lunes, septiembre 17, 2007

Extra, Extra… Goliath is Defeated Once Again!

David has won! The Electricity Without Price Controls (EWPC) Breakthrough paradigm has finally beaten the Vertically Integrated Utilities (VIU) Paradigm. Global economies of scale under Tofflers’ Third Wave EWPC are much larger than those local economies of scale under Second Wave VIU.

Extra, Extra… Goliath is Defeated Once Again!

By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity

Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.

From Wikipedia: David and Goliath are figures of a well-known tale in the Bible (1 Samuel 17, in most English language versions), wherein David, an Israelite shepherd-boy and future King of Israel, using his sling, defeats and kills Goliath, a giant Philistine warrior, in single combat.

My reticular activating system (the gateway to awareness) has given me a very important insight to use these words which become my sling in the combat to defeat and kill Goliath. I must thank Goliath’s - interpreted by Don Giegler - for the attack to EWPC during a combat we had and in which his economy of scale trigger allow me to apply aikido to the VIUs. I can say without any doubt that I have finally slew Goliath. This is how the 21st century story goes:

Philistine Don Giegler (in one attack of the combat) wrote


… Sorting through your attempt to slay Golaith, I ran into, "Sorry. Generators will need to have a retail department to handle non-trivial retail management. Economies of scale should be the result of activities under my response on item 3." Sam Insull, at the end of the 19th century and during the first part of the 20th century discovered vertically-integrated electric systems provided such economies.

To make a complete story, I must go back to item 3 (see link A Paradigm Shift to EWPC) to pick up my response to Mr. Len Gould (another Philistine) about his question: “How can a fragmented bunch of small-cap ‘Retailers’ finance items such as new-build nuclear?”, which went as follows:


Ja, ja, ja…nuclear! All you need is a robust, complete and fully functional retail and wholesale markets. Second generation retailers are not small-cap retailers. Today’s utilities should be restructured by separating the commercial regulated retailers from the physical distribution which should be integrated with transmission to become transport. Under EWPC a lot of mergers and acquisitions activity and competitive, as well as business model innovations will lead to worldwide competition after a transition…”

Now, I like to add that the point of generators to need retail departments was not to suggest that they should do it. On the contrary, now I have strong arguments to prohibit worldwide generating agents to invade the retail domain. What I meant was to make Len Gould understand that retailers are an essential requirement of robust, complete and fully functional electric power markets.

Coming back to Mr. Giegler attack:

Yes, vertically integrated utilities economies of scale on Alvin Toffler’s Second Wave were generally limited to the state level in the US and on the country level in Europe. Now, the world has changed and we are on the Third Wave, with large jurisdictional problems between states in the US and countries in Europe, which have become large barriers to the needed reforms of the power industry. With EWPC the barrier is eliminated, as only the controlled market transportation monopoly (the utility infrastructure) will remain in every jurisdiction of the US and Europe.

In the posted link Lowest Cost Electricity Generation is Just Intuitive, the message is that generation economies of scale were not the key to reliable electricity service. I believe that the economy of scale of interconnected power systems development, discovered in 1921, not by insull, but by what’s today PJM, is the essential requirement that I call ultraquality transportation.

It is now crystal clear that Second Generation Retailers (go to the link Second Generation Retailer - 2GR) should be completely separate from generation and transportation activities. Global electricity restructuring, based on the EWPC paradigm, should not allow transporters to become retailers nor generators. So negotiations at the World Trade Organization should impose trade and investments disciplines to make sure that global merging and acquisition activities don’t result on generators exercising retail activities, nor transportation activities, and vice versa.

That is what kills Goliath economies of scale. Generation and retail become global EWPC open market activities with a much larger economies of scale than under the obsolete VIU paradigm. As the art of generation is highly advanced, I expect that most innovations will be made by 2GRs business model innovations.

So, global prudential regulations of the EWPC open market must become a requirement to protect the customers and the agents from abuses. At least, in the US that could be developed by federal regulations and in Europe by EU regulations. As distribution activities are merged with transmission activities, they have a large probability of becoming federal and UE regulations of the transportation monopoly central market.


No hay comentarios: