Economics, USA

Pulling Plugs.

I’ve Seen the Lights Go Out on Broadway –
I saw the Empire State laid low.
And life went on beyond the Palisades,
They all bought bright Cadillacs-
And left there long ago.

We held a concert out in Brooklyn-
To watch the Island bridges blow.
They turned our power down,
And drove us underground-
But we went right on with the show…

Billy Joel, Miami 2017

Not many will have seen the lights go out on broadway until today (IHT coverage). Although massive power outages are not too uncommon in the US, today’s blackout is apparently the biggest so far.

The “Blackout History Project” tries to keep the memory of past ones alive by archiving personal stories of what happened when the lights went out. Personally, I remember that the big 1977 NY power failure was a major story in my 8thgrade English textbook for some reason.

Power failures are an interesting phenomenon, for they demonstrate the vulnerabilty of extremely complex systems like modern industrial societies. Sometimes we forget how much infrastructure is needed to keep such a complex web alive. And we ought not to – low tech beats high tech, every single time, if used appropriately. Just like we do it at home whenever we get annoyed at the deficiencies of one operating system or another – we hit the button, we pull the plug.

That, of course, is a controlled exercise. A power failure, by definition, is not planned. It is either an accident or the consequence of an attack. As this one, according to most commentators, was likely an accident, there will be a lot of questions, just like in the aftermath of the California blackouts a few years ago.

In a Larry King Live special edition former US energy secretary Bill Richardson stated that America might a superpower, but one with a third world electricity grid. When asked if this could happen in Chicago, San Francisco, New Orleans, he said –

“Yes, it can, Larry, and the reason is that our transmission lines, our electricity grid is all interconnected. And since we have not built enough transmission lines, the existing lines have an enormous amount of electricity pent-up. In other words, overload. And what we need is basically the federal government and the states working together to allow utilities to invest in new technologies, to bring in wind power and solar and biomass, not just get electricity from the traditional coal and nuclear sources. Diversify, invest in new modern plants. But also, Larry, this is – you know, this is very technical. But the Congress has been, for years, not passing an energy bill which contains what are called reliability standards, mandatory reliability standards on utilities, many that are monopolies, that don’t want this kind of control, that says to them, look, you cannot have more power than you can absorb. And what they had here in New York – well, in the Niagara power grid is too much power, an overload of power.”

So apparently, it was an overload. No wonder somebody pulled the plug.

But the regulation part is interesting. Even though problematic incentives for utility industries seem to be more common in the US, there is no guarantee whatsoever, the EU is not replicating these mistakes while liberalising the EU energy market. In fact, I became rather scared last December when I talked to an EU energy market official and learned that there are mostly lawyers concerned with these issues.

Of course, it’s not the lawyers themselves who pull the plugs. But you might remember – lawyers don’t calculate (anything but their fees). And a bit calculus can come in quite handy when constructing institutional arrangements for complex infrastructure service providers to conduct business in. If this is not done the right way, darkness will follow, sooner or later.

Some of the lessons to be learnt from the Californian blackouts some years ago have been summerized by Paul Krugman. If your read it you will no longer wonder if it is actually legal issues that are primarily at stake here.