martes, diciembre 19, 2006

Playing With Fire and Collapse Part 9

Reference: Playing With Fire and Collapse Part 8

Arvid, thanks for your humble response about the mental model related to the wikepedia quote about EDF Finances. It is clear from your response that it is a vertical integration controlled market mental model. As you can infer from my writing something else is emerging to solve the efficiency of electric power markets.

Uncertainty is a very complex issue. I accept that nuclear power could be part of any scenario, but it should compete with other technologies. Energy efficiency should be in all scenarios – as a predetermined element. Market rules should eliminate the barriers to the resources of the demand side to allow for the full competitive development of energy efficiency, demand response, energy storage, distributed generation, etc.

Electric power monopolies - vertical integration – have become increasingly inefficient since the 70s. Physical risk management on vertical integration was done with supply side - generation and transmission reserves for system coordination. The emerging market changes iron system coordination to bits system coordination, as information and control transaction costs that were prohibitive years ago are getting cheaper and cheaper as time goes on.

Deregulation was sold by people that apparently didn't know about electricity (maybe knew a lot) but knew a lot about making money. The “decade old debate” was about vertical integration versus a flawed reform paradigm that is more inefficient than vertical integration for the majority of the customers. Please read about electricity without price controls starting with The Future Utility Customer Service Model to understand the third way. Go as deep as possible into the links until you feel satified.

The European Union agreed to liberalize electricity and gas for all customers on July 1st, 2007. France, Germany, and Spain are being pressured to unbundled retail and other changes. However, the problem is that the market design and architecture is the flawed one. The third way was not considered at all. Unbundling and other changes, although required, are insufficient to develop a true competitive market.


José Antonio

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