Electricity Transmission and Rates of Technological Diffusion

Milestone in transmission wires

According to this article, American Superconductor has achieved an important milestone in producing transmission wires from high temperature superconductor material: “American Superconductor Corporation announced it has achieved reproducible results in electrical performance over 10-meter lengths of its second generation, coated conductor composite, high temperature superconductor (HTS) wires that are significantly ahead of the goals set by the U.S. Department of Energy (DOE).”

This is pretty cool, because HTS wires reduce resistance, and therefore line loss, that limits the economic feasibility of long-distance electricity transmission. Overcoming line loss currently (no pun intended) requires augmenting the current at specific distances along its path, which is costly, so reducing line loss would reduce transmission costs. The problem has been, though, that HTS need to be kept cool (don’t let that word “high” fool you; it’s high on the Kelvin scale!), which typically means having to sheath HTS wires in liquid nitrogen. Such sheathing is not cheap, and could also increase maintenance costs. So the economic tradeoff here is between the value from reducing line loss and the incremental cost of the HTS wires, including sheathing, maintenance, and higher cost of the wires. Particularly in areas of the country that have transmission system congestion (such as Path 15 going into the Bay Area in California), reducing line loss can have sufficient value to encourage investment in HTS wires to replace or supplement old wires.

As the linked article indicates, the next step in American Superconductor’s effort is to scale it up – take the small-scale reproducible results they have achieved and produce the HTS wires in large numbers. This step is crucial to HTS wires becoming more economically competitive with existing wires technology – economies of scale in production that lowers average cost will help make HTS wires a more attractive investment option across a wider range of congestion conditions. This tradeoff also means that continued research into cheaper, impervious and low-maintenance sheathing technology will be important in making HTS wires economically competitive with the older wires technology that has line loss. And the old technologies have not been standing still; standard AC transmission wires have improved substantially over the past century, and can now transmit over longer distances with less line loss than even two decades ago.

An example from economic history closely parallels this pattern, and is very informative about technology diffusion. The double-acting steam engine became technologically and economically viable by the late 1780s, largely courtesy of James Watt’s ingeneuity, his business partner Matthew Boulton’s business acumen, and local blacksmith/engineer John Wilkinson’s ability to build to Watt’s designs and low tolerances to achieve strong pressure differentials. However, the steam engine did not immediately displace its competing, older technology, the water wheel; in fact the steam engine did not become dominant in powering British industrial manufacturing until the 1840s.

There are two primary reasons for this slow diffusion of a “clearly superior” technology. First, James Watt had a dread fear of explosions, so all of his engines were low-pressure. Watt was also vigorous in defending his patents on his “bundled suite” of steam engine inventions, so inventors who were coming up with novel, high-pressure steam engines that could get more power for a given amount of fuel could not commercialize their inventions until Watt’s patents expired. These high-pressure engines, which increased the value of the steam engine relative to other technologies, really came onto the market starting in the late 1820s. Second, the water wheel continued to improve through the early 19th century, with shaped blades to capture as much energy as possible from the water, as well as other inventions (interesting note: this water wheel with curved blades, called the Poncelet water wheel, was the technological precursor of the water and steam turbines invented in the late 19th century and used to generate electricity today). Even if the steam engine was a “clearly superior” technology, it’s the incremental or marginal value of the technology that will determine whether or not it gets adopted at a particular time. The marginal value of the superior technology increased slowly from the 1780s until its ultimate dominance in the 1840s.

That’s a 60-year diffusion cycle, even for the most dramatic human invention since moveable type/the printing press. The punch line of this story for the HTS wires story is that diffusion is likely to be slower the more that traditional wires technologies continue to improve. Countless examples exist where older technologies hold on for longer than is expected, and this marginal value of the superior technology is the key factor in that pace of diffusion.

Lynne Kiesling is director of economic policy at Reason Foundation and senior lecturer in economics at Northwestern University.

Lynne Kiesling is Director of Economic Policy at Reason Public Policy Institute. She is also Visiting Associate Professor of Economics at Northwestern University. Her previous positions include Assistant Professor of Economics at the College of William and Mary, and Manager in the Transfer Pricing Economics group at PriceWaterhouseCoopers LLP. She has a Ph.D. in economics from Northwestern University, and has published extensively in academic journals.