martes, noviembre 28, 2006

Let's Get Out of Back Rooms to a Generative Dialogue Part 6

Another post added to AMI Services Solutions for Alberta's Deregulated Market.

I welcome the contribution of Nick to the generative dialogue, as follows: The privatization of metering services is a key technology for the “integrated” development of the resources of the demand side. “Integrated” is an added insight emerging from this dialogue. The only incentive for such development is a proper market architecture and design, to allow the development of innovative business designs. Please find four nearly one year old quotes on such designs.

With regards to incentives, under the article Energy Bill 2005 - A Waste of Time? “if true retail (and wholesale) competition is enabled, retail marketers will have the right incentives to develop innovative business designs, without the need for price controls, integrating real time metering, energy efficiency, and demand response. Again, I believe that is a vision leading to the End-State of the electric power industry.”

Under the article Strategic Perspectives on Utility Enterprise Solutions, I said: “… Bob Lieberman has given a new hope to residential real-time pricing based on the existence of a risk premium, part of which responsive customers can pocket. Bob adds that conventional wisdom regarding that real-time pricing of residential customers won’t work was proven wrong. Lieberman identifies 4 problems to be overcome develop the market: 1) Short term thinking; 2) Who's job is it?; 3) Overcoming the "DR is about protection system "mindset; and, 4) Explaining to customers what we are talking about and what's in it for them…By taking a close look to … all 4 problems can be addressed by competitive retail marketers, with innovative business designs under their own Retailers Enterprise Solutions. The result will be a new paradigm of the electricity industry for the new global economy, where increased efficiency will result. Every customer will be able to choose value added from electricity and the majority of customers will have lower prices, after a while.

Responding a letter of Jack Casazza, on the post some friendly comments on true electric deregulation, I said: “Jack’s assumption that there can be no product … differentiation is true under a deterministic world, but false on a probabilistic one. Every customer has a perceived supply security requirement … that minimizes his/her costs of electricity in the long run. By developing and applying demand response technology, an opportunity to develop new competing business designs innovations can be implemented to satisfy long run least cost power sector development and benefit from increases in scale … Actually, under systemic competitiveness that would change from least cost to maximum value added.”

On the post utilities vs retail-marketers on the purchase of communication ... I added the following, “Late professor Fred C. Schweppe recommended on the book “Spot Pricing of Electricity,” that customer’s choice should be centered on price-reliability, and not on price alone. Retail-marketers are better positioned than utilities to perform retail marketing. By letting retail-marketers (not utilities) purchase an AMI system to develop their business designs, under a set of minimum standards, much of the confusion goes away. Eventually winning standards will arrive for each market segment. In a sense the purchasing decision becomes part of the relevant winning business designs models.”

De Israel Electric se Interesan en Diálogo Generativo

Estimados Amigos del GMH,

Lean por favor la nota Let's Get Out of Back Rooms to a Generative Dialogue Part 4, para conocer el mensaje de Gary Shaffer de Israel Electric, interesado en el Dialogo Generativo, y la respuesta que le he dado.


José Antonio

Let's Get Out of Back Rooms to a Generative Dialogue Part 5

I added a post under the EnergyPulse article The Power Will Be There But Will It Get to Market?, by Michael Morrison, National Energy and Infrastructure Industry Group Manager, Gowlings Lafleur Henderson LLP, and David McFadden, Chair, National Energy and Infrastructure Industry Group, Gowling Lafleur Henderson LLP. The post says the following:

The authors have presented a very clear article on the key infrastructure of an intermediate and but unstable reform, where generation has center stage and where transmission follows the generation mix. The purpose of the development of an Integrated Power System Plan is to reverse the situation, to have the generation mix follow transmission. Such reform is clearly an afterthought.

Under electricity without price controls (EWPC), an important design requirement is for the transportation (T&D) to be the key infrastructure that takes precedence to the generation mix. System adequacy comes from a new paradigm where transportation takes center stage and performs physical risk management to avoid systemic risk. As customers’ quality and reliability requirements increase, transportation from far locations becomes relatively more risky and thus more expensive than from closer locations. As renewable power is also distributed, distribution requirements become as important as transmission requirements, since the development of the resources on the demand side should compete with the development of the resources on the supply side.

At the center of a generative dialogue is something similar to an Integrated Resources Power System Plan. As customers become active participants of the power system, and demand forecasts are no longer useful, the old assumptions of supply side system development should be complemented with the development of the resources on the demand side. Please join the generative dialogue that has started under the articles AMI Services Solutions for Alberta's Deregulated Market and TXU Displacing Older Generation With Advanced Technologies.

Let's Get Out of Back Rooms to a Generative Dialogue Part 4

As you can see below, Gary Scheffer has responded to my suggestion of a generative dialogue, under the article AMI Services Solutions for Alberta's Deregulated Market. This is what I posted as a response.

Thanks Gary for your interest.

Electricity Without Price Controls (EWPC) is an emerging paradigm - no comparative studies exist as far as I know. The split of wires into T and D was a big mistake that needs to be undone. If necessary, the split of wires needs to be done area wise, by keeping cohesive T&D monopolies together linked by tie lines. Non real-time competitive activities - retail marketing and generation - as explained in a recent posts, should be left to a market that can be verify to enable workable competition.

For research, I suggest to study Spot Pricing of Electricity and in general the research led by Fred C. Schweppe of MIT from 1978 to 1988. In the early 90s a big mistake was done by Bill Hogan, which interpreted erroneously the work of Schweppe by assuring that distribution and retail marketing could be kept together. Hogan misunderstood the meaning of customer, which for Schweppe was the end-customer, to be even a utility-customer. The result was transmission open access and native loads own by utilities.

As for the extension of Schweppe work that is emerging I suggest to Google vanderhorst-silverio in the site of EnergyPulse for English speaking material. Please find in the May-June issue of IEEE Power & Energy Review the article a Dominican strategy. You may find under the Peak Load Management Alliance for the presentations I made in the Fall of 2004 Achieving Electricity Market Value through DR Technologies and in the Spring of 2005 Dominican Republic Electricity Risk: A Customer Orientation.

José Antonio Vanderhorst-Silverio, PhD
Interdependent (Systemic) Consultant on Electricity

Gary Shaffer post the following message on EnergyPulse

Dear All I am joining in from the Israel Electric, still a government owened vrtically integrated utility of some 11,000 MW, 2.3 million customers and some 45,000 km of transmission and distribution lines. We do it all, from power station and network construction through generation and supply to meter reading and invoicing and we are trying hard to avoid the mistakes some markets went through when restructuring their electricity business."the power brokers in the back rooms" in our case are ministry officials that will not stop at less than 3-5 power suppliers and 4-5 distribution local monopolies. Privat power producers have been encouraged by law for the last 10 years, but our price is too low so there are almost none. So I would like to take you up on Jose's proposition on the need for a generative dialogue. I am ofcourse mostly interested in avoiding the split of our wire business into mini-utilities. Can you suggest reaserch, articles, views, dealing with the optimal configuration of the wire business? are you aware of any comparative (benchmarking?) studies on this topice?