domingo, diciembre 31, 2006

EWPC: People Coordinating and Cooperating with Electrons Part 2

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

To all readers that want to learn about the third way of deregulation

Eberhart Rechtin and Mark Maier, in their book “The Art of System Architecting,” explain that “social system quality… is less a foundation than a case-by-case trade-off; that is, the quality desired depends on the system to be provided. In nuclear power generation, modern manufacturing, and manned space flight, ultraquality is an imperative. But in public health, pollution control, and safety, the level of acceptable quality is only one of many economic, social, political, and technical factors to be accommodated.” [I published this insight on march this year at the Academy of Science of the Dominican Republic.]

In the first case, the experts are the engineers. For the center stage, controlled market, system engineer institution to assures that electrons and people have the same purpose, as I mentioned on 12.30.06, ultraquality is an imperative to manage short run and long run systemic risk, with both supply side and demand side resources.

In the second case, according to Rechtin and Maier, the accommodation is done by the architect with “a professional response to the public needs and perceptions.” It is such unjustified perceptions that fueled the decade long debate. Bill Hogan mistake was that he didn’t understand what Fred Schweppe meant by the fourth criterion: “consider the engineering requirements for controlling, operating and planning an electric power system,” which can only be met by ultraquality. As time has advanced and new digital technology market share becomes larger, electricity demand for quality is only increasing. A professional response is needed, however, for the remaining, non real-time, free market activities of retail and generation. EWPC for the customers is such a response.

PEST engineers are correct when they say that “'Deregulation and the concomitant restructuring of the electric power industry in the United States have resulted in a decline in the reliability of North American bulk power systems and constitute the ultimate root cause of the California meltdown, Enron's depredations, and the 14 August 2003 blackout.”

In al three cases mentioned by PEST, the root cause is the lack of ultraquality. First the lack of ultraquality “stressed the system.” Had the past decade been used to developed elasticity in the resources of the demand side true, none of the three cases had resulted. The decline in reliability when the system is stressed led to price spikes. Instead of changing from stage 1, to stage 2, to stage 3, California just needed to rotate blackouts and compensate the customers’ interruptions.

While PEST can be tagged as pinning for the good old days, by no means are they silly. Engineering manpower and institutional memory has suffered a lot in the power industry worldwide under deregulation. There is a need to allow for the emergence of the good new days, and EWPC is a strong candidate to increase the revised criteria: 1) Freedom of choice; 2) Economic efficiency; 3) Equity; and 4) Ultraquality. Only through new knowledge and innovations will societies satisfy emergent needs.

© 2006. José Antonio Vanderhorst-Silverio, PhD.

EWPC: People Coordinating and Cooperating with Electrons

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

To all readers that want to learn about the third way of deregulation

Jack Casazza, Frank Delea and George Loehr, of “Power Engineers Supporting Truth (PEST),” have written the article Electrons Versus People: Which group is smarter?”, for the January-February 2007 issue, of the IEEE Power & Energy Magazine, “In my View” column.

While I strongly recommend reading and “listening openly” to what the authors say, I only quote incompletely the beginning and last paragraphs. The authors start by saying that: “Deregulation and the concomitant restructuring of the electric power industry in the United States have resulted in a decline in the reliability of North American bulk power systems and constitute the ultimate root cause of the California meltdown, Enron's depredations, and the 14 August 2003 blackout.”

As part of the decade old debate, done with faulty deregulation and restructuring, the authors conclude that “An independent investigation is needed of all the issues raised by the blackout and other reliability problems to ascertain that all necessary remedial actions have been taken.”

As can be seen in the book “Powerful Times: Rising to the Challenge of our Uncertain World,” written by Eamonn Kelly, CEO of Global Business Network, a renown futures network and scenario strategy consultant, there is a need to consider an emergent paradigm and creative destruction of the power industry.

The independent investigation should consider fully both the institutional memory and the sound research done by Fred C. Schweppe and colleagues, from 1978-1988, not in a debate, but in a generative dialogue, to resolve most of the flaws identified by Casazza, Delea and Loehr, and also to break the barriers to the emergent innovations flowing into the industry.

In one promising third way of deregulation mixed market architecture and design, centered on Electricity Without Price Controls (EWPC), NERC reliability activities are merged into the system engineer institution, which is in charge of managing short run and long run systemic risk, with both supply side and demand side resources. That center stage controlled market institution assures that electrons and people have the same purpose. Transportation (T&D) of electricity is an integrated monopoly responding to the system engineer institution and under a traditional regulator.

The free market, non real-time activities, restricted to the supply side resources (central watts and vars generation and storage, FACTS, etc.) and demand side resources (AMI, CIS, energy efficiency, demand response, distributed watts and vars generation and storage, etc.), also respond to the system engineer institution on matters of control, operations and planning, and to a prudential regulator on conduct of business, such as competition, market power, consumer protection, asset quality, etc.

As the readers of the comments under this article may recall, at the center of the suggested generative dialogue we have pending the following statement:

IRRESPECTIVE OF LOCATION, THE BEST INVESTMENT STRATEGY FOR AN ELECTRIC POWER SYSTEM WITH THE APPROPIATE MARKET RCHITECTURE AND DESIGN IS A MIX OF INVESTMENTS ON THE DEVELOPMENT OF THE RESOURCES OF THE DEMAND SIDE AND INVESTMENTS ON THE DEVELOPMENT OF THE RESOURCES OF THE SUPPLY SIDE THAT REDUCES SHORT RUN AND LONG RUN SYSTEMIC RISK WHILE SOCIETY RECEIVES THE MAXIMUM VALUE FROM ELECTRICITY.

© 2006. José Antonio Vanderhorst-Silverio, PhD.