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Leonard Hyman & William Tilles

Leonard Hyman & William Tilles

Leonard S. Hyman is an economist and financial analyst specializing in the energy sector. He headed utility equity research at a major brokerage house and…

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What Thomas Edison Can Teach Us About Our Electricity Crisis

  • In an effort to reduce emissions, governments and countries around the world are attempting to electrify as much as they can as quickly as they can.
  • In the U.S., this raises a very important and overlooked question, where is the system that can incorporate all of the innovation and invention this push for electrification is producing?
  • This is a problem that the UK faced in the past, and the only way they were able to solve it was with significant government intervention.

The Biden administration will soon end the production of incandescent light bulbs, originally developed back in 1878. The bulbs, which use electricity inefficiently, were scheduled for an earlier demise, but the Trump administration gave them a reprieve. Any way you look at it, though, 144 years is a pretty good run for a product. And it should remind us why Thomas Edison triumphed when other inventors with similar products did not. Edison said, “I had the central station idea in my mind all the time… I worked on a system.”

Now, let us fast forward to the upcoming technological achievement, the electrification of the economy, especially of the transportation sector. And then notice the worrying headlines. Tesla is making a deal to get nickel in Canada. Everyone is worrying that the Chinese control lithium processing. And don’t even mention Ukraine and Neon. Special tax credits are readily offered for this or that product that uses less energy. But the whole effort rests on an electric grid whose managers have chosen to ignore climate change for thirty years and who have spent time and resources denying and delaying rather than preparing. In the meantime, the US electric grid is older, more transmission constrained, and has become increasingly fragile, to borrow a phrase. The issue isn’t the outage length or the cause, hurricanes or forest fires, it doesn’t matter. These seem to be occurring with more frequency precisely at the historical moment when electricity is increasingly vital to our everyday lives—cooling, heating, lighting, transport.

The more the economy is electrified, the more we become dependent on the reliability of the electrical grid. Imagine the owner of that $65,000 electric pickup who can’t quickly or fully charge up to escape a forest fire. It’s not simply embarrassing. It’s potentially life-threatening. The sellers of the new electric goods have not completely worked out the system to deliver the electricity in a totally reliable manner. Like good classical economists, they assume that it will be there. That might be a good assumption in say European countries with a unified electric system and a few huge electricity providers. But not here with 51 state regulatory jurisdictions plus the federal administrative agencies—and probably one-third of the population thinking that the old way is just fine.

Now back to Edison’s time for a moment. He devised a complete electric lighting system for his early customers in lower Manhattan using lower voltage direct current (DC). His rival at the time, George Westinghouse, also sponsored a complete lighting system—one that was technically superior but relied on far higher voltages and a step down transformer. The Westinghouse system used alternating current (AC), which was far superior for moving power over longer distances, and within a few years it was universally adopted (even by the former Edison companies). Related: Brent Hits $113 As Oil Heads For Second Weekly Gain

In the US, antitrust laws had just been passed and electricity was not a big enough business to even warrant government attention. Thus, no government intervention was required. In essence, the Westinghouse monopoly replaced Edison’s, and the electric lighting business quickly developed. As a result, American consumers could eventually buy mass-produced products that worked everywhere. The British, on the other hand, also believed in free enterprise, customer choice, and competition. But as a result, British consumers could not even move their appliances when they moved homes, because the electric system was probably different in the new home. The manufacturers could not mass produce products because every business and residence needed custom electrical products. And the British could not achieve economies of scale because they had subdivided the electricity market into small parts. Their free market prevailed with enormous diversity but, as a result, customers lost, and so did British manufacturers, and ultimately the economy as a whole.

So, what is next here? Will we regress back to the old UK system with different electrical outlets for different types of cars and appliances? Will inadequate electricity supply cause drivers to change their routes? California, Texas, and other states have already issued public warnings about looming summertime electricity shortages. Will regulators respond by approving new infrastructure to serve “speculative” loads that will not materialize until the infrastructure is in place? Our present electrical grid depends on free-market incentives to allocate capital for a new supply network. This includes a new grid, an ubiquitous network of vehicle charging stations, and new transmission to connect remotely produced renewables to urban load centers. Thinking about Edison’s genius, we are again wondering, “Where is the system?”

The British did not resolve these electric grid problems until they instituted a massive government intervention, the formation of the National Grid. Does the US need a dose of socialism to further electrify its economy in a timely fashion?    

By Leonard Hyman and William Tilles for Oilprice.com


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Leave a comment
  • Clinton Luckinbill on May 10 2022 said:
    Micro-reactors that serve a small town will distribute electricity production in a significant way. The grid will still be there but won't be the high capacity long distance thing that it is today.
  • Jon Davies on May 12 2022 said:
    I'm sorry, but this story really stretches things. Edison built a private electrical network. He lost out to Westinghouse. So far so good. All of the us has electrical standards unlike the British. This was done without socialism. I fail to see any correlation to what happens next on the us electrical grid.
    What a mishmash of thinking....

Leave a comment

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