The economics of electricity markets 1st edition darryl r. biggar 2024 scribd download
The Economics of Electricity Markets
1st Edition Darryl R. Biggar
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Electricity markets theories and applications 1st Edition Jeremy Lin
Electricity Markets with Increasing Levels of Renewable Generation Structure Operation Agent based Simulation and Emerging Designs 1st Edition Fernando Lopes
Australian Competition and Consumer Commission, Melbourne, Australia
Mohammad Reza Hesamzadeh
KTH Royal Institute of Technology, Stockholm, Sweden
A co-publication of IEEE Press and John Wiley & Sons Ltd
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Library of Congress Cataloging-in-Publication Data
Biggar, Darryl R. (Darryl Ross)
The economics of electricity markets / Darryl R Biggar, Mohammad Reza Hesamzadeh. pages cm
ISBN 978‐1‐118‐77575‐2 (hardback)
1. Electric power consumption. 2. Electric power–Economic aspects. 3. Electric utilities. I. Hesamzadeh, Mohammad Reza. II. Title.
HD9685.A2B54 2014 333.793´ 2–dc23
A catalogue record for this book is available from the British Library.
ISBN 9781118775752
Set in 10/12pt TimesLTStd-Roman by Thomson Digital, Noida, India.
1 2014
2014014039
Preface
Around the world, the electricity industry is in the process of undergoing a fundamental transition. Twenty years ago, electricity was primarily generated at large, industrial-scale generating plants, and transported in one direction to consumers via the transmission and distribution networks. The large generators were typically closely integrated into the operation of the transmission and distribution networks. Electricity consumers, on the other hand, were treated as essentially passive.
This paradigm has changed and will change further. Around the world, a number of regions have chosen to introduce competition and competitive markets into the generation of electricity. In most of these regions, the operation of generation and transmission is coordinated through market mechanisms. This required a substantial change in the way the electricity industry is organised and operated.
However, further transformations are underway. With increasing pressure for decarbonisation of the energy sector, there is increasing penetration of renewable generation and increasing take-up of electric vehicles. Changes in battery technology threatens to substantially change the way electricity is stored and consumed. Just as importantly, the IT and communication revolutions have opened up the scope for a host of new devices and appliances, allowing small-scale consumers for the first time to respond to local electricity market conditions.
The full benefits of these developments will only be achieved if the electricity industry completes its transition. From a paradigm of one-way managed electricity supply, the electricity industry is transforming to a new service model. In this new paradigm the industry exists to provide a platform for the two-way trade of electricity, with all customers large and small, integrated with and responding to local market conditions. This is an exciting time to be studying the electricity industry.
In preparing this text, we found three themes that were important and that shaped the material. The first of these was symmetry between generators and loads. In the future, the historic distinction between electricity producers and electricity consumers will diminish. It seems likely to us that an increasing number of participants in the electricity industry will be able to produce and consume electricity, switching between net injection and net withdrawals from the system according to local market conditions. In such a world, it seems to us essential that there be symmetry in the treatment of generators and loads. Rather than distinguishing generators and loads, we prefer to view them all as electricity market participants. The key distinction that will remain is not between generators and loads but between large and small market participants.
In a similar manner, we have also actively avoided any distinction between transmission and distribution networks. Although there are real differences in their construction and operation, these differences do not seem to us as fundamentally important for the economic analysis of electricity markets. There are only networks, and the physical limits that those network impose on power flows.
The second major theme was the importance of understanding over sophisticated modelling We have sought to highlight key principles and to develop understanding. For this purpose, we have used the simplest possible models and examples wherever possible. We have avoided complex sets of equations or complex models wherever possible, even at the sacrifice of realism. In our view, a small amount of understanding is worth a large amount of sophisticated black-box modelling.
Consistent with this approach, we have not always sought to accurately capture every element of real-world electricity networks. For example, for much of this text, electricity losses have been ignored. Some engineers may be troubled by this. Nevertheless, we consider that the benefits of clarity and simplicity of presentation outweigh the additional complexity of modelling losses in every model. In our view, when it comes to learning about the electricity industry, understanding is more important than sophisticated modelling.
The third major theme was consistency of economic approach. We have sought to set out a consistent, coherent, economic approach to electricity markets, with reliance as far as possible on price signals and market-based incentives. In practice, every real electricity market of which we are aware is some distance away from this theoretically ideal model. Real-world electricity markets tend to be a patchwork of compromises, approximations and ad hoc interventions. Some of those interventions may be justified. However, we are concerned that often compromises are made due to a lack of understanding or fear of the theoretically ideal approach. We consider there is considerable value in setting out a thorough-going economic approach. There will be debates about the extent to which this approach can be implemented in practice. Also, many of the departures from the theoretical framework (such as zonal pricing) are worth studying in their own right. Nevertheless, we consider that students of electricity markets should be exposed to the simplicity and elegance of the theoretically pure approach. One of the important implications of this approach is that reliability – which is traditionally a primary concern of the power system engineer – diminishes in importance. In a thorough-going market approach, reliability disappears as an issue entirely. Prices always adjust to balance supply and demand.
We hope you find your study of the electricity market as fascinating and challenging as we do.
Nomenclature
The following terminology is used in this book:
Symbol Name Units
Qi
Meaning
Rate of production units/time interval, Rate of production of output by or consumption kW, or MW producer i or rate of consumption by consumer i
C i Qi Cost function $/time interval
MCi Qi C 0 i Qi
dC i dQi
Marginal cost function
$/unit, $/kWh or $/MWh
π i Qi Profit function $/time interval
UQ Utility function
$/time interval
φi Qi Net utility function $/time interval
Rate at which costs are incurred by producer i when producing at the rate Qi (units/time interval)
Rate at which costs increase with an increase in the rate of production
Rate at which profits are received by producer i when producing at the rate Qi (units/time interval)
Rate at which utility is received when consuming at rate Q (units/time interval)
Rate at which net utility is received by customer i when consuming at the rate Qi (units/time interval)
π i Qi Profit function $/time interval
P Price
Rate at which profit is received by generator i when producing at the rate Qi (units/time interval)
$/unit, $/kWh, Amount of additional $/MWh expenditure required to acquire and additional unit
(Continued)
(Continued)
Symbol Name Units Meaning
QD P
PD Q
PS Q
Demand curve
Inverse demand
PRD Q curve
units/time interval, Rate of consumption as a function kW, MW of the linear market price
$/unit, $/kWh, Price consistent with a given
Supply curve (Inverse) residual $/MWh
$/unit
$/unit, $/kWh, rate of consumption
Price consistent with a given rate of production
Market price consistent with a demand curve $/MWh given rate of production of a dominant firm. Residual demand curve is equal to market demand curve less supply of other firms.
ε Elasticity dimensionless Elasticity is a measure of the sensitivity of the demand function to the price. For the demand function QP elasticity is defined as: ε dln Q dln P P Q dQ dP
c Variable cost
K
K it
$/unit, $/MWh
Variable cost of production (typically assumed to be constant)
Productive capacity units/time interval, Maximum rate of production of kW, MW a producer
Productive capacity MW
Maximum rate of production of a generator of type t at node i
f Cost per unit of $/unit/time interval, Marginal cost of adding an extra capacity $/MW unit of capacity
F Fixed cost of $/time interval Fixed cost of generation (often generation equal to fK ).
W ; Q; P Real power, reactive Watts, VARs and power, apparent VAs (also kVA power and MVA)
λ Lagrange multiplier $/MWh Often interpreted as the price. on the energy Equal to System Marginal balance constraint Cost (SMC)
μi ; νi Lagrange multiplier on generator $/MW
νi is the Lagrange multiplier on the lower bound on production production (usually taken as constraints zero); μi is the Lagrange multiplier on the upper bound on production (equal to the generator’s capacity).
(Continued)
(Continued) Symbol
Lagrange multiplier on energy-limit constraint
Partition of the set of producers and consumers
Load duration curve
Duration of the tth interval
Day ahead and realtime prices and quantities
Probability density function for demand
Originating and terminating nodes for link l
Net injection to node i
Flow on link l
Maximum flow on link l
Constraint marginal value for link l Merchandising surplus
Congestion rents associated with link l Settlement residues associated with link l
Economic welfare
$/MWh
Set
MW
Hours
$/MWh, MW
Probability
This is a partition, so N i ∩N j ∅ and ∪N j N
For any fraction z, the level of demand q for which Pr Q q z
Hedge contract
Volume associated with a hedge contract
Node
When demand is treated as a random variable, the probability density function determines the shape of the load–duration curve
Network link l joins node org l to node term l
Net injection is the local production less the local consumption
$/MW/time interval
$/time interval
$/time interval
$/time interval
$/time interval
$/time interval MW
The overall economic welfare for a network of a given configuration and network flow limits K l
VP ; ε @ @ H P P; ε
(Continued)
(Continued)
Symbol Name Units Meaning
FTR Pi ; Pj ; V FTR hedge contract
$/time interval
CapFTR Pi ; PN ; S; V Cap FTR hedge
$/time interval
Payout on a FTR hedge contract from a node with price Pi to a node with price Pj and a volume V . FTR Pi ; Pj ; V Pj Pi V
Payout on a CapFTR hedge contract product from a node with price Pi to node with price PN , strike price S and volume V CapFTR Pi ; PN ; S; V PN Pi VI Pi S
Part I Introduction to Economic Concepts
Construction of a pole-mounted transformer substation, Waitaki Electric Power Board, New Zealand, ca 1925 (Source: Neil Rennie, Power to The People: 100 Years of Public Electricity Supply in New Zealand, Electricity Supply Association of New Zealand)
1 Introduction to Micro-economics
This book is about the economics of electricity markets. It is therefore essential that the reader understands a number of basic concepts in economics. Much of the material here can be found in introductory textbooks in economics. However, we hope that setting out this material at the start of this textbook will assist readers who do not have a background in economics. Readers who have a background in economics may choose to skip this part. However, this presentation probably contains some new material, even for readers familiar with economics. In addition, we introduce notation and a few key ideas which are used throughout the rest of the book. We recommend at least a review of this material.
1.1 Economic Objectives
Economics is the study of the production, consumption, and exchange of goods and services in an economy – including how production, consumption, and exchange are organised, how information flows and how participants are rewarded and incentivised for playing their part. Economics seeks to both create theories which explain the patterns of behaviour and organisation that we see in the real world (so-called positive theories), and to develop policies and proposals for changing the arrangements that exist in the real world (normative theories).
But, if we are to recommend changes to existing arrangements, we need a commonly agreed set of objectives that we are trying to achieve. In our view, this common set of objectives must relate, in some way, to a common vision of the overall economic welfare of the society or economy as a whole.
There may be many different ways of articulating the overall economic welfare of a society or economy, if such a thing exists at all. It may never be possible to get consensus over whether or not some alternative state of the world, B, is preferred to the status quo, A. Economists tend to focus on areas where, in principle, there could be consensus – that is, situations where, in principle, every member of society could agree that B is preferred over A. These tend to be situations where there is what might be described as waste or inefficiency – where we could reorganise things so that we could achieve the same outcomes with fewer resources, or achieve better outcomes with the same resources. If these situations exist we could, in principle, leave everyone better off.
Although there is some variation in economic theory, in practice most public policy economists make certain assumptions which simplify the task of determining the total
economic welfare. Chief amongst these is the assumption that we can ignore income effects. In effect, this means that the benefit of an additional dollar to me is about the same as the benefit to any other member of the society. This assumption rules out the possibility of deriving any benefit from income redistribution alone. Alternatively, we can imagine that such income redistribution has already occurred through some other mechanism.
If we make this assumption, for any public policy change we can envisage, we can value the benefits and the costs imposed using a simple monetary metric. The change in economic welfare brought about by the public policy change is the simple sum of the monetised benefits and costs. An arrangement which maximises the economic benefits less the costs is said to be efficient This is the usual meaning of the term economic efficiency in public policy analysis. This notion of economic efficiency does not incorporate everything which the broader public might consider important. In particular, it does not usually directly deal with controversial questions about how income should be distributed in the economy. Neither does it normally directly address questions of fairness or equity.1 Nevertheless, this notion of economic efficiency captures important, and broadly acceptable, notions of social welfare, and for most economists represents a legitimate goal for economic policymakers.
It is valuable to break down this notion of efficiency further. It is useful and helpful to distinguish between short-run and long-run concepts of efficiency. In the short-run we have an existing stock of assets in place. Short-run efficiency relates to getting the most out of the existing stock of assets: producing as much as possible and allocating those goods and services to those customers which value them most highly. In the longer run we can change the stock of assets, creating new assets or removing old assets. Longer-run efficiency includes the notion of efficiency in changing the stock of assets over time. We can distinguish between both production assets (used to make other goods or services, including electricity) and consumption assets (which are used to directly provide services to customers, such as electrical appliances or electrical machinery).
Specifically, we can distinguish between the following:
a. Efficiency in the use or operation of an existing stock of assets. This includes efficiency in the allocation of goods and services (ensuring that goods and services are consumed by those who value them most highly) and efficiency in the production of goods and services (ensuring that goods and services are produced at the lowest possible cost, given the existing stock of assets).
b. Efficiency in investment in the creation of new assets (or the disposal of old assets), including investment by seller(s) in new production assets (of the right size, in the right location, in the right amount, of the right type, and so on) and investment in developing new goods and services, and investment by buyer(s) in assets which increase their value for the goods or services produced (new consumption assets).
Many textbooks distinguish between allocative, productive and dynamic efficiency. These terms are defined in different ways by different economists. We prefer the following definition: Allocative and productive efficiency are short-run efficiency concepts, relating to the efficient use of the existing stock of assets. Allocative efficiency refers to ensuring that the goods and
1 This does not mean to imply that economic policies will not accord with principles of fairness or equity – but rather that those terms are interpreted in an economic way where they are addressed at all.
services produced are allocated to those who value them most highly. Productive efficiency refers to ensuring that goods and services are produced at the lowest possible cost. In contrast, dynamic efficiency is a longer-run concept, relating to changes in the existing stock of assets. Dynamic efficiency refers to efficient decisions regarding investment in new assets (what, where, when, and what type of investment), including investment in developing new products and services over time.
Result: Economic efficiency has both a short-run and long-run dimension. In the short run, economic efficiency is about the efficient use of a given set of production and consumption assets (productive and allocative efficiency). In the longer run, economic efficiency is about efficient decisions in the creation of new assets or the disposal of old assets (dynamic efficiency).
This book is about the design of arrangements to achieve these economic efficiency objectives in the electricity industry. Any particular arrangement is only desirable to the extent it achieves these objectives. In particular, this book will explore the extent to which competitive markets in the electricity sector can achieve the objectives above. We will see that in many situations, competitive markets deliver economically efficient outcomes. In other situations, competitive markets will not achieve these outcomes and we must substitute alternative arrangements, such as direct price controls. Particular institutional arrangements, such as competitive markets, are not an end in themselves. They are only the means to an end –a means to the achievement of the objectives set out above.
In many parts of the text that follow we will first seek to determine the efficient outcome (that is, the efficient use/operation of existing assets and/or the efficient investment outcomes) and then seek to determine whether particular market arrangements can achieve those outcomes, and under what conditions the market arrangements might achieve those outcomes. When it comes to achieving efficient outcomes using a given stock of assets, economists typically focus separately on the buying (or demand) side of the market and the selling (or supply) side of the market. The next two sections focus in turn on the buying side of a market and the supply side of a market. We will then bring these ideas together to look at what it means to achieve efficiency in the use of a given stock of assets. In the subsequent section we will explore whether or not short-run efficient outcome can be achieved using a competitive market. First, however, we review the principles of constrained optimisation.
1.2 Introduction to Constrained Optimisation
Optimisation lies at the heart of economics. Under conventional economic theory all economic actors are assumed to be maximisers of an objective function. This underlying assumption is made even more explicit in the smart markets introduced in Section 1.6. It is therefore essential for all students of electricity markets to have some understanding of the theory of constrained optimisation. In this text we will often see a constrained optimisation problem expressed in the following form:
Subject to the following conditions:
a. For i 1; ... ; n; ci $ λi gi x
b. For j 1; ... ; m; d j $ μj hj x k
Here x is a vector of k variables, and the functions f ; gi ; hj are all functions from R to R . The equations gi(x) = ci and hj(x) = dj are known as constraint equations.
The variables λi and μj are known as Lagrange multipliers and their value will become apparent shortly. Each constraint equation has its own Lagrange multiplier. Here we are following the convention which uses the symbol $ to show the Lagrange multiplier which is associated with each constraint equation.
Let us suppose that we have a set of values x; λ; μ which satisfy the following conditions, known as the Karush–Kuhn–Tucker (or KKT) conditions. Then x is a solution to the constrained optimisation problem above.
The KKT conditions are as follows:
1. For l 1; ; k ,
@ f @ gi @ hj λi μj 0 @ xl
This condition is known as the First Order Condition
2. For i 1; ; n; ci gi x 3. For j 1; ... ; m; μj 0; hj x
In other words, the problem of finding a solution to the constrained optimisation problem above reduces to the problem of finding a solution to the KKT conditions (1)–(3).
It is worth noting that the Lagrange multipliers have a particular interpretation. The Lagrange multipliers measure the extent to which the objective function can be improved following a small change in the constraints. For example, let us define L to be the value of the objective function at the solution of the constrained optimisation above. Then the Lagrange multiplier λi is the change in the objective function with respect to a small change in the parameter ci . Similarly, the Lagrange multiplier μj is the change in the objective function with respect to a small change in the parameter d j .
1.3 Demand and Consumers’ Surplus
Let us focus more closely on the buying (or demand) side of a market for a particular good or service, such as electricity. We will focus on an abstract buyer or customer of this service. Although we will use the word customer, we do not intend to limit ourselves to small customers or consumers. Rather this customer could be a large business, such as an aluminium smelter, a small business, such as an office or restaurant, or a residential household.
To model the behaviour of customers in a market, in principle we need to specify two things: (a) the range of actions or choices that the customer faces; and (b) some form of objective which the customer is seeking to pursue.
1.3.1 The Short-Run Decision of the Customer
In principle, customers can take a range of actions which affect the value they receive from a good or service. This is particularly true in the case of electricity. Customers do not consume electricity directly; instead they consume the services of a range of machinery, pumps, heaters, devices and appliances which consume electricity. The demand for electricity at any one point in time depends on the stock ofpast investments made bythe customer.More generally,thedemandforaparticular good or service in the economy will depend on the past actions taken by customers.
For the moment we will focus on short-run decisions of the customer. Let us assume that the customer has made a set of decisions in the past regarding devices which consume electricity. The key remaining decision of the customer is how much electricity to consume at a given point in time – or more precisely, the rate at which electricity is consumed. 2
1.3.2 The Value or Utility Function
In order to complete the model of customer behaviour, we need to specify the customer’s objective. Many introductory textbooks in economics start by introducing the demand curve. However, we will follow a slightly unconventional path and start with the notion of a value or utility function This approach is straightforward and allows us to draw simple parallels between the demand and the supply sides of each market.
Let us suppose we have a customer which is consuming a particular good or service at the rate Q (units per interval of time). Let us assume that we can express the utility or value (also known as surplus) that this customer receives from consuming this particular good or service in the form of a function, known as a utility function UQ ($ per interval of time). (This customer could itself be a firm, in which case the utility is equal to the profit of the firm from the activity).
This utility will depend on a number of factors, such as the investments the customer has made in equipment which uses the good or service in question, or, if the customer is itself a firm, the demand for the final product produced by the firm and the substitutes available for the good or service in question. Typically, the customer is assumed to obtain higher utility from consuming at a higher rate. In other words, U ´ Q > 0 (here the prime symbol signifies the first derivative of the utility function with respect to the rate of consumption). Also, by assumption the rate at which value increases with consumption decreases the higher the rate of consumption (i.e. U ´´ Q < 0).
In practice, a customer will typically not consume just a single good or service, but several different goods and services at the same time. The utility function can be a function of the rate of consumption of each of these goods and services. For example, if a customer consumes two goods, at the rates Q1 and Q2 , the rate at which the customer receives value or utility might be denoted by UQ 1 ; Q2 ($/interval of time).
1.3.3 The Demand Curve for a Price-Taking Customer Facing a Simple Price
Let us suppose that the customer obtains a particular good or service through arm’s length transactions in a market. The simplest assumption we can make is that the customer pays a
2 Strictly speaking, the customer does not directly choose the rate of consumption of electricity – instead he/she chooses the rate at which to enjoy the services for which electricity is used (such as the rate of manufacture of aluminium), and the rate of consumption of electricity follows.
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purity and abstinence of his style, and we who speak it, for having emboldened us to trust ourselves to take delight in simple things, and to trust ourselves to our own instincts. And he hath his reward. It needs not to
Bid Beaumont lie A little farther off to make him room,
for there is no fear of crowding in that little society with whom he is now enrolled as the fifth in the succession of the great English poets.
LECTURE XII
THE FUNCTION OF THE POET
(Friday Evening, February 16, 1855)
XII
Whether, as some philosophers here assume, we possess only the fragments of a great cycle of knowledge, in whose center stood the primeval man in friendly relation with the powers of the universe, and build our hovels out of the ruins of our ancestral palace; or whether, according to the developing theory of others, we are rising gradually and have come up from an atom instead of descending from an Adam, so that the proudest pedigree might run up to a barnacle or a zoöphyte at last, are questions which will keep for a good many centuries yet. Confining myself to what little we can learn from History, we find tribes rising slowly out of barbarism to a higher or lower point of culture and civility, and everywhere the poet also is found under one name or another, changing in certain outward respects, but essentially the same.
But however far we go back, we shall find this also—that the poet and the priest were united originally in the same person: which means that the poet was he who was conscious of the world of spirit as well as that of sense, and was the ambassador of the gods to men. This was his highest function, and hence his name of seer
I suppose the word epic originally meant nothing more than this, that the poet was the person who was the greatest master of speech. His were the ἔπεα πτερόεντα, the true winged words that could fly down the unexplored future and carry thither the names of ancestral heroes, of the brave, and wise, and good. It was thus that the poet
could reward virtue, and, by and by, as society grew more complex, could burn in the brand of shame. This is Homer’s character of Demodocus in the eighth book of the “Odyssey,”
When the Muse loved and gave the good and ill,
the gift of conferring good or evil immortality.
The first histories were in verse, and, sung as they were at the feasts and gatherings of the people, they awoke in men the desire of fame, which is the first promoter of courage and self-trust, because it teaches men by degrees to appeal from the present to the future. We may fancy what the influence of the early epics was when they were recited to men who claimed the heroes celebrated in them for their ancestors, by what Bouchardon, the sculptor, said only two centuries ago: “When I read Homer I feel as if I were twenty feet high.”
Nor have poets lost their power over the future in modern times. Dante lifts up by the hair the face of some petty traitor, the Smith and Brown of some provincial Italian town, lets the fire of his Inferno glare upon it for a moment, and it is printed forever on the memory of mankind. The historians may iron out the shoulders of Richard III. as smooth as they can; they will never get over the wrench that Shakspeare gave them.
The peculiarity of almost all early literature is that it seems to have a double meaning; that underneath its natural we find ourselves continually seeing and suspecting a supernatural meaning. Even in the older epics the characters seem to be only half-historical and half-typical. They appear as the Pilgrim Fathers do in Twenty-second of December speeches at Plymouth. The names may be historical, but the attributes are ideal. The orator draws a portrait rather of what he thinks the founders ought to have been than a likeness which contemporaries would have recognized. Thus did early poets endeavor to make reality out of appearances. For, except a few
typical men in whom certain ideas get embodied, the generations of mankind are mere apparitions who come out of the dark for a purposeless moment, and enter the dark again after they have performed the nothing they came for.
The poet’s gift, then, is that of seer. He it is that discovers the truth as it exists in types and images; that is the spiritual meaning, which abides forever under the sensual. And his instinct is to express himself also in types and images. But it was not only necessary that he himself should be delighted with his vision, but that he should interest his hearers with the faculty divine. Pure truth is not acceptable to the mental palate. It must be diluted with character and incident; it must be humanized in order to be attractive. If the bones of a mastodon be exhumed, a crowd will gather out of curiosity; but let the skeleton of a man be turned up, and what a difference in the expression of the features! Every bystander then creates his little drama, in which those whitened bones take flesh upon them and stalk as chief actor.
The poet is he who can best see or best say what is ideal; what belongs to the world of soul and of beauty. Whether he celebrates the brave and good, or the gods, or the beautiful as it appears in man or nature, something of a religious character still clings to him. He may be unconscious of his mission; he may be false to it, but in proportion as he is a great poet, he rises to the level of it more often. He does not always directly rebuke what is bad or base, but indirectly, by making us feel what delight there is in the good and fair. If he besiege evil it is with such beautiful engines of war (as Plutarch tells us of Demetrius) that the besieged themselves are charmed with them. Whoever reads the great poets cannot but be made better by it, for they always introduce him to a higher society, to a greater style of manners and of thinking. Whoever learns to love what is beautiful is made incapable of the mean and low and bad. It is something to be thought of, that all the great poets have been good men. He who translates the divine into the vulgar, the spiritual into the sensual, is the reverse of a poet.
It seems to be thought that we have come upon the earth too late; that there has been a feast of the imagination formerly, and all that is left for us is to steal the scraps. We hear that there is no poetry in railroads, steamboats, and telegraphs, and especially in Brother Jonathan. If this be true, so much the worse for him. But, because he is a materialist, shall there be no poets? When we have said that we live in a materialistic age, we have said something which meant more than we intended. If we say it in the way of blame, we have said a foolish thing, for probably one age is as good as another; and, at any rate, the worst is good enough company for us. The age of Shakspeare seems richer than our own only because he was lucky enough to have such a pair of eyes as his to see it and such a gift as his to report it. Shakspeare did not sit down and cry for the water of Helicon to turn the wheels of his little private mill there at the Bankside. He appears to have gone more quietly about his business than any playwright in London; to have drawn off what water-power he wanted from the great prosy current of affairs that flows alike for all, and in spite of all; to have ground for the public what grist they want, coarse or fine; and it seems a mere piece of luck that the smooth stream of his activity reflected with ravishing clearness every changing mood of heaven and earth, every stick and stone, every dog and clown and courtier that stood upon its brink. It is a curious illustration of the friendly manner in which Shakspeare received everything that came along, of what a present man he was, that in the very same year that the mulberry tree was brought into England, he got one and planted it in his garden at Stratford.
It is perfectly true that this is a materialistic age, and for this very reason we want our poets all the more. We find that every generation contrives to catch its singing larks without the sky’s falling. When the poet comes he always turns out to be the man who discovers that the passing moment is the inspired one, and that the secret of poetry is not to have lived in Homer’s day or Dante’s, but to be alive now To be alive now, that is the great art and mystery They are dead men who live in the past, and men yet unborn who live in the future. We are like Hans-in-Luck, forever exchanging the burthensome good we have for something else, till at last we come
home empty-handed. The people who find their own age prosaic are those who see only its costume. And this is what makes it prosaic: that we have not faith enough in ourselves to think that our own clothes are good enough to be presented to Posterity in. The artists seem to think that the court dress of posterity is that of Vandyke’s time or Cæsar’s. I have seen the model of a statue of Sir Robert Peel—a statesman whose merit consisted in yielding gracefully to the present—in which the sculptor had done his best to travesty the real man into a make-believe Roman. At the period when England produced its greatest poets, we find exactly the reverse of this, and we are thankful to the man who made the monument of Lord Bacon that he had genius enough to copy every button of his dress, everything down to the rosettes on his shoes. These men had faith even in their own shoe-strings. Till Dante’s time the Italian poets thought no language good enough to put their nothings into but Latin (and, indeed, a dead tongue was the best for dead thoughts), but Dante found the common speech of Florence, in which men bargained, and scolded, and made love, good enough for him, and out of the world around him made such a poem as no Roman ever sang.
We cannot get rid of our wonder, we who have brought down the wild lightning from writing fiery doom upon the walls of heaven to be our errand-boy and penny postman. In this day of newspapers and electric telegraphs, in which common-sense and ridicule can magnetise a whole continent between dinner and tea, we may say that such a phenomenon as Mahomet were impossible; and behold Joe Smith and the State of Deseret! Turning over the yellow leaves of the same copy of Webster on “Witchcraft” which Cotton Mather studied, I thought, Well, that goblin is laid at last! And while I mused, the tables were dancing and the chairs beating the devil’s tattoo all over Christendom. I have a neighbor who dug down through tough strata of clay-slate to a spring pointed out by a witch-hazel rod in the hands of a seventh son’s seventh son, and the water is sweeter to him for the wonder that is mixed with it. After all, it seems that our scientific gas, be it never so brilliant, is not equal to the dingy old Aladdin’s lamp.
It is impossible for men to live in the world without poetry of some sort or another. If they cannot get the best, they will get at some substitute for it. But there is as much poetry as ever in the world if we can ever know how to find it out; and as much imagination, perhaps, only that it takes a more prosaic direction. Every man who meets with misfortune, who is stripped of his material prosperity, finds that he has a little outlying mountain-farm of imagination, which does not appear in the schedule of his effects, on which his spirit is able to keep alive, though he never thought of it while he was fortunate. Job turns out to be a great poet as soon as his flocks and herds are taken away from him.
Perhaps our continent will begin to sing by and by, as the others have done. We have had the Practical forced upon us by our condition. We have had a whole hemisphere to clear up and put to rights. And we are descended from men who were hardened and stiffened by a downright wrestle with Necessity. There was no chance for poetry among the Puritans. And yet if any people have a right to imagination, it should be the descendants of those very Puritans. They had enough of it, or they could not have conceived the great epic they did, whose books are States, and which is written on this continent from Maine to California.
John Quincy Adams, making a speech at New Bedford many years ago, reckoned the number of whale ships (if I remember rightly) that sailed out of that port, and, comparing it with some former period, took it as a type of American success. But, alas! it is with quite other oil that those far-shining lamps of a nation’s true glory which burn forever must be filled. It is not by any amount of material splendor or prosperity, but only by moral greatness, by ideas, by works of the imagination, that a race can conquer the future. No voice comes to us from the once mighty Assyria but the hoot of the owl that nests amid her crumbling palaces; of Carthage, whose merchant fleets once furled their sails in every port of the known world, nothing is left but the deeds of Hannibal. She lies dead on the shore of her once subject sea, and the wind of the desert flings its handfuls of burialsand upon her corpse. A fog can blot Holland or Switzerland out of existence. But how large is the space occupied in the maps of the
soul by little Athens or powerless Italy They were great by the soul, and their vital force is as indestructible as the soul.
Till America has learned to love Art, not as an amusement, not as a mere ornament of her cities, not as a superstition of what is comme il faut for a great nation, but for its harmonizing and ennobling energy, for its power of making men better by arousing in them the perception of their own instincts for what is beautiful and sacred and religious, and an eternal rebuke of the base and worldly, she will not have succeeded in that high sense which alone makes a nation out of a people, and raises it from a dead name to a living power. Were our little mother-island sunk beneath the sea; or worse, were she conquered by Scythian barbarians, yet Shakspeare would be an immortal England, and would conquer countries when the bones of her last sailor had kept their ghastly watch for ages in unhallowed ooze beside the quenched thunders of her navy
This lesson I learn from the past: that grace and goodness, the fair, the noble, and the true will never cease out of the world till the God from whom they emanate ceases out of it; that the sacred duty and noble office of the poet is to reveal and justify them to man; that as long as the soul endures, endures also the theme of new and unexampled song; that while there is grace in grace, love in love, and beauty in beauty, God will still send poets to find them, and bear witness of them, and to hang their ideal portraitures in the gallery of memory God with us is forever the mystical theme of the hour that is passing. The lives of the great poets teach us that they were men of their generation who felt most deeply the meaning of the Present.
I have been more painfully conscious than any one else could be of the inadequacy of what I have been able to say, when compared to the richness and variety of my theme. I shall endeavor to make my apology in verse, and will bid you farewell in a little poem in which I have endeavored to express the futility of all effort to speak the loveliness of things, and also my theory of where the Muse is to be found, if ever. It is to her that I sing my hymn.
Mr Lowell here read an original poem of considerable length, which concluded the lecture, and was received with bursts of applause.
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