growth circa 1980, thus rationally requiring that new construction slow to a crawl, in doing so bringing to an end the notion of being a power station construction authority since there simply wasn't a need to keep building overly much.
Instead well Eraring was commissioned in 1984, Bayswater in 1985-86 and finally Mt Piper was half built (2 units instead of 4) in 1993. Between them they added 6600 MW or 61% to NSW's peak generating capacity which far exceeded growth in demand at the time.
What happened next is what brings us to where are today:
3060 MW of plant was prematurely closed, equivalent to the entire Bayswater power station plus half of Mt Piper. That consisted of 2865 MW of coal plant less than 30 years old at the time, indeed most was closer to 20 years old and still effectively "new" at the time. It also included 195 MW of gas turbines that really were new, having barely been run since installation.
This occurred against a backdrop of frequent industrial action leading to restrictions and blackouts in Victoria and Queensland over the preceding years, major controversy over proposed new hydro development in Tasmania and the first ever "real terms" increase in the price of electricity to consumers in several states.
That situation taken as a whole lead to a fairly widespread perception that the industry was inefficient, poorly managed and otherwise needed "reforming". This perception coming about at a time when Australia had an extremely reformist government under Hawke as PM and Keating as Treasurer and later PM. Noting that Keating was ultimately instrumental in the emergence of the National Electricity Market.
The final nail in the coffin came circa 1990 when several states, most notably Victoria and SA, found themselves in great financial difficulty. This came at a time when the Australian Government was pursuing privatisation of assets and overseas governments were doing likewise.
And so Victoria privatised first during the mid-1990's and applied very serious pressure on other states to follow, South Australia doing so some years later. NSW privatised more recently.
Qld, Tas, NT and WA didn't privatise but they do have some degree of privately owned assets in the industry, they're not state-owned monopolies.
The other manner in which that history leads to where we are today is with so much capacity having been built at the same time, it's now all reaching end of life at the same time. Rather than NSW having had to gradually replace plant built in the 1950's and 60's in the 2000's and 2010's, it instead has a massive lump of capacity built 1979 - 86 all reaching end of life at about the same time.
Looking at all that, my basic observation is that government owned authorities are extremely good at coming up with a comprehensive plan on what needs to be done. That is their strong point. They're also extremely good at working out what to run and when to run it, it generally does beat the private sector on that one from my observations.
What they're not good at is making themselves redundant. Without the financial discipline of the private sector, there's a definite tendency to keep going with things that really don't need keeping going. That is, keeping building when there's nothing more that needs to be built. The private sector wins with that one easily.
Putting all that together, well I'll argue that neither is perfect, both can run off the rails, but that a combined approach might just be the best way forward.
Government as planner of what's built and day to day dispatch.
Private ownership that'll put the brakes on if there's no need to spend the capital.
With the right design of market that could probably be done.