ABSTRACT
The most important cost problem which affected the electricity supply industry at the time of nationalisation was caused by the price of coal. Coal prices had been rising steadily since the 1930s and fuel costs had increased from about one-third to over a half of the industry’s total costs. With fuel forming such an important input to production, the generating industry, like the gas industry, became extremely sensitive to further price increases. Although coal for electricity generating was not in such short supply as gas coals, its price nevertheless rose by about 75 per cent up to 1960. Increased costs from this source alone were sufficient to make price increases of approximately. 40 per cent necessary for the industry, had there been no opportunity to improve efficiency.
There were, however, substantial opportunities for improving the generation process. The coal-fired boiler, steam turbine and electrical alternator had been used for generation since the early 1900s. Thermal efficiency, which is the inverse of fuel productivity, is dependent upon the application of various technical improvements to each of the components of generating equipment (such as the addition of a steam re-heat cycle), and is also more generally dependent upon operating steam temperatures and pressures. At the time of nationalisation average thermal efficiency in the generating authority’s stations was 20 per cent and there was a preponderance of older plant in which thermal efficiency was well below this level. Technically it was feasible at the time to install plant which would operate at 28 to 30 per cent, using techniques and steam conditions which were already established in practice. Further advances made by the generating authority during the 1950s and early 1960s, both in the application of improvements to turbo-alternators and in the raising of steam conditions, brought thermal efficiencies up to 35 per cent.
Of only slightly less importance than fuel costs were capital costs. The constant-price costs of building power stations had shown a declining trend during the earlier part of the twentieth century, due to improved technical efficiency and larger scale of units. The pace of technical change had then begun to slow in the 1930s and the cost of building new stations failed to decline further. With the effect of wartime and postwar inflation, building costs began to rise steeply. At the stage of technological development55 reached in the 1950s, and as a result of scale increases, the capital costs of generating equipment showed a further marked tendency to decline, as power stations advanced in size from 200 MW to 2,000 MW and individual generating units grew from 30–60 MW to 500 MW. The decline in costs was assisted by the improvement in thermal efficiency. In terms of constant prices, power station building costs declined from about £90 per kW in the late 1940s to around £40 per kW in the early 1960s.
One of the most important new techniques of the postwar period was the development of electricity generation from nuclear power stations. In this technique only the heat source is radically different from conventional methods. Steam produced in a heat exchanger is still used to power a turbine for the alternator. The nuclear power station contributed neither to improved thermal efficiency nor to reduced capital costs in the first twenty-five years of its development. The building of some fifteen Magnox and AGR stations in Britain was initiated as a programme from which economic benefits were expected in the long run. Magnox stations were launched as a measure to safeguard fuel supplies and the later AGR stations were begun in the belief, not unfortunately borne out, that they would be cheaper overall than conventional power stations.
The generating industry’s organisation for bringing about technical change was uneven, both in its pattern and in its performance. Before nationalisation, ownership of the industry was fragmented, but there were several outstanding companies which acted as industry leaders. The generating companies entered very little into research and development on generating techniques, but acted as informed and discriminating customers of the equipment manufacturers. Techniques were generally advanced through the process of one generating company agreeing to the purchase of an advanced design of plant from a manufacturer and operating the design somewhat experimentally. When the new techniques involved were established as practicable, further orders based on the design principle would follow. However this informal process had failed to produce a rate of technical advance commensurate with that in other countries for some years before nationalisation, partly through fragmentation and the small size of many companies, which led to them being unwilling to invest in advanced or large-scale designs, and partly through the low rate of investment in new plant, which resulted in the opportunity for experimental plant being limited.
The industry had a strong professional association in the Institution of Electrical Engineers. The Institution provided a useful forum for the discussion of technical developments. One of the major pre-war changes had been the construction of the Grid by a specially created public corporation, and in this venture leading engineers in the profession had played a major part, in both planning and execution. Interconnection of the main centres of electricity demand through the Grid provided the opportunity to build much larger power stations. The means of planning for the installation of large central power stations was provided when the supply industry came under the management of a single national public corporation. 1
Although rising costs provide a sufficient explanation of the ensuing changes in scale and techniques, the strength of demand for electricity proved an equal or greater force in causing those changes to be adopted56 rapidly throughout the system. Demand grew at rates between 6 and 10 per cent annually for most of the years 1947–65, and during much of this period the capacity of the system was less than the potential simultaneous maximum demand. Additional capacity was installed as rapidly as the physical constraints imposed by planning and construction would allow. Initially the technical characteristics and steam conditions of new plant installed were conservative, but the generating authority’s engineers pressed for rapid technical change. Major advances in generating equipment were made between 1951 and 1966, at first very successfully; in later programmes of new plant, particularly those involving the 500 MW generator and the AGR, performance to design and time schedule was not maintained. Technical failures, cost increases and delay affected both the conventional generating programme and the nuclear one. The effects were less severe than they might have been, because the growth of demand had slowed down by the time that the main difficulties were being experienced.
At the time of nationalisation the generating authority had not undertaken a thorough overhaul of the supply industry’s arrangements for the advance of techniques. On the transmission side, central research facilities existed prior to public ownership and they were added to by the new public corporation. On the generation side the authority did not set up central facilities for comprehensive research into advancing techniques. Although laboratories existed on a small scale at some power stations, and tests were carried out on new equipment, the major responsibility for research remained with the manufacturers.
Responding to the pressures of demand and of rising costs, the generating authority tried to speed up the process of advancing techniques and of raising unit sizes, but the informal procedures which had previously been accepted for promoting technical change proved inadequate to their new task. The first major change, from a standard of 60 MW to turbo-generators of 100 MW capacity, was accomplished successfully. It was, however, assisted by the fact that the change in scale was fairly small and did not stretch existing techniques very far. Sets of 60 MW, 75 MW and 100 MW outputs had previously been operated, although the last size had been of rather different design from that which the authority proposed in the early 1950s. Steam pressures were advanced from 900 lb/sq. in. to 1,500 lb/sq. in., and temperatures from 900°F to 1,000°F, but again these were not far above the levels of some previous sets of advanced design. The second change, to 200 MW 2,350 lb/sq. in. and 1,050°F, was used very successfully in one application but was not adopted as a standard. Then half-a-dozen larger sizes of an experimental nature were ordered without pause to consolidate the techniques being employed. They culminated in the 500 MW size, which was adopted as a standard but which had a troubled career.
The increases in scale and operating parameters involved in the AGR programme were even more drastic. The 600 MW reactors ordered were based on a research prototype only one-twentieth the size and working at much lower temperatures and efficiencies. The AGR design was not fixed and was not commercially developed when ordered. In consequence its progress was beset by technical snags, delays and cost increases.
Inquiries into the failures in the 500 MW generator programme laid the blame partly upon the quality of management applied by the CEGB to progress these large projects, and partly on shortcomings in the design57 capabilities of the manufacturers. While both these criticisms were no doubt justified, they tended to divert attention from the more important issue, of whether the arrangements for research and development and the application of advanced techniques in the generating industry were such as to make the failures which occurred more likely.
The CEGB pointed to the responsibility of the manufacturers for some of the design failings. They in their turn argued that the CEGB, as a monopoly buyer, had squeezed profits and contracts so much that it was not surprising that the research, experimental work and designs which were necessary to such advanced programmes were not always to be found in the developments which followed public ownership.
The truth seems to be that the industry and the Board were together attempting to achieve a fairly complex technical objective, but that neither singly nor collectively did they give its difficulty proper recognition. The research, technical development and consolidation of advanced techniques which were needed for success were not planned for. Investing in new plant for the system was a function not separately distinguished from running the development programme, and the needs of one activity clashed with those of the other.
In the nuclear plant programme also, it appears that technical developments were pushed forward much faster than was justified. The AGR design” was so little developed that building a full-scale station would have been desirable only in order for it to act as a commercial demonstration plant for the principles involved. The Generating Board and the Atomic Energy Authority did not see the necessity for this step.
