By Dr Ken Thornton*
In Australia in 2018, barring the consequences of extreme weather events or equipment malfunctions, the light always comes on when you flick the switch. As a residential consumer, your PC or Mac fires up when you want to check your emails or do some writing. Electricity is always there when you want it and in the quantity you want. Admittedly, some politicians, sections of the media and regulatory bodies have observed that this may not always be the case in the future.
Between 1946 and 1953, New South Wales (NSW) had anything but a reliable supply of electricity. Limitations on its use were government-mandated through state-wide zoning restrictions. Load shedding and unplanned losses of electricity were not one-off events. Increasingly during these seven years, they were unannounced, and lasted for many hours, several times a day.
The failure of the NSW electricity system to meet demand had arisen from a variety of causes. These included a fragmented industry, ageing equipment, delays in new equipment procurement and its installation, poor quality coal, inadequate maintenance and timid political policies. Overshadowing all of these was the substantial increase in the demand for electricity.
In 1939 the four major electricity generation authorities in NSW—the Sydney County Council (SCC), Government Railways, Public Works and a private company—operated eight separate networks. Between 1940 and 1942, defence and energy security considerations, rather than the technical benefits of interconnection, hastened the strengthening of the electrical connections between the major systems.
Yet, with interconnection a reality, ownership arrangements remained the same; that is, separate. Each of the major generating authorities remained focused on its own local supply franchises. Few, if any of them viewed NSW as a single electricity network.
Over and above these interconnections the critical issue for NSW was a decrease in the margin between the quantity of available electricity and the increasing demand.
At the start of the Second World War, NSW had a 53% positive margin between supply and demand. In the five years to 1945, demand increased by 49%, in line with population growth and as industry converted to defence-related production
In contrast, effective generation capacity increased by only 4%. Without the initial and substantial margin of reserve capacity, the shortages that eventuated from 1946 would have started much earlier, with significant negative impact on the NSW and Australian war efforts.
The immediate post-war years continued the trend of the previous five years. Rising demand contrasted with a flat or falling trend in available generating capacity. By 1946, any excess capacity in the system had been consumed. The margin moved into negative territory and continued to deteriorate until a 30% shortfall existed in 1950. This equates to the period of increasingly severe load shedding, unplanned loss of electricity and restrictions.
In 1937 a government-commissioned study into the industry’s development had recommended not only statewide interconnection but also ‘centralisation’ of the industry. The recommendations came to nought, mainly through a lack of political will by various state governments to counter the vested interests of local government authorities, particularly the SCC, which argued for the status quo to protect its substantial investment in electricity assets.
By the early 1950, the dire electricity supply situation prompted the NSW Labor government to centralise the industry. Political pragmatism, in the form of an upcoming state election, probably had a hand in the decision-making process.
By bringing NSW’s physically interconnected, but separately owned, electricity generation and transmission industry under a single public authority, the government was able to achieve coordination of both planning and operations. Seven years of unreliable electricity supply was resolved in 36 months.
In 2018, the affordability of electricity parallels reliability issues. The ACCC’s June 2018 report on Retail Pricing highlighted network costs, privatisation, solar feed-in tariffs and retailing practices as contributing to high prices for electricity.
Affordability has not always been an issue. Despite an initial increase in the price of bulk electricity following centralisation of the NSW industry in the early to mid-1950s, production costs and prices experienced moderate annual decreases to the mid-1960s, then flatlined to the early to mid-1970s.
Three main factors contributed to these cost reductions. The first related to lower fuel costs that were a consequence of locating new generating plant at the fuel source and the advent of low-cost open-cut coal. The second related to the benefits associated with economies of scale associated with newer and larger generating units, and the third factor was the growth in the proportion of peak demand met by hydro-electric stations.
From the mid-1970s, fundamental changes occurred in the costs of electricity production in NSW. The main contributors to these increases included a decline in hydropower as a percentage of the increasing demand for electricity. However, higher coal costs and increased debt financing charges associated with construction of four large power stations were the main contributors. These stations continue to form the core of the NSW industry.
In 2018, the NSW electricity generating industry has seemingly come full circle. Before 1950, there were four separate major generating authorities plus a host of regional generators. Today the major NSW power stations are owned by four separate generating companies—AGL, Origin, EnergyAustralia and Delta Electricity. Also, there are a host of renewables, including the solar power station that many people have on their roof.
Over and above sufficient generation capacity, there are two keys to a reliable electricity supply; an integrated network and an exclusive oversight organisation. Following the reforms of the 1950s, NSW had a single, interconnected high voltage state network. In 2018 it is served by a single network that stretches from north Queensland to Tasmania and South Australia. The second guarantor of reliable electricity supply is the existence of a single organisation to manage and coordinate the interconnected network. From 1950 the management authority was the Electricity Commission of NSW/Pacific Power, and in 2018 it is the Australian Energy Market Operator.
*Dr Ken Thornton retired from the New South Wales electricity generation industry in 2007 after 37 years. He graduated in October 2015. His PhD thesis was titled “The Electricity Commission of New South Wales and its place in the rise of centralised coordination of bulk electricity generation and transmission 1888 – 2003.” In October 2017, Ken published a history of Munmorah Power Station to coincide with that station’s fiftieth anniversary and is currently researching the history of Liddell Power Station as it approaches its 50th year. Ken is also a member of a small team (University of Newcastle and the Bureau of Meteorology) researching historic weather records. Email: firstname.lastname@example.org.