CAPACITY AND RELIABILITY – THE AIRLINES
One of the oldest lines goes something like “predictions are often wrong, especially if they are about the future”. I thought about this line recently when I had an American Airlines flight from Washington DC to Chicago on a Sunday afternoon. We had just arrived at the airport when the gate agent just said that there was bad weather at O’Hare and they canceled all flights into Chicago.
In a past life as a consultant I flew literally hundreds of times and I know a bit about airports and airlines. In past eras, the airline would have continually postponed the flight, helped you with alternatives, and bravely kept chugging along, trying to get you to your destination. Nowadays, with current fuel prices and most airlines on the brink of bankruptcy, the equation has changed; the airline that you select is basically on price or your Frequent Flyer mile affiliation, and the airlines are returning the favor – they are cutting flights, packing flights full to the brim, and basically stripping all the excess capacity out of the system.
The more subtle outcome of this is that airlines have become a significantly less reliable way of getting you from place A to place B. Cruises are now telling passengers that they ought to arrive the day before the cruise; it is too risky to fly out the morning of your cruise because so many flights are delayed that you might miss your departure. When I go on vacations, I often leave a day in front and a day in back just for these sorts of situations; a significant percentage of my recent trips were like the one to Washington DC when an extra day (or 8+ hours late at arrival) was inadvertently tacked on to my return.
The airline is basically substituting my personal time (which has a cost, especially if it is a day of work lost or vacation day) and my stress level (it is stressful not knowing whether you are going to get home that day to meet commitments or arrive at the start of your trip) for their financial survival. Flying on a plane nowadays is significantly more of a crap-shoot in terms of reliability and cancellation than it was in the past, and just try to fly stand-by if your flight is canceled when all of the subsequent fights are packed to the gills – that is even more stressful.
The parallels between airlines and electric power are actually very great, although this seems odd at first. For many years the airlines were focused on reliability and services beyond just the lowest price; they didn’t fill every flight to the absolute brim and they had spare planes available in case of weather emergencies or mechanical issues. This extra level of investment helped service in many subtle ways, but cost money – money tied up in airplanes that weren’t flying, ground crew to help with your experience, and in space in their schedule to re-jigger flights if needed.
Airlines and power have another subtle similarity – they are both services dependent upon time. The price of power famously varies depending on the time of day and weather conditions; this is due to the fact that you don’t want power “as a service” when it is best for the power company, you want it when it is best for YOU. If it is a hot day, you want air conditioning at noon. If you are running a company, you want power while the machines are running. The airlines aren’t just offering to fly me from A to B at a price; they are also balancing my time into the equation. If I have a funeral to attend, I want reliability, not price. If I have to make a critical overseas connection, I need to be in the right airport at the right time. While the airlines are competing on price, they are dropping so much capacity from the system (spare machines, spare people, room in schedule) that they are trading off between the two in a way that is significant and growing.
All of these items would be important if the airlines were competing on service, or in a financially viable situation. However, the airlines now are mainly competing on price and with the cost of jet fuel where it is today, all excess capacity is being ruthlessly stripped out of the system.
The ticky-tack fees that the airlines are now hitting you with for checking extra bags are another way to pass on costs – with the price of jet fuel today it makes no sense to subsidize a passenger with more bags relative to someone with a carry on. These types of charges cause passenger dissatisfaction, but that isn’t very relevant to the airlines now since most competition is on price.
CAPACITY AND RELIABILITY – POWER
As I have noted over and over in my posts, you can basically assume that no significant new baseload capacity is being added to the system. The significant baseload plants run continuously after a large capital investment and either run on coal, nuclear fuel or hydro power. You can wring your hands over this or dream that things will change, but they won’t – the system is being stripped of excess capacity in the form of baseload power and this will significantly change the reliability footprint over time.
Given that electricity is a requirement and air travel is still partially a luxury, the price of electricity is less flexible than air travel. The price of power on peak days will soar, and it will also be less reliable. The reasons for this are very complex, since the system is intertwined between generation, transmission and distribution, but under-investment and the fact that all the money will be MADE by the generating companies (who will just sit on it, since no one is making new investments) but will be NEEDED by the transmission and distribution companies for investments in “smart” grids and “smart” meters.
Since generation won’t be built and siting new transmission lines is virtually impossible, the likely alternatives are making the distribution grid more efficient. This will be done through time-of-use metering and punitive tariffs on peak (i.e., you want to run your A/C on the hottest day of the year – it will cost you $20).
The other, more subtle elements, are that businesses are building in backup power for their facilities. Since you can’t rely on the grid (any more than you can count on an airline getting to your destination on time) you need to invest massive amounts of money in fault tolerant electrical systems on your premises, in the form of power units to allow your systems to “fail gracefully” as well as backup generators if you can’t let it fail at all.
Even for individuals it will likely be more and more common for houses to be built with some sort of backup generation on site and some sort of “power quality monitoring” capability for sensitive electronics. I wouldn’t be surprised to start seeing this as a feature on expensive residential condominiums, as well. These units are expensive and having the fuel onsite is complicated; and when these units turn on they will likely put more pollutants into the environment than an equivalent, monitored controlled generating plant (per capita).
THE TELEPHONE AND CELLULAR TECHNOLOGY
Telephones also have a cost / quality / time dimension to them. The AT&T system was famously reliable; in Motorola terms they would have shot for the “six sigma” level of defects (that is to say, very very low). However, there were obvious disadvantages – fixed lines were just that, fixed and not portable, and innovation was low.
Cell phones now are famously unreliable; since I am in a high rise my service is spotty, and dropped calls are the norm. It is now expected that calls will be dropped and people aren’t necessarily offended if a call is broken off; this is the nature of the system.
The end state of this is “texting” – a new innovation that was originally kind of “tacked on” to the phone but now is critical and virtually everyone, including your grandparents, has caught on. I have a close family acquaintance who knew Motorola quite well and said that originally they were building a system using high reliability machines and guaranteed delivery, since this is their history. Over time there isn’t a sense of guaranteed delivery today with texting but this service is cheap and “good enough” – one of the hallmarks of “the age of unreliability”.
It is important to note that the cellular industry has been the most subject to innovation because it has been the most deregulated of the industries being discussed here. While airlines were deregulated, the airports and traffic control are still heavily regulated and they burden the airlines with fees (gate fees) and other devices that impact the free flow of business. Cities used to lean on airlines to pay for new airports; it will be interesting to see how they are funded in the future since the airlines can’t be relied upon to pay back anything in their current financial state. Power hasn’t been deregulated for practical purposes; the funding mechanisms have been irrationally tampered with but essentially it is coasting on past successes. While there are many opportunities for innovation at the local level, who is going to pay for it?
It is important to note another subtle effect of all this – the elites are moving to their own “parallel” systems. Corporate and executive jets are exploding in usage – to bypass security and guarantee delivery at their time and choosing, while paying the high prices that this methodology costs.
For power, we will likely move to a similar regime over time, when local builders, towns, or regions will “wall themselves” off from the rest of the grid in some way or provide local backup power for when the grid fails. You can be sure that this backup will be placed where the rich and the elite work and live – the poor will basically suffer the brunt of unreliability while the rich suffer in their pocketbook.
This already occurs with schooling – you can segregate by location (move to a wealthy suburb) or by price (do what Cl*nton and O*ama do and send your kids to private schools) and then leave the poor to suffer through the terrible schools of the inner city.
Another subtle impact on this is patriotism – these “elite” worlds will often look the same around the world, whether they are in Chicago, Rio, Dubai, Moscow, or Lagos (don’t laugh – there is a lot of oil wealth in Nigeria). They are self contained, with their own security, their own power, their own schools, their own travel corridors, and their own communications. The people that travel between these worlds have more in common with each other (the other elites) than with the huddled masses in their own countries (regardless of origin), and over time their attitudes will likely become more and more similar as they disengage from the world (of the commoner).
Originally the elite vs. poor was by country but it is really moving to segregation across countries AND within countries. Certainly if your country is wracked by civil war, everyone will suffer. And if your country starts out richer (US, UK, Japan) you are that much further ahead of someone coming up in the pack (India, China, South America). But over time the elites in all the major countries will be essentially walled off from their citizens to a larger or lesser degree and mostly be interchangeable, moving their wealth with them from place to place depending on local tax laws, beauty, the weather, and fashion.
THE AGE OF UNRELIABILITY
Who would have predicted the age of unreliability, which is what is coming for us, as the public and semi-public infrastructure (travel, schools, electricity, security) rides off past investments and the elites build their own mechanisms to cope with this, becoming more and more alike in the process, and more and more unlike the citizenry in their own country of origin.
Some technologies, like cellular technology and texting, have empowered the poor and are a bright story to counter the overall gloom of disinvestment in infrastructure and systems. But these systems are the exception, not the rule, and they benefit from some items (Moore’s law, wireless and not fixed grids) that don’t apply to the other elements, which require massive capital investment, fixed infrastructure, and a heavy service component (which as we know goes UP in costs, while electronics go DOWN in costs).
I don’t offer solutions because that isn’t my business, my business is to look at the world “as it is” not “as the way it ought to be”. And I have been frankly surprised by the “age of unreliability” since it hasn’t been widely trumpeted to the best of my knowledge. I also think that this unreliability is closely linked to the walled-off nature and similarity of the world’s elite, which I believe will become more and more pronounced in the future, for good or ill.
Cross posted at LITGM