jueves, diciembre 14, 2006

The Future of the Power Industry in 2006 Part 2

On December 27th, 2005, under the article A Few More Unfriendly Comments on Electric Deregulation, I quoted Fred C Schweppe el al (Spot Pricing of Electricity, Kluwer Academic Publishers, 1988) saying:

New directions for the utility industry are being sought by many interested parties in the government, the private sector, and the universities. One such direction has been widespread interest in utility-customer cooperation through innovative rates characterized by broader options and better use of information on utility costs and customer needs. The goal of this book is to provide a theoretically sound, yet practical foundation for the implementation of utility-customer transactions based on today's needs. Our goal is to meet four criteria:

1) Freedom of Choice: provide customers with options on the cost and reliability of supply and how they choose to use electric energy.
2) Economic Efficiency: Motivate customers to adjust their own electric energy usage patterns to match utility marginal costs.
3) Equity: Reduce customer cross-subsidies…
4) Utility Control, Operation and planning: Consider the engineering requirements for controlling, operating and planning an electric power system.


"Restructuring Debate Still Rages," December 11, 2006, by Ken Silverstein, EnergyBiz Insider, Editor-in-Chief, starts out with a dilemma as follows: "The discussion over whether electricity can be made into a competitive enterprise or whether it is an uncommon commodity that should be tightly regulated still rages more than a decade after the concept of restructuring was first envisioned."

Missing in the decade old debate was a third way: the natural and simple way. The way to do it: the wires are natural monopolies to be kept integrated and tightly regulated to meet Schweppe’s 4th criteria – “consider the engineering requirements for controlling, operating and planning an electric power system.” The mistake: open transmission access, which also violated the other three criteria for the end-customers. My research shows that the separation of transmission and distribution is not done at a modular interface from the operation standpoint. Generation and retail marketing are natural competitive enterprises.

"Time To Innovate - Energy Utilities Face Unprecedented Challenge,Opportunity [PDF]," EnergyBiz magazine, November/December 2006, is about an emerging third way. EWPC: electricity without price controls the extension of Schweppe’s model is just one potential emerging candidate industry scenario.

© 2006. José Antonio Vanderhorst-Silverio, PhD.

Let's Get Out of Back Rooms to a Generative Dialogue Part 11

Estimados Amigos del GMH y del Exatec,

Como expresé en la nota Let's Get Out of Back Rooms to a Generative Dialogue Part 9 , en respuesta al atento y oportuno email de César Féliz,

… sigo esperando otros “feedbacks.” Lo que hace falta ahora es ampliar el Círculo de Amigos al GMH o a lo mejor al Círculo de Amigos a la ESCP – no para imponerla – sino para desarrollar una concertación que permita a los dominicanos transformar esta crisis sistémica – la gran depresión eléctrica – en un conjunto de grandes oportunidades, con la asociación del capital extranjero para dirigirnos a convertir la electricidad como nuestra marca país.

Muchas gracias de nuevo a Bernardo por su insistencia en aclarar la propuesta del GMH. Hoy nos envía una aporte con el asunto “Debate Sobre los Beneficios de la Reestructuración del Sector Eléctrico en EUA,” que he cambiado otra vez a la serie “Let's Get Out of Back Rooms to a Generative Dialogue,” porque entiendo la mención a la verdad absoluta nace de las siguientes notas que ahora aparecen en la Bitácora Digital:

Let's Get Out of Back Rooms to a Generative Dialogue Part 10
Let's Get Out of Back Rooms to a Generative Dialogue Part 9
Let's Get Out of Back Rooms to a Generative Dialogue Part 8

Como precisamente no soy un conocedor de la verdad, sino un dominicano laborioso, entusiasta y visionario, propulsor de la emergente electricidad sin control de precios, con el propósito de resolver la crisis enorme de electricidad que hemos venido padeciendo los dominicanos, he propuesto que dialoguemos para impulsar la mejor solución emergente. El diálogo generativo tiene precisamente como característica que uno no es su opinión, dejando claramente establecida la humildad y la capacidad de reconocer que es intrínseca en la naturaleza humana no ser dueña de la verdad absoluta.

El diálogo generativo es una expresión superior al debate que en vez de quedarse encerrada en el pasado da la posibilidad de buscar soluciones del futuro emergente que satisfagan a todas las partes sin concepciones preconcebidas.

Como bien se explicó en la Parte 8, ninguna de las dos posiciones del debate de los Estados Unidos que están escenificando dos entidades comprometidas con su territorio es valedera. En un lado está la APPA, que representa los intereses de la industria verticalmente integrada de los Estados Unidos (modelo mental que inspira el de la CDEEE, pero quedándose esta última bien corta) y que tiene una campaña montada bajo el nombre de Electric Market Reform Initiative (EMRI).

En el otro están las RTO (Regional Transmission Organizations), que representan la liberación de los mercados basadas en la separación de la transmisión de la distribución, con el famoso Open Transmission Access (modelo mental que inspira el de la capitalización, pero quedándose esta última bien corta). En la electricidad sin control de precios – un modelo mental emergente que extiende las investigaciones de Fred C. Scheppe - la transmisión y distribución permanecen integradas o son reintegradas en un monopolio de transporte puro. La diferencia es vital.

Silverstein inicia su comentario en que la discusión es sobre si la electricidad puede volverse una empresa competitiva o si debe mantener fuertemente regulada. La electricidad sin control de precios hace ambas cosas a las partes que les compete: las actividades naturalmente competitivas pasan a lograrlo, pero sin interferir en el desarrollo del sistema de transporte, ni en interferir en el riesgo sistémico a corto o largo plazos para obtener poder de mercado.

Ayer mismo estuve mirando el informe del profesor Kwoka, quien aparentemente encuentra que no hay evidencia confiable y convincente en que los consumidores están mejor, al encontrar deficiencias metodológicas importantes en 12 estudios, como se puede ver en la Nota de Prensa de la APPA. En su campaña, la APPA (Refutes LECG Study on Benefits of RTOs) refuta el Estudio LEGG de los beneficios de las RTO (Regional Transmission Organizations).

En síntesis la nota Let's Get Out of Back Rooms to a Generative Dialogue Part 8 explica que la posición de la APPA es insostenible porque los clientes grandes encuentran oportunidades para evitar el sistema, que es lo que está haciendo Wal-Mart en Méjico. Que los grandes intereses negociaron en aposentos con los reguladores para imponer el Open Transmission Access, dejando a los clientes regulados cautivos, para asegurar que sus inversiones en generación no se volvieran obsoletas.

Por otro lado, la respuesta sobre Casazza aparece en la serie siguiente:

Jack Casazza Recommendation: Cooperate and Coordinate Parte 3

Jack Casazza Recommendation: Cooperate and Coordinate Parte 2

Jack Casazza Recommendation: Cooperate and Coordinate

La electricidad sin control de precios está diseñada para aprovechar las economías de coordinación que Jack menciona. Esas economías nacen de la reintegración del sector eléctrico dominicano, tal como lo expliqué en mi artículo del IEEE Power & Energy Review, en mi presentación de la Academia de Ciencias y en la propia Bitácora Digital. Esas economías de coordinación se fueron perdiendo con la desintegración del sector, creo primero en los ingenios azucareros. Federico toca el desarrollo de la Romana como isla independiente y que ahora resulta evidente cuando hablamos de colapso.

Con relación al colapso, la nota Let's Get Out of Back Rooms to a Generative Dialogue Part 10 responde a Federico Martínez sobre lo aparentemente obvio en la noticia de Wal-Mart, para explicar la estrategia global de esa empresa. Lo importante del reportaje de EnergyBiz Time To Innovate - Energy Utilities Face Unprecedented Challenge,Opportunity [PDF] es el convencimiento de que estamos en el momento ideal para pensar frescamente sobre la solución a los problemas de la reforma de los sectores eléctricos.

Por lo anterior, vuelvo y repito que “Necesitamos que la clase económicamente pudiente y pragmática esté enterada de este mensaje, tome un nuevo rol y una sus esfuerzos para que la República Dominicana sea una de las sociedades exitosas de “estar dispuestos a reevaluar sus valores fundamentales,” como bien ha sugerido el Dominicano Valiente Federico Martínez.”

Un fuerte abrazo,

José Antonio

From: Bernardo Castellanos [mailto:bacm25@yahoo.com] Sent: Thursday, December 14, 2006 1:48 PMTo: Martín Robles; Michael Roy; Agustin Abreu; Gustavo Alba Sanchez; Jonathan Arthur; Luis Arthur; Emilio Contreras; "Máximo" D'oleo; Hector Jaquez; javs@ieee.org; Federico Martinez; George Reinoso; Martín Robles; Armando Rodriguez; Michael Roy; Milcíades Valenzuela; Jose Antonio Vanderhorst; Baron Victoria; Ernesto A. VilaltaSubject: DEBATE SOBRE LOS BENEFICIOS DE LA REESTRUCTURACION DEL SECTOR ELECTRICO EN EUA

En EUA exisyte un interesante debate sobre los supuestos beneficios que la reestructuracion del sector electrico ha traido a los uuarios Este articulo publicado en la revista EnergyBiz Insider trata sobre una serie de estudios realizados los cuales demuestran conclusiones contrapuestas

En adicion he incluido algunos comentarios de lectores de la revista

Quiero traer a colacion un comentario realizado hace un año por Jack Cassaza sobre este tema, el cual considero muy importante

Todo esto demuestra, que nadie es dueño de la verdad absoluta

Saludos

Bernardo

http://www.energycentral.com/centers/energybiz/ebi_detail.cfm?id=249

On 12/29/05, Jack Casazza wrote:

Dear Jose Antonio,

I have been reading the discussions between you, Prof. Banks and others and did not comment previously because I did not have anything to add. I thought perhaps I could be helpful at this time by providing a few comments, as follows:

- The restructuring and deregulation of the electric power industry was a serious mistake in the USA and in many countries, harming the general public.

- Competition has produced some benefits, particularly in the improvement in the operation of generation plants, but caused a severe decline in the coordination needed between the participants in the planning, design and operation of the generation and transmission systems of electric power grids. The reduction in the number of companies involved can produce some future savings.

- Generation dispatch is based on quoted prices rather that incremental production costs, increasing total production costs.

- Present and long range costs have been increased significantly since each company made decisions based on its own profits and not what was best for the overall grid in the long run, i.e., the overall public interest. (In the USA past studies have shown that the savings from coordination exceeded $20 billion a year before restructuring. Many of these prior benefits have been lost.)

- In most cases the changes that have been made in the industry structure and procedures cannot be undone, so we have to proceed by trying to use what is good from restructuring and removing or correcting the many harmful things that have resulted.

- I believe the greatest harm has been the loss of cooperation and coordination between those involved in the power industry. A way to correct this learned from the past is through "coordination contracts" signed by the participating companies that provide for the planning, design and operation to be performed as if they constituted a single company. In such contracts the long range lowest total cost solution and lowest cost operation procedures were selected even if it meant that one company had to spend extra funds or give up some profits, as long as it resulted in a lower overall cost or was necessary to preserve reliability, even if in another system. These contracts provided for the compensation of a company for its extra costs or profits foregone plus a share of the overall benefits resulting to the public. (I have negotiated such contracts as far back as 50 years ago.)

There is much more analysis needed, but perhaps the comments above will get you thinking about the power system, not the markets.

Best regards,

Jack Casazza


Your Dec. 11 article, "Restructuring Debate Still Rages" completely misses the point with respect to the APPA-commissioned review of several studies of the benefits of restructuring (or lack thereof) mentioned therein. The quotes you used in the article come from the final paragraph of APPA's press release. Those quotes have virtually nothing to do with the substance of the review itself. Instead, they describe APPA's concerns regarding developments in the wholesale markets that prompted us to commission this review in the first instance.
The review itself was undertaken by Dr. John Kwoka, Neil F. Finnegan Distinguished Professor of Economics at Northeastern University in Boston. After reviewing twelve of the most frequently cited studies of the consequences of industry restructuring, Prof. Kwoka concluded that "despite much advocacy, there is no convincing evidence that consumers are better off as a result of restructuring of the U.S. power industry today." The LECG study, to which you devote four paragraphs, suffers from many of the same deficiencies as the studies reviewed by Dr. Kwoka, and should not be relied upon as providing convincing evidence of consumer benefits from restructuring. A copy of Dr. Kwoka's paper is available on our Web site (www.APPAnet.org). I encourage you to read it - and perhaps to even write about it.

Alan H. Richardson
President & CEO
American Public Power Association

The debate about restructuring remains hopelessly muddled, and will continue to until we shift the conversation to one that includes the whole electricity system. As you point out, the transmission system is constrained and there is relatively little that commodity-deregulation is going to do to change this fact. Additionally, the efficiency of power generation remains locked at 33%. These two facts are innately linked: The single most expensive component of the power grid is the T&D backbone. And the biggest losses in the system are the heat losses from central power. Combined, this means that the single biggest opportunities to extract greater efficiencies from the grid are excluded from wholesale, commodity-focused restructuring: Namely, local generation. Local generation bypasses T, and much of D. Local generation enables the use of opportunity fuels and waste heat recovery. But to a large degree, local generators cannot meaningfully participate in restructured markets, due to a combination of their (usually) relatively small size, (often) high transactional costs to participate in ISO/RTO markets and a failure of these markets to acknowledge location- or time-specific values of electricity. At present, the deployment of local generation, is driven only by the displacement of regulated electricity from the local utility, not by any of the market restructuring which has occurred on the commodity side. Absent structures that recognize the values created by local generation, restructured markets can do little other than fuel swap - which is essentially all they have done. Ultimately, a grid responsive to market forces will include a mix of local and central generation, fossil and renewable fuels, power-only and CHP plants - but so far, the market signals have failed to make any serious effort to affect deployments of downstream assets. The irony is that as we become increasingly wires- and fuel-constrained, the commodity prices are bound to rise until we introduce full deregulation, which does perversely make the economics of local-generation ever more compelling, but this is a rather indirect and costly way to get to the right place.

We have gotten so caught up in the so-called unique nature of the electricity system, that we fail to see the current model for what it is. Imagine, if you will a world in which anyone could grow tomatoes, but once grown they had to sell them to Del Monte who had the exclusive right to process those tomatoes and distribute them through a chain of government-controlled grocery stores. Would any reasonable person call that a functional tomato market? The inefficiencies of this hypothetical model are obvious, and yet it is exactly what we have done in electricity. It is undoubtedly true that the opening up of wholesale markets was a step in the right direction - but we've still got miles to walk before we will see market forces significantly affecting the price of delivered electricity.

Sean Casten
Turbosteam Corporation

As a California resident, I saw the effects of California attempt at deregulation. Companies didn't simply game the market to their best legal advantage, they broke laws intended to keep the market fair and traders at those companies laughed and joked about it while they were ripping people off. I don't want these same companies to be in a free market again. They had their chance and proved themselves to be the worst stereotypes of big corporations.

Chris Stehlik

I don't know if our sound bite society is incapable of understanding nuance, or if interest groups are simply unwilling to concede that sometimes the opposition is right in some circumstances.
The PJM interconnect was a balkanized patchwork of many small companies. Getting rid of pancaked transmission improved economic dispatch of regional resources and lowered costs for everyone, hopefully enough to offset transmission cost increases on those entities that had low cost before the restructuring.

Out here in the Pacific Northwest, BPA controls about 80% of the regional transmission, PacifiCorp controls half or more of the remaining transmission. Because of this circumstance, there is far less uneconomic dispatch in the region, and therefore fewer benefits would result from an RTO. Since it costs a lot of money to create an RTO, it isn't clear the region would benefit from creating a duplicate of the structure that worked in PJM.

Furthermore, there is some point at which pancaked transmission is the efficient economic signal. When we import low cost power from Montana we pay two transmission charges to get it to the west coast. My gut feeling is that power generated half a continent away should pay more for transmission than local resources.

The transmission market is not perfect here, but I feel that too often studies are done for the express purpose of posturing, or are taken by advocates to support positions without understanding the differences between regions.

Eric Hiaasen
Mid-term Trader
Eugene Water & Electric Board

Let's Get Out of Back Rooms to a Generative Dialogue Part 10

Estimados Amigos del GMH y del Exatec,

Muchas gracias a Federico Martínez por sus preguntas muy atinadas, que permiten aclarar mi sugerencia de hacer – con el impulso de los receptores, nacionales y extranjeros, pragmáticos y poderosos de este email - que se torne inminente una reforma realmente integral del sector eléctrico.

Verdaderamente, para cualquier persona que no sea entusiasta o visionaria, lo que se desprende de la información referida por Luís Arthur es simplemente un “peak shaving” y nada más. Sin embargo, yo sabía que Wal-Mart tiene una estrategia global, cuyas metas son:
20% Energy/GHG reduction in existing stores within 7 years
30% Energy/GHG reduction for new prototype within 4 years

GHG es green house gases.

Una cita complementaria:

"I have traveled extensively visiting retail in North America, Central America, South America, Europe and Asia. I can honestly say that in my opinion the stores Wal-Mart builds today in the US are the most energy efficient of any I have ever seen anywhere in the world."

Anexo pueden encontrar una foto de War-Mart que respalda mi comentario “la cogeneración le permite a Wal-Mart aprovechar el calor que las centrales desperdician,” que aparece en “Part 8” de esta serie.

A la luz de la información anterior y ahora que EnergyBiz emitió el informe Time To Innovate - Energy Utilities Face Unprecedented Challenge,Opportunity [PDF], a mi me parece otra cosa. Ese informe dice: “As levels of spending escalate, the paramount question will be whether the money is spent on appropriate technologies. The moment is ideal, some suggest, for utilities to think freshly about how to best accomplish their mission.

Me encantó esto del momento ideal para pensar frescamente (de eso trata el diálogo generativo), ahora que según Federico el país está yendo hacia el colapso. Si el país se va al colapso, estoy completamente seguro, y así lo he escrito en varias ocasiones, que el principal empuje lo está dando el sector eléctrico desde los años 70. Los agentes del sector eléctrico que están considerando invertir en centrales a carbón IPP se darán un gran susto si el sector eléctrico sigue el proceso de colapso. A ellos le recomiendo leer la nota Atención al Proceso de Colapso para asegurarse de que están invirtiendo sus recursos en las tecnologías apropiadas.

Necesitamos que la clase económicamente pudiente y pragmática esté enterada de este mensaje, tome un nuevo rol y una sus esfuerzos para que la República Dominicana sea una de las sociedades exitosas de “estar dispuestos a reevaluar sus valores fundamentales,” como bien ha sugerido el Dominicano Valiente Federico Martínez.

Saludos muy cordiales,

José Antonio

From: Federico A. Martinez [mailto:federico@promarketdr.com] Sent: Wednesday, December 13, 2006 2:25 PMTo: 'José Antonio Vanderhorst-Silverio, PhD'; 'Bernardo Castellanos'; 'Luis H. Arthur S.'; 'Armando Rodriguez'; 'César Féliz'; 'Ernesto A. Vilalta'; 'george reinoso'; javs@ieee.org; 'Jonathan Arthur'; '"'Martín" Robles''Cc: 'Alvaro Sousa'; 'Antonio Peña'; 'Eloy Blanco Abbott'; 'Emilio Contreras'; 'Frank Castillo (CONEP)'; 'Gustavo Alba Sanchez'; 'Jorge Abbott'; 'Jose Oscar Orsini Bosch'; 'Marie Carmen Jaquez'; 'Milcíades Valenzuela'; 'Milton Tejada/T&T Prime Media'; 'Rhadamés García'Subject: RE: De El Norte de hoy

Parece más bien que instalaron plantas de “peak shaving”. ¿Será que se desconectan a la hora en que la energía es más cara?

FM

Let's Get Out of Back Rooms to a Generative Dialogue Part 9

Muchas gracias a César por tu atento y oportuno “feedback” y por la clara apreciación sobre el destino de los bueyes que no quieran cambiar.

Necesitamos otros “feedbacks.” Lo que hace falta ahora es ampliar el Círculo de Amigos al GMH o a lo mejor al Círculo de Amigos a la ESCP – no para imponerla – sino para desarrollar una concertación que permita a los dominicanos transformar esta crisis sistémica – la gran depresión eléctrica – en un conjunto de grandes oportunidades, con la asociación del capital extranjero para dirigirnos a convertir la electricidad como nuestra marca país.

Resultará evidente que aquellos que tienen intereses creados, y que normalmente exigen el cumplimiento de sus derechos adquiridos, deberían cambiar de modelo mental y asociarse al diálogo generativo para orientar sus derechos y exigencias de otra manera.

Esa otra manera es la de mirar al sector como una unidad que compite con los otros sectores eléctricos de Centroamérica y el Caribe, asociada a los demás sectores productivos, para aprovechar los acuerdos de DR-CAFTA con USA y de AAE con la Unión Europea. Al hacerlo, desarrollarán ventajas competitivas para luego desplazarse a Centroamérica, al Caribe y hasta llegar a América del Sur a completar la reforma que iniciaron los chilenos.

La industria eléctrica tradicional debe dejar de ser protegida y dejar que emerja la nueva industria. Hagamos como los ingleses: murió el Rey; viva el Rey. Esos son elementos de una visión compartida emergente. Esperemos que así se entienda.

Un humilde abrazo,

José Antonio


From: César Féliz [mailto:cesar.feliz@gmail.com]
Sent: Wednesday, December 13, 2006 11:09 AM
To: Jose Antonio Vanderhorst
Subject: Fwd: Let's Get Out of Back Rooms to a Generative Dialogue Part 8


Apreciado José Antonio:

Tu punto de vista respecto al caso WalMart en México y Hotel Jaragua y otras empresas de República Dominicana, recalca una vez más el lema de que ninguna clase se suicida (
encuentran "los defectos en las obsoletas reglas de los sectores eléctricos para salirse del defectuoso y costos sistema" y las ventajas, "tener bajo su control su propia generación y asegurar así un menor riesgo a sus delicados sistemas de operación".) En síntesis, estos casos ponen de manifiesto, que los clientes no son tomados en cuenta en la repartición del pastel eléctrico, excepto en el pago de éste.

El artículo de Donella Meadows lo explica con claridad, estoy de acuerdo que talvez mucho de los del grupo, no leyeron completo el artículo o talvez no hayan podido hacer una buena traducción.

Lo importante es, que los modelos viejos han demostrado que no funcionan adecuadamente, y que la electricidad sin control de precios (nuevo modelo) si resuelve los defectos del modelo (sintomático) infuncional actual. Finalmente, si los bueyes que no quieren cambiar no se alinean con los nuevos astros (nuevos modelos), es posible que los astrólogos no los tomen en cuenta en el zodíaco o la realidad del mercado les dará en la cara.

César Féliz