This week saw the passing of Margaret Thatcher; former Prime Minister of the UK. I used to reside in the UK and whether I was chatting in a country pub or negotiating in a City of London boardroom, there were few words that evoked as much emotion as Thatcher; or Thatcherism as her ideology came to be known. Her industrial policy transformed Britain, perhaps nowhere more so than in the energy sector. Her reforms systematically transformed Britain's state run electricity sector into one governed by free markets. Although controversial at the time, Thatcher's reforms have proven successful and have acted as a model for other countries who have since introduced deregulated electricity markets. Today, these competitive electricity markets are facilitating change and innovation that Thatcher could have never imagined, such as the proliferation of renewable energy.
Thatcher's first substantive impact on the UK's energy sector was through her suppression of the UK miners' strike of the mid-1980's. At the time, the UK generated most of its electricity from domestically mined coal. The previous time the miners went on strike in 1974 they nearly brought the country to it's knees. The official work week was shortened to three days to cope with electricity shortages and the miners are credited with bringing down the Labour government of the day. Thatcher, however, proved more successful in taking on the miners. She systematically closed down the most inefficient coal mines and allowed imports of cheaper coal from abroad. This lowered electricity prices for consumers and provided a beachhead for international trade into the electricity sector. More was to follow.
At the close of the 1980's, Thatcher took another bold step forward. She completely privatised her country's electricity sector and, perhaps most controversially, allowed electricity prices to fluctuate with the market. This was a hugely controversial reform at the time but one that has proven to be quite successful, largely by harnessing the forces of innovation and competition. For example, in the late 1990's when the UK discovered vast quantities of natural gas in the North Sea, the privatised electricity sector quickly mobilised over 10 billion to build dozens of gas fired electricity stations; this became known as the "dash for gas". It is unlikely that without Thatcher's reforms a government run electricity sector would have been able to do so much, so quickly.
If imitation is the most sincere form of flattery then Thatcher's reforms can be judged an international success. Around the world, her model of electricity privatisation has been copied by countries such as the USA, Chile and New Zealand. Even the EU (or as Thatcher referred to it, the Belgian Empire!) is now imposing a European wide electricity market that is very similar to Thatcher's original reforms.
Here in Canada where electricity is a provincial matter, Alberta is the only jurisdiction that has deregulated its electricity market and embraced competition as Thatcher did in Britain. And that is why it is only in Alberta that we can see the "invisible hand" do its work by bringing forth unanticipated change and innovation. I am thinking in particular of Alberta's wind energy sector. Despite the fact that Alberta does not have a reputation as an environmentally friendly province, it is Canada's leader in wind energy. One of the principle reasons for this is because Alberta's open electricity market allows wind energy to compete with traditional forms of generation.
I am sure Thatcher never thought that her industrial policy would one day assist wind power, especially in Alberta. But they have. Her energy reforms of the 1980's transformed Britain, proved an example to the world, and their legacy now is ensuring that new technologies such as wind energy are able to compete in open and fair markets.
