Selling Power
eBook - ePub

Selling Power

Economics, Policy, and Electric Utilities Before 1940

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  2. ePUB (mobile friendly)
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eBook - ePub

Selling Power

Economics, Policy, and Electric Utilities Before 1940

About this book

We remember Thomas Edison as the inventor of the incandescent light bulb, but he deserves credit for something much larger, an even more singular invention that profoundly changed the way the world works: the modern electric utility industry. Edison's light bulb was the first to work within a system where a utility generated electricity and distributed it to customers for lighting. The story of how electric utilities went within one generation from prototype to an indispensable part of most Americans' lives is a story about the relationships between political and technological change.
           
John L. Neufeld offers a comprehensive historical treatment of the economics that shaped electric utilities. Compared with most industries, the organization of the electric utility industry is not—and cannot be—economically efficient. Most industries are kept by law in a state of fair competition, but the capital necessary to start an electric company—generators, transmission and distribution systems, and land and buildings—is so substantial that few companies can enter the market and compete. Therefore, the natural state of the electric utility industry since its inception has been a monopoly subject to government oversight. These characteristics of electric utilities—and electricity's importance—have created over time sharp political controversies, and changing public policies have dramatically changed the industry's structure to an extent matched by few other industries. Neufeld outlines the struggles that shaped the industry's development, and shows how the experience of electric utilities provides insight into the design of economic institutions, including today's new large-scale markets.
 

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Information

Year
2016
Print ISBN
9780226399638
eBook ISBN
9780226399775

CHAPTER ONE

Early Commercialization

Static electricity was known in ancient times as a property of amber, which, when rubbed with fur or wool, will take on a static electric charge sufficient to attract small bits of material. The word for amber in ancient Greek (and fifteenth-century English) was elektrum. Interest in this property lay dormant until 1600 when William Gilbert, royal physician to Queen Elizabeth and King James, published De Magnete, in which he coined the term “electric” to refer to this static electric property. Otto von Guericke, in the 1650s or early 1660s, invented the first electrostatic generator, which produced static electricity by friction on a revolving ball filled with powdered sulfur.1 In the 1740s, the development of the Leyden jar, a type of capacitor, enabled the storage of relatively large amounts of static electricity for days, which could be discharged at will. It was also in this era that Benjamin Franklin contributed to the scientific understanding of electricity by, among other things, demonstrating its presence in lightning.
Static electricity generally has very high voltage but low current and power. In 1800, the Italian physicist Alessandro Volta invented the battery, and early improvements made available electric currents with higher current and power. Very soon after Volta’s discovery, the English scientists William Nicholson and Anthony Carlisle discovered electrolysis, the use of electricity to separate compounds into their elemental components, by separating water into hydrogen and oxygen. By 1809, their compatriot Sir Humphry Davy first isolated a large number of elements by using batteries that could provide the high current needed. Commercially important electrochemical processes, including electroplating, and the smelting and refining of many materials soon followed. Two methods of producing artificial light from electricity, arc and incandescent lighting, each became a major impetus for the commercialization of electricity. Sir Humphry Davy demonstrated electric incandescent lighting in 1801 by using batteries to heat platinum strips hot enough to glow. There is some evidence that Davy demonstrated arc lighting the following year, but in 1808, he provided a well-documented spectacular demonstration of arc lighting to the Royal Institution powered by 2,000 battery cells, perhaps the brightest artificial lights heretofore seen.2 In 1820, Hans Christian Ørsted discovered that a magnetic field surrounded a wire conducting electricity. The following year, Michael Faraday, a onetime laboratory assistant to Davy, made what was probably the first electric motor.
Devices that could provide ever-larger quantities of electricity stimulated the scientific study of electricity. Batteries provided sufficient electricity to enable the commercialization of some electrochemical processes, as noted above, and to support the transmission of information by telegraph and telephone. For other applications, including light and power, the use of electricity remained a curiosity until the development of the generator substantially reduced the cost of producing large enough quantities of electricity to make possible an electric utility industry. The generator also enabled the creation of alternating current. Although batteries only produce direct current, the most common design of a generator more naturally produces alternating current. A simple device, the commutator, can convert this to something approximating direct current. Some uses for electricity, however, such as electroplating, required direct current. The development of both direct and alternating current generators occurred very early. The special properties of alternating current were to have a profound effect on the development of the electric utility industry, but it took some time before these properties and their importance were understood.
The first generators used permanent magnets. The discovery of self-excitation, where permanent magnets were replaced by electromagnets using current produced by the same generator, led to substantial improvements in generator design. Generators with permanent magnets were called magnetogenerators, and those using self-excitation were called dynamogenerators, usually shortened to “dynamos.” Since electromagnets require direct current, a true dynamo can only generate direct current. Electromagnets were soon used in alternators, however, and these also were called dynamos, although the electromagnets were usually powered by a separate direct-current generator. In 1871, ZĂ©nobe-ThĂ©ophile Gramme, who was born in Belgium but did much of his work in France, produced the first commercially successful dynamo. Although until the late 1870s its use was primarily by the electrochemical industries, it made the more widespread use of electric lighting inevitable, and by 1879 Gramme had sold over one thousand of them. Gramme’s dynamo could also function as a motor, as he demonstrated at the Vienna exhibition of 1873. In the Philadelphia centennial exhibition of 1876, Gramme dynamos powered arc lights and electroplating demonstrations and also ran as motors.3

Light

Artificial lighting was the first application to drive the development of the electric utility industry. The modern utility industry sells electrical energy for all purposes, a characteristic that distinguishes it from, among others, the telephone and telegraph industries that sell a service produced with electricity. The industry that became the electric power industry began also by selling a service produced with electricity: artificial light. Artificial light required more power than telegraphs or telephones, and the superiority of electric lighting over other forms of artificial light led to the need for an infrastructure capable of distributing large amounts of electricity.
It is difficult to appreciate fully life without satisfactory artificial lighting. Modern calendars sometimes provide the phases of the moon, now a quaint decoration. As late as the beginning of the nineteenth century, however, knowledge of the phases of the moon was of significant practical importance, because most people simply did not venture out at night unless there was adequate moonlight.4 Prior to electric light, artificial light required a flame from such devices as a fire, a candle, or an oil or gas lamp. These generally suffered from major disadvantages compared to the electric light: (1) the quality and amount of light was low, (2) they created heat and soot, (3) they consumed oxygen, (4) they smelled, and (5) they generally required constant maintenance. We may today use candles or oil lamps when the electricity fails or to achieve a romantic atmosphere, but the modern candle and oil lamp themselves are enormous improvements over the candles that were available until the end of the eighteenth century.5 Prior to electric lighting, the desire for improvement in artificial lighting was a major factor driving the whaling industry and the infant petroleum industry, both of which provided products that substantially improved the quality of candles and lamps.
Gas lighting, which became available in metropolitan areas in the first couple of decades of the nineteenth century, was a considerably improved form of artificial lighting. A central plant would heat an organic material (usually coal) in the absence of air. This would produce a gas then piped to customers in the area. Those customers burned the gas in a fixed lamp or other appliance designed for this purpose. Like other forms of lighting, the light came from an open flame.6 Designs for gaslights enabled them to be brighter than most other forms of artificial lights by using multiple flames and larger flames than candles or oil lamps. Perhaps the major advantage of gas lighting was that it required much less maintenance than other forms of open flames. There was no need to refill a fuel reservoir, and there was no wick to constantly adjust and trim. For these reasons, gaslights enabled the more widespread use of artificial outdoor lighting, such as streetlights. Nevertheless, gaslights retained all of the other disadvantages of open flames, and electric utilities touted the advantages of electric light (figure 1.1).
FIGURE 1.1. Edison sign. Digitally enhanced to improve clarity.
Humphry Davy demonstrated the principles by which electricity could produce light: incandescent and arc light. In fact, both techniques used incandescence—heating a material until it glows—to produce light.7 In an incandescent light, electricity flows through a conductor whose resistance causes the conductor to heat to incandescence. In an arc light, a spark crosses a gap between two electrodes. This spark heats the electrodes (particularly the anode, or positive electrode). Although the spark itself produces some light, most comes from the incandescing anode. The light from an arc light is very intense—too intense for most indoor applications but well suited to outdoor illumination and the illumination of very large interior spaces, as in public buildings.
The primary problem that both arc and incandescent lighting had to overcome to achieve commercialization is that the heat required for incandescence tends to destroy the incandescing material. This destruction eventually creates a gap in the incandescent conductor, which stops the flow of current and extinguishes the light. In an arc light, the destruction of the electrodes occurs only in the direct vicinity of the arc, but this increases the gap width until it becomes too great for an arc to span, also stopping the current and extinguishing the light. Attempted solutions to these problems inevitably brought forward other problems. The problem of incandescent lighting was solved once it became possible to seal the conductor in a glass bulb from which oxygen had been eliminated, reducing the rate of deterioration of the incandescing conductor. The most common solution to the problem faced by arc lighting was to devise a “regulator” that would automatically adjust the interelectrode gap. The earliest regulators limited a generator to powering only a single arc light, and full commercialization waited until this problem was overcome.8

Arc Lighting

The Russian telegraph engineer Paul Jablochkoff, who worked in Paris, designed the first commercially successful arc lighting system in 1876. Jablochkoff’s “candle” eliminated the need for a regulator by placing the electrodes in parallel with a solid material used as a spacer. The lamps were cheap but short-lived and could not be relit once they were turned off. Jablochkoff was able to install several lamps in series in a single circuit, and he was able to make lamps of varying brightness (although all were too bright for residential interior use). The connection of arc lights in series became the standard industry practice. A drawback to this arrangement is that an interruption in the flow of current through any device would shut down the entire circuit, plunging the whole area served by the circuit into darkness, although various solutions to this problem were eventually developed. Series connection permitted a single switch to control an entire circuit of lights, a desirable feature for streetlights and the lighting of some large interior spaces.
The problem of maintaining an arc lighting circuit when one of the lights burned out brought Jablochkoff to the threshold of discovering the principle of the transformer, a device that was to totally remake the infrastructure of electric utilities. To ensure that both electrodes were consumed evenly, Jablochkoff employed alternating current in his system. Alternating current (but not direct current) produces a varying magnetic field that can induce current in adjacent conductors, this principle being the basis of the transformer. Jablochkoff experimented with the use of induction coils, actually transformers, to connect each individual lamp to the circuit. Connecting an arc light to its circuit via an induction coil enabled an arc light’s failure not to stop the flow of current in the circuit. However, he found methods of dealing with the problem of interruptions in the series circuit preferable. Jablochkoff’s system was installed in numerous locations in Paris both by his SociĂ©tĂ© GĂ©nĂ©rale d’ElectricitĂ© and by others and, in 1878, in various locations in London.9 Ultimately, however, systems that used lamps with superior regulating mechanisms superseded Jablochkoff’s.
The more lights, or other electricity-using devices, on a circuit, the greater the power that circuit must supply. Electrical power is the product of voltage (pressure) and current (amperage). Modern electric utility circuits maintain constant voltage and vary amperage as needed to adjust total power to the needs of the devices on the circuit. The original arc lighting circuits, by contrast, maintained constant amperage and varied voltage when the number of arc lights on the circuit changed.10 A characteristic of arc lights is that their resistance is inversely proportional to the amperage of the current flowing through them; higher amperage results in lower resistance. In such a circuit, a constant voltage generator would tend to increase amperage whenever an arc light’s resistance dropped. The increased amperage would further reduce the light’s resistance, leading to even greater amperage. High enough amperage could cause the circuit to overheat, potentially resulting in a fire. Constant amperage generators avoided this problem but led to the need to design a very different circuit for incandescent lighting, one that required protection, such as fuses, to protect against excessive amperage.
In 1879, the first arc lighting central station, the California Electric Light Company of San Francisco, began operations. It is an indication of how rapidly technical events were progressing in the industry that in the same year a workable incandescent bulb was demonstrated by Joseph Swan in England (in February) and Thomas Edison in the United States (in October). Although a number of other inventors had also worked on incandescent lighting, and were soon to develop practical designs, Swan and Edison are the ones most often identified with the invention of the incandescent bulb.11 The intense brightness of arc lights made them unsuited for the majority of situations where artificial light was needed, such as inside residences. Incandescent lighting had long been seen as a possible solution to this problem, and Swan had begun working on incandescent lighting as early as 1848—before generators or high vacuum pumps were available and while Edison was still a teenager. In 1881, the incandescent lamps of four different inventors or partnerships were exhibited at the first international electrical exhibition in Paris.12
In America, at least, Edison is widely known as the “inventor” of the incandescent light. This is inaccurate and fails to recognize the actual fundamental contribution he made to the development of electric utilities—one that rendered obsolete the entire technological foundation of the nascent arc lighting industry. A person of enormous personal inventive genius, Edison was also a skillful organizer and promoter. By the time he began his work on electricity, Edison had a staff of forty people, including the mathematically trained Francis Upton. Edison was not a solitary inventor but more like a symphony conductor orchestrating the effort of his entire staff, and he had a much broader conception of the problem of electric lighting than did Swan. The central problem that concerned Swan was that of developing a method to make a durable incandescing conductor. Although mindful of the problem of durability, Edison developed an entire technical basis for a wholly new electric lighting industry. He then proceeded with his staff to invent all of the components for this new industry, of which the light bulb, although key, was only one element.
Edison took gas lighting, not arc lights, as his model for a new incandescent lighting industry.13 Like gaslights, Edison wanted incandescent lights to be independently controlled. This meant that the lights would have to be connected to the generator in parallel, not in series, and this change profoundly affected the electrical characteristics of the system.
The relationships between the power used by an electrical device, and the voltage and amperage of the circuit are shown by the following two equations, both derived from Ohm’s law:
P = VI = I2R
and
where P is power, V is voltage, I is amperage, and R is resistan...

Table of contents

  1. Cover
  2. Title Page
  3. Copyright Page
  4. Dedication
  5. Contents
  6. List of Illustrations
  7. List of Tables
  8. Acknowledgments
  9. Introduction. The Economics of Electric Utilities
  10. CHAPTER 1.  Early Commercialization
  11. CHAPTER 2.  The First Electric Utilities
  12. CHAPTER 3.  The Adoption of State Commission Rate Regulation
  13. CHAPTER 4.  Growth and Growing Pains
  14. CHAPTER 5.  Public Utility Holding Companies: Opportunity and Crisis
  15. CHAPTER 6.  Public Utility Holding Companies: Indictment and “Death Sentence”
  16. CHAPTER 7.  Hydroelectricity and the Federal Government
  17. CHAPTER 8.  Rural Electrification
  18. Conclusion and a Look Forward from 1940
  19. Notes
  20. Bibliography
  21. Index

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