Omnipotent State Withholds Power

The notion that state-owned monopolies can magically provide everyone in a nation with anything they need took a hit today. Indeed, we now have proof by example that such monopolies can deprive enormous numbers of people in a nation of something they need. Indonesia's government electricity monopoly has set, what I am sure, is the record for the world's worst electrical blackout, in terms of the number of people affected: 100 million! (The Great Blackout of 1965 affected only 25 million. This figure and those for other recent North American blackouts can be found here.)

Some 100m Indonesians were without electricity on Thursday as power outages hit the country's main grid, leaving office workers in Jakarta trapped in elevators and the state-owned power monopoly [bold added] struggling for an explanation.

The immediate blame rested on an inadequate infrastructure: old transmission lines and not enough generating capacity.

In parts, the main transmission lines were more than 20 years old, Mr Widiono told reporters. The outages also highlighted what is rapidly becoming an energy crisis for Indonesia, one of the world's most resource- and energy-rich countries [bold added].

The World Bank and others have warned that lack of investment in the power sector would create a power-generating deficit as the economy and demand for electricity grew.

Fortunately for Indonesia, efforts are underway to introduce privatization to the power sector. This is ultimately what will be needed to encourage "investment in the power sector". While the United States has a slightly freer energy sector and some movement towards allowing competition, support for environmentalism has resulted in regulations (and litigation) that have prevented us from adding sorely-needed generation capacity. Writing about the brownouts that occurred in California a couple of years ago, Andrew Bernstein writes:

[T]he biomass power industry, which burns waste from forest timber to produce electricity, has been crippled by lawsuits from environmentalist organizations. The Honey Lake biomass plant was shut down several years ago because of litigation originated by the San Francisco-based Earth Island Institute against the U.S. Forest Service. Because of the lawsuit, the Forest Service suspended the logging operations that provided the biomass company with its fuel source. Prior to the shutdown, the 20 biomass companies in California could collectively have generated 600 megawatts per year. Further, California has not built a new power plant in almost 20 years. The reason is that any attempt must endure years of costly lawsuits from environmentalist groups. The Diablo Canyon nuclear station, finally completed in 1985, had its building costs increased twelve-fold, from $500 million to $6 billion. Nuclear plants, despite their unparalleled safety record in the United States, are a favorite target, but hydroelectric plants are also attacked because they require construction of dams, and coal plants because they are considered too dirty [italics added].

I have often argued that excessive government control of an economy can result in shortages, but I never considered the kind of instant havoc a state electricity monopoly could wreak.

But this is impressive only in the speed at which so many were affected. The ability to force its citizens to be loyal customers and the lack of a profit motive make such a result a predictable, if usually slower, outcome of any such government monopoly.

-- CAV