Re: Artículo Sobre Demand Response Part 6

This is my response to Mr. Thomas Brunetto reply to Re: Artículo Sobre Demand Response Part 5 on EnergyPulse.

Thank you Thomas.

I hope you received a copy of my rebuttal, which I sent via EnergyPulse. I will assume that to be the case.

I understand that you agree that there is at least an Alternative to "The Business Case for Demand Response" reflected in the rebuttal, which is in the approval pipeline. That alternative has DR as a condition of service, so customers don't have an option, but could pay higher price to lower the risk of lack of supply under shortages. That is the same general mechanism of cost reduction to a customer which is willing to accept a higher risk.

I agree that free markets bring more complexity when the value chain is the same as the supply chain. Much of the complexity identified in the article is linked to an outdated business model, which mixes a natural monopoly and a competitive business. Business model innovation will exploit the simpler value chain with advanced technology. However, retail deregulation reform is require to allow it in most places.

On page 111 of the book "Profit Patterns," Adrian J. Slywostky characterizes, Wall-Mart business design as a special case of value chain profit pattern, called "Strengthening the week link." Certainly there are other business models on that book, not based on supply chains.

The experience of interference by incumbent's utilities in several countries, like Spain, Chile, and in my country Dominican Republic, gives ample evidence of not allowing affiliates of monopolies to participate in the free market. I believe the main problem is perverse incentives. Marketing function is the most important activity of retailers, to segment customers on supply security risk. In my alternative, at the retail level, there is only one essential institution between the generator and the customer: the retailer.

José Antonio Vanderhorst Silverio, PhD.

Interdependent Consultant on Electricity.

javs@ieee.org