jueves, diciembre 28, 2006

A Generative Dialogue Without Illusions Part 3

Part 3 of 3.

As you will see, moving from the regulated Space A to the regulated Space C involves a very large undertaking, while moving from Space C to Space to D no such a large one. The regulated (Space C: see page 11 of Spot Pricing of Electricity) “energy marketplace involves the utility and its customers operating as partners… Utility implementation concerns include real-time calculation/prediction of hourly spot prices, metering-communication-billing, and system control center operation using the new control signal called price… customers who choose to exploit the energy marketplace potentials must implement the appropriate response systems (today demand response), which could range from simple manual response to sophisticated digital controls.”

Among the thing that I have done is recognize that Space C is no longer advisable and that all of the retail activities, including CIS, AMI, etc. should belong to a competitive entity. This is what I said then:
My hypothesis is that time and reality are given us the opportunity to bypass Space C and go directly to Space D. It does not make any sense today to develop a Regulated Spot Price Based Energy Marketplace. It does not make any sense either to stay at Space A. Maybe my contribution, if there is one, is recognizing that a very simple restructuring, which keeps the wires utility out of the competitive business, creates an opportunity for retail marketers to develop the Deregulated Spot Price Based Energy Marketplace. That I suggest is the required change in firm organization that goes satisfies the control scheme, on the need to develop the corresponding innovative business models.
By the way, on 1.7.06, Fred said: “Sorry José, but you'll have to take this discussion up with somebody else.” I am glad that you would like to take it from the faulty end of the deregulation spectrum.

What should have emerged in the 90s is still waiting to emerge, except that now the 2005 Energy Bill favors Demand Response. Most of the damage done seems that it cannot be undone. Experts, like Jack Casazza, claim that the agreements of the “weird sort” (Fred’s term) are like scramble eggs, which can be unscrambled. However, new developments as those reported by David Cay Johnston that says “A federal appeals court yesterday called into question the government’s efforts to change the power industry into a more competitive business, ruling that national energy officials abdicated their responsibility to ensure fair electricity markets,” may help unscrambled them.

You are really a late comer. In the past year I have written comments at length in support of EWPC in EnergyPulse. I suggest that you take your time and read as much as you can to get up to speed.

Don’t forget the most important rule of the generative dialogue: you are not your opinion. This of course applies to me and everybody else too.


José Antonio

© 2006. José Antonio Vanderhorst-Silverio, PhD

A Generative Dialogue Without Illusions Part 2

Part 2 of 3.

On systemic risk see my answer to Fred about his expertise on risk management and his lack of knowledge hidden under engineering knowledge. I think that what I have done so far is: “cracking through the egg shell (title of a chapter of solving tough problems)” of the power industry. That is the missing side of your “world … the bone and gristle world of decisions.”

Andy started his article with the following sentence: “This is the first of a four part series of articles on the natural gas and electricity price and supply risks facing the U.S. economy. The first article provides an overview and summary.” If we apply the expected long run natural gas price and supply risks to the electricity industry, there is a big difference between the decade old debate and a generative dialogue to “reassess the likely long-term prospects for price and supply in the U.S. market,” as Andy puts it.

At the center of the decade old deregulation debate, the research and practice suggested by Fred C. Schweppe and his colleagues in the 1988 book Spot Pricing of Electricity was in general bypassed. That is exactly what PA Consulting Viepoint on Energy is saying now.

My article An Alternative Business Case for Demand Response, a rebuttal to The Business Case for Demand Response, by Thomas Brunetto, Managing Director and Jamie Wimberly, CEO, both of Distributed Energy Financial Group, was the first stake on the “ground” that led to the emerging EWPC model. As you can see from what I said to be the “Key issue” in my post you refer to, it is Mr. Wimberly who acknowledges an emergent revolution away from the continuity scenario, which the Deloitte Research Energy Study identified in the 2005-2010.

Schweppe’s insights were to be applied first to a transformation of the vertically integrated utility by developing a spot price energy marketplace. As can be seen from my comments of 12.27.05 to Mr. Martin-Giraldo under A Few More Unfriendly Comments on Electric Deregulation, written by Fred, all deregulation experiments were based on jumping to the wrong conclusions. This is part of what I posted at that time:

I believe there has been a big misunderstanding of Fred C. Schweppe proposal. Trying to clarify his proposal, lets consider four general structures for the electric business: A) a traditional vertical integrated utility; B) a faulty deregulation or re-regulation that keeps a largely irresponsive and obsolete utility business model; C) Fred C. Schweppe “Regulated Spot Price Based Energy Marketplace” with homeostatic utility controls, where the utility is the only middleman; and D) a true deregulated electricity market, with retailers innovative business models, without price controls, a new value chain (generator, retailer & customer), while re-regulating the wires monopoly.

Quote completed on next paragraph…

A Generative Dialogue Without Illusions Part 1

Thanks James for accepting the challenge of the generative dialogue. My world is that of an interdependent (systemic) consultant on electricity centered now on market design and architecture. I have “listen” closely to what you wrote and will also "listen" to any new perspective you may bring.

Part 1 of 3.

As I suggested under the article The Power Will Be There But Will It Get to Market?, please accept that the word debate has the meaning found in the suggested reading: generative dialogue paper by Adam Kahane, entitled "Changing the World by Changing How We Talk and Listen." Diagram "Four Ways of Talking and Listening," presented by Kahane in a 2003 conference.

I hope you understand now that under the generative dialogue debates based on the deregulation performance so far are completely misleading. A large part of the overcapacity is due to lack of knowledge of the utility industry by vested interests. In my opinion, debates on the decade old deregulation are over. Let’s do a generative dialogue on deregulation to create a new market architecture and design for the electricity system, without selfish components that destroy the system as W. Edward Deming would have said.

Under the article Condemned to the Fourth Quartile?, I wrote the following:

I found in the website an interesting paragraph in the introduction of the report "Viewpoint on Energy: shortages, surplus, and the search for value” of PA Consulting,” prepared by Todd Filsinger, Member del PA Management Group, to the article prepared by Edward Kee (also a member) entitled “Reaping the benefits of electricity industry reform: defining and limiting the use of price controls,” that says:

Deregulated wholesale electricity markets have come under attack for their perceived deficiencies. Edward argues that the competitive benefits of wholesale competition have never been realized because of the deleterious impact of retail market regulation and political interventions, which decouple the ultimate consumer from real-time market pricing, thwarting economically rational decisions on power consumption. He concludes that only when the retail customer is allowed to decide when and how much to consume based on the actual cost of providing that service, will the many promised benefits of competitive energy markets be realized.

I believe that the paragraph can be taken as a useful contribution to the generative dialogue I proposed earlier in the post Let's Get Out of Back Rooms to a Generative Dialogue. A generative dialogue cannot be done by looking the issues in isolation topic by topic, but as a system, cutting across topics. Please follow the links on the post.

I work under the Koestenbaum strategy that says “reality means having no illusions.” I have “convinced” Fred many times. So, only once I see results, I will change my opinion when I see the consensus. In general, to fill in the content you will need to read a lot of my comments dispersed on EnergyPulse to make sense of EWPC and the rephrased argument. I know that I should start to write my book to make it easy for readers to make sense to EWPC.