Playing With Fire and Collapse Part 20

Reference: Playing with Fire - The 10 Tcf/year Supply Gap -- Part I

Generative dialogue synthesis:

Competition is divided in two phases: One) market vs market and Two) company vs company.

In Phase One all interested parties cooperate in the generative dialogue to select the emergent winning market. Phase Two is not part of the generative dialogue.

EWPC – an integral reform paradigm - is an open and robust emergent market architecture and design that divides the vertically integrated utility at modular interfaces. 1) Long run and short run system planning, operation and control natural monopoly functions are also kept integrated. 2) The T&D wires natural transport monopoly is kept integrated. 3) Supply - generation - natural competitive functions compete with each other 4) Demand - retail - natural competitive functions compete with each other. 5) Supply and demand – Megawatt/vars vs Negawatt/vars - compete with each other in time and space. Module 1 commitments on planning, operation and control are to be executed by the other modules.

Based on mechanistic thinking, IMEUC is one close and fractured strategy, like any other experienced deregulation efforts, that suggests retaining one of the key elements of retail business model innovations – the metering function – as a monopoly. The intermediary Market Manager is designed to contract base load units based on long run forecasting under uncertainty, arising from improper market signals.

IMEUC as a switchboard intermediary is just one of the many potential business models. It is only through execution – high dynamic complexity – of the development of the resources on the demand side that the potential will be realized. Other potential business model innovations won’t be able to be developed if IMEUC is unfairly and prematurely selected, by giving it market power over other intermediaries. It is no correct to assume how customers will behave – and evolve - beforehand. Instead, there is a need for a customer orientation.

While incremental costs might become negligible, sunk costs might be comparatively prohibitive for all customers. As a “right” solution, IMEUC becomes a strong barrier to emergent – high generative complexity - creative destruction. The best way to find out what the real overhead costs will be is in Phase Two with the right strategy and flawless execution under competition.

Module 1 is to take decisions for the health of the whole system as they unfold. The forward looking statement suggested to Prof. Banks and Mr. Carson on the generative dialogue goes in that direction. The Market Manager does not have such integral perspective.

I want to keep my opinions on Phase One. I am open to review the general open market design and architecture, if there are unfair elements associated with it. I have “listen” carefully to Len’s opinions and perceive that his interests, by going farther than necessary, go well beyond Phase One. Other parties representative of the larger whole – high social complexity - with different interests – regulators, generation of differing kinds, wholesale, retail, transmission, distribution, fuel supply, manufacturers of systems and equipments, etc. - are invited to participate in the generative dialogue.

© 2006. José Antonio Vanderhorst-Silverio, PhD.