The economics of electric lighting were at first assumed to be similar to those of gas lighting. Experience, however, soon proved that there were important differences, one being that gas may be stored in gasometers without Economics. appreciable loss and the work of production carried on steadily without reference to fluctuations of demand. Electricity cannot be economically stored to the same extent, and for the most part it has to be used as it is generated. The demand for electric light is practically confined to the hours between sunset and midnight, and it rises sharply to a “peak” during this period. Consequently the generating station has to be equipped with plant of sufficient capacity to cope with the maximum load, although the peak does not persist for many minutes—a condition which is very uneconomical both as regards capital expenditure and working costs (see [Lighting]: Electric). In order to obviate the unproductiveness of the generating plant during the greater part of the day, electricity supply undertakings sought to develop the “daylight” load. This they did by supplying electricity for traction purposes, but more particularly for industrial power purposes. The difficulties in the way of this line of development, however, were that electric power could not be supplied cheaply enough to compete with steam, hydraulic, gas and other forms of power, unless it was generated on a very large scale, and this large demand could not be developed within the restricted areas for which provisional orders were granted and under the restrictive conditions of these orders in regard to situation of power-house and other matters.
The leading factors which make for economy in electricity supply are the magnitude of the output, the load factor, and the diversity factor, also the situation of the power house, the means of distribution, and the provision of suitable, trustworthy and efficient plant. These factors become more favourable the larger the area and the greater and more varied the demand to be supplied. Generally speaking, as the output increases so the cost per unit diminishes, but the ratio (called the load factor) which the output during any given period bears to the maximum possible output during the same period has a very important influence on costs. The ideal condition would be when a power station is working at its normal maximum output continuously night and day. This would give a load-factor of 100%, and represents the ultimate ideal towards which the electrical engineer strives by increasing the area of his operations and consequently also the load and the variety of the overlapping demands. It is only by combining a large number of demands which fluctuate at different times—that is by achieving a high diversity factor—that the supplier of electricity can hope to approach the ideal of continuous and steady output. Owing to the dovetailing of miscellaneous demands the actual demand on a power station at any moment is never anything like the aggregate of all the maximum demands. One large station would require a plant of 36,000 k.w. capacity if all the demands came upon the station simultaneously, but the maximum demand on the generating plant is only 15,000 kilowatts. The difference between these two figures may be taken to represent the economy effected by combining a large number of demands on one station. In short, the keynote of progress in cheap electricity is increased and diversified demand combined with concentration of load. The average load-factor of all the British electricity stations in 1907 was 14.5%—a figure which tends to improve.
Several electric power supply companies have been established in the United Kingdom to give practical effect to these principles. The Electric Lighting Acts, however, do not provide for the establishment of large power companies, and Power companies. special acts of parliament have had to be promoted to authorize these undertakings. In 1898 several bills were introduced in parliament for these purposes. They were referred to a joint committee of both Houses of Parliament presided over by Lord Cross. The committee concluded that, where sufficient public advantages are shown, powers should be given for the supply of electricity over areas including the districts of several local authorities and involving the use of exceptional plant; that the usual conditions of purchase of the undertakings by the local authorities did not apply to such undertakings; that the period of forty-two years was “none too long” a tenure; and that the terms of purchase should be reconsidered. With regard to the provision of the Electric Lighting Acts which requires that the consent of the local authority should be obtained as a condition precedent to the granting of a provisional order, the committee was of opinion that the local authority should be entitled to be heard by the Board of Trade, but should not have the power of veto. No general legislation took place as a result of these recommendations, but the undermentioned special acts constituting power supply companies were passed.
In 1902 the president of the Board of Trade stated that a bill had been drafted which he thought “would go far to meet all the reasonable objections that had been urged against the present powers by the local authorities.” In 1904 the government introduced the Supply of Electricity Bill, which provided for the removal of some of the minor anomalies in the law relating to electricity. The bill passed through all its stages in the House of Lords but was not proceeded with in the House of Commons. In 1905 the bill was again presented to parliament but allowed to lie on the table. In the words of the president of the Board of Trade, there was “difficulty of dealing with this question so long as local authorities took so strong a view as to the power which ought to be reserved to them in connexion with this enterprise.” In the official language of the council of the Institution of Electrical Engineers, the development of electrical science in the United Kingdom is in a backward condition as compared with other countries in respect of the practical application to the industrial and social requirements of the nation, notwithstanding that Englishmen have been among the first in inventive genius. The cause of such backwardness is largely due to the conditions under which the electrical industry has been carried on in the country, and especially to the restrictive character of the legislation governing the initiation and development of electrical power and traction undertakings, and to the powers of obstruction granted to local authorities. Eventually The Electric Lighting Act 1909 was passed. This Act provides:—(1) for the granting of provisional orders authorizing any local authority or company to supply electricity in bulk; (2) for the exercise of electric lighting powers by local authorities jointly under provisional order; (3) for the supply of electricity to railways, canals and tramways outside the area of supply with the consent of the Board of Trade; (4) for the compulsory acquisition of land for generating stations by provisional order; (5) for the exemption of agreements for the supply of electricity from stamp duty; and (6) for the amendment of regulations relating to July notices, revision of maximum price, certification of meters, transfer of powers of undertakers, auditors’ reports, and other matters.
The first of the Power Bills was promoted in 1898, under which it was proposed to erect a large generating station in the Midlands from which an area of about two thousand square miles would be supplied. Vigorous opposition was organized against the bill by the local authorities and it did not pass. The bill was revived in 1899, but was finally crushed. In 1900 and following years several power bills were successfully promoted, and the following are the areas over which the powers of these acts extend:
In Scotland, (1) the Clyde Valley, (2) the county of Fife, (3) the districts described as “Scottish Central,” comprising Linlithgow, Clackmannan, and portions of Dumbarton and Stirling, and (4) the Lothians, which include portions of Midlothian, East Lothian, Peebles and Lanark.
In England there are companies operating in (1) Northumberland, (2) Durham county, (3) Lancashire, (4) South Wales and Carmarthenshire, (5) Derbyshire and Nottinghamshire, (6) Leicestershire and Warwickshire, (7) Yorkshire, (8) Shropshire, Worcestershire and Staffordshire, (9) Somerset, (10) Kent, (11) Cornwall, (12) portions of Gloucestershire, (13) North Wales, (14) North Staffordshire, Derbyshire, Denbighshire and Flintshire, (15) West Cumberland, (16) the Cleveland district, (17) the North Metropolitan district, and (18) the West Metropolitan area. An undertaking which may be included in this category, although it is not a Power Act company, is the Midland Electric Corporation in South Staffordshire. The systems of generation and distribution are generally 10,000 or 11,000 volts three-phase alternating current.
The powers conferred by these acts were much restricted as a result of opposition offered to them. In many cases the larger towns were cut out of the areas of supply altogether, but the general rule was that the power company was prohibited from supplying direct to a power consumer in the area of an authorized distributor without the consent of the latter, subject to appeal to the Board of Trade. Even this restricted power of direct supply was not embodied in all the acts, the power of taking supply in bulk being left only to certain authorized distributors and to authorized users such as railways and tramways. Owing chiefly to the exclusion of large towns and industrial centres from their areas, these power supply companies did not all prove as successful as was expected.
In the case of one of the power companies which has been in a favourable position for the development of its business, the theoretical conclusions in regard to the economy of large production above stated have been amply demonstrated in practice. In 1901, when this company was emerging from the stage of a simple electric lighting company, the total costs per unit were 1.05d. with an output of about 2½ million units per annum. In 1905 the output rose to over 30 million units mostly for power and traction purposes, and the costs fell to 0.56d. per unit.
An interesting phase of the power supply question has arisen in London. Under the general acts it was stipulated that the power-house should be erected within the area of supply, and amalgamation of undertakings was prohibited. After less than a decade of development several of the companies in London found themselves obliged to make considerable additions to their generating plants. But their existing buildings were full to their utmost capacity, and the difficulties of generating cheaply on crowded sites had increased instead of diminished during the interval. Several of the companies had to promote special acts of parliament to obtain relief, but the idea of a general combination was not considered to be within the range of practical politics until 1905, when the Administrative County of London Electric Power Bill was introduced. Compared with other large cities, the consumption of electricity in London is small. The output of electricity in New York for all purposes is 971 million units per annum or 282 units per head of population. The output of electricity in London is only 42 units per head per annum. There are in London twelve local authorities and fourteen companies carrying on electricity supply undertakings. The capital expenditure is £3,127,000 by the local authorities and £12,530,000 by the companies, and their aggregate capacity of plant is 165,000 k.w. The total output is about 160,000,000 units per annum, the total revenue is over £2,000,000, and the gross profit before providing for interest and sinking fund charges is £1,158,000. The general average cost of production is 1.55d. per unit, and the average price per unit sold is 3.16d., but some of the undertakers have already supplied electricity to large power consumers at below 1d. per unit. By generating on a large scale for a wide variety of demands the promoters of the new scheme calculated to be able to offer electrical energy in bulk to electricity supply companies and local authorities at prices substantially below their costs of production at separate stations, and also to provide them and power users with electricity at rates which would compete with other forms of power. The authorized capital was fixed at £6,666,000, and the initial outlay on the first plant of 90,000 k.w., mains, &c., was estimated at £2,000,000. The costs of generation were estimated at 0.15d. per unit, and the total cost at 0.52d. per unit sold. The output by the year 1911 was estimated at 133,500,000 units at an average selling price of 0.7d. per unit, to be reduced to 0.55d. by 1916 when the output was estimated at 600,000,000 units. The bill underwent a searching examination before the House of Lords committee and was passed in an amended form. At the second reading in the House of Commons a strong effort was made to throw it out, but it was allowed to go to committee on the condition—contrary to the general recommendations of the parliamentary committee of 1898—that a purchase clause would be inserted; but amendments were proposed to such an extent that the bill was not reported for third reading until the eve of the prorogation of parliament. In the following year (1906) the Administrative Company’s bill was again introduced in parliament, but the London County Council, which had previously adopted an attitude both hostile and negative, also brought forward a similar bill. Among other schemes, one known as the Additional Electric Power Supply Bill was to authorize the transmission of current from St Neots in Hunts. This bill was rejected by the House of Commons because the promoters declined to give precedence to the bill of the London County Council. The latter bill was referred to a hybrid committee with instructions to consider the whole question of London power supply, but it was ultimately rejected. The same result attended a second bill which was promoted by the London County Council in 1907. The question was settled by the London Electric Supply Act 1908, which constitutes the London County Council the purchasing authority (in the place of the local authorities) for the electric supply companies in London. This Act also enabled the Companies and other authorized undertakers to enter into agreements for the exchange of current and the linking-up of stations.