jueves, noviembre 15, 2007

EWPC is NOT the UK Model

In EWPC there are 8 possible End-State (UK was developed on 4), only one of which is the generic market model paradigm: retail competition with active demand (UK had no active demand) and ultraquality transportation (UK has separate transmission and distribution and no ultraquality identified). That is the essence."

EWPC is NOT the UK Model

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.

Adrian: thanks for your comments. I hope you get to see this very brief response that goes right to the essence.

If you didn't have the time to read the "Synthesis Proposal Agreement of EWPC," you will see that EWPC it is NOT the UK model, but a new market architecture and design breakthrough paradigm that emerged in the last two years. This is the summary of my discovery as simple, but not simpler, as it can be said:

There are "8 possible End-State (UK was developed on 4), only one of which is the generic market model paradigm: retail competition with active demand (UK had no active demand) and ultraquality transportation (UK has separate transmission and distribution and no ultraquality identified). That is the essence."

Ultraquality transportation is the key requirement to develop A Futures Market under EWPC (hit link please), which the UK model lacks. That is why the UK model, as you say “has failed to deliver adequate investment in new generation…” It has also failed to deliver “demand side participation,” because it only considered the 4 possible End-States at the outset.

Please don’t confuse EWPC with the UK model. EWPC is an extension of Fred Schweppe et al Spot Pricing of Electricity. Under EWPC, system reliability is first and foremost. Instead of first generation (and incumbent) retailers, as the UK has, EWPC has Second Generation Retailer - 2GR (no incumbents) that participate in long run power system planning to integrate demand.

The important example of the Dominican Republic is not that of the vegetables, which we certainly have. I have tried hard, as Len can attest, to have Dominican like electric retailers. The example is that of customer differentiation, giving the opportunity to integrate demand and to practice true spot pricing of electricity. The opportunity is to integrate demand into power system planning, operation and control. It is about the opportunities available on demand side risk management.

In Free Market and Central Planning, Under R1E2, I wrote of the discovery that “To optimize the transportation system, it is required to consider total social (demand, transport, supply) welfare needs, and not just the optimization of transmission, distribution, or both, by themselves.” I used to say that electricity was not a commodity (I did in 1995 at an IEEE meeting). But once you have ultraquality transportation in the least cost controlled grid, electricity becomes the best commodity in an open market.


A New Response to Adrian Lloyd

Adrian Lloyd’s is happy to listen. His opinions, which he may change, as he is a well versed and important person, are responded below.

This is how EWPC completes the answers Adrian Lloyd comments:

1) Be against isolated distributed generation. Mixed feelings!

For the 3rd time, “… Existing national power grids won't disappear.

”In addition, many customers can remain integrated to the grid without
being interconnected. That is how most customers operate their distributed
resources in the Dominican Republic, with which they will be able to provide
Demand Response services to the grid.

2) Suggest that the grid is for one way traffic from central station to customers. Bad!

Supply side only risk management needs generating reserves (sometimes in the order of 35% of capacity) with some of them to operate a few hours in the year to service customers reliably. One way traffic used to be the way with inactive demand as an externality. Active demand should be integrated to power system planning, operation and control to increase power industry efficiency.

Also read under the article EWPC As The New Internet my response to Malcolm "Problem is that millions of distributed generators will results in no income for the people that supply and operate the grid. No money no maintenance, no maintenance no grid and the scheme falls apart."

3) Saying that the power system should be operated in the Normal Operating State. Good!

That is satisfied with the essential requirement of transportation ultraquality under EWPC. Read the article Synthesis Proposal Agreement of EWPC please.

4) Power quality needs to be solved. Good!

Same response as in item 3.

5) There is problem with variable generation. Good!

Read the article Integrating Uncertain Generation to the Grid posted above please.

6) Wants to know: Who pays? Consider all the costs. No more subsidies. Good!

Leave that to the open market value chain and not to the Government or the utilities. I like to stress from the above article Financing and Developing Uncertain Generation, that the question “Who pays?” is always answered by those that control the political process, as debates get locked, and to get them unlocked the hierarchical force of the authorities is employed. Please read also Slicing the Last of the Regulated Monopolies to complete the response.

Reference and context: Distributed Architectural Renewable Energy Generation, by Brian Braginton-Smith, Executive Director, Sustainable Resources Group.


Financing and Developing Uncertain Generation

Another partial response to respond to Adrian Lloyd in this upgrade to Nov. 15, 2007, most viewed article. EWPC is the answer to the difficult question on how to finance and develop uncertain generation projects for all stakeholders to win. The underlying problem is found on the successive extensions of the inefficient price controls of the vertically integrated utilities paradigm that leads to simple and stupid behavior.

Financing and Developing Uncertain Generation

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.

In the article Optimize Transmission Assets for New Wind Farms but Who Pays?, Mr. HIMADRI BANERJI brings a difficult question on how to finance and develop wind [changed to Uncertain Generation without any loss of generality] projects. The problem, however, comes from the lesson that Dee Hock, CEO Emeritus VISA International, gave us: “Simple, clear purpose and principles give rise to complex and intelligent behavior. Complex rules and regulations give rise to simple and stupid behavior.”

The problem Mr. Banerji is bringing has its origin in the vertically integrated utilities (VIUs) paradigm, whose incremental extensions give rise to very complex rules and regulations that result in simple and stupid behavior. It is well known that price controls are inefficient and lack transparency. Lack of transparency is one side of a coin, the other side being corruption. So the question “Who pays?” is always answered by those that control the political process, as debates get locked, and to get them unlocked the hierarchical force of the authorities is employed. Please read Slicing the Last of the Regulated Monopolies.

Electricity Without Price Controls is a market architecture and design paradigm shift away from the VIUs paradigm based on “simple, clear purpose and principles,” as can be seen in the article Synthesis Proposal Agreement of EWPC. Under EWPC, both questions – who should pay and how to develop an optimal transportation (T&D) grid, as many RR projects are to be connected to distribution lines, are answered without getting into debates.

Financing and Developing Uncertain Generation . . . continued . . .

Optimal transportation should be the result of expansion planning where all potential RR projects (see also Integrating Uncertain Generation to the Grid ) are taken into consideration at the same time for a give planning horizon. Such expansion planning is to be done in the environment suggested in the article Free Market and Central Planning, Under R1E2.

With a transportation utility that is financed by tolls the problem of “Who Pays?” is solved. A simple explanation of how to optimize the transportation system is given in the context of the article Demand Integration Under EWPC, as follows:

Generators and Second Generator Retailers interchange with the System Engineer their proposed investments and other key information to allow the System Engineer develop the transportation utility expansion plans for the long run, in order to optimize the future grid by minimizing total system costs (not just the transportation costs) in order for 2GRs to enable a potential maximum social welfare in the national economic context, and not just the financial viewpoint of the utility as the VIUs paradigm calls for.

For more details please read other articles in the Energy Central Network EWPC Blog.




Integrating Uncertain Generation to the Grid

As a partial response to Adrain Lloyd, the article Wind Integration: An Emerging Paradigm, can be paraphrased almost entirely by interchanging “wind” with “UG (uncertain generation),” from the second paragraph on, as follows:

After reading the article by Sandy Smith, Communications Coordinator, Utility Wind Integration Group, some of its references, the articles by Roger Arnold, and all of the really valuable comments on all 4 articles, I like to select what J. Charles Smith wrote in the article Winds of Change as a summary message: “For many of us, this has created the necessity of a fundamental realignment in our thinking. We must understand all the implications of this and go about the business of helping to create the future.”

The following are my generative dialogue suggestions (I am not my opinion) for a fundamental realignment in our thinking:

1) A carbon tax should be negotiated on a global setting, i.e. the World Trade Organization. Each country that does not apply the negotiated tax, will then free ride the global system.

2) Most of the discussions are indirectly supporting generation as a monopoly. Generation competition is not only possible, but absolutely necessary to go forward.

3) UG variability is an important consideration, but its uncertainty is even more important. Power system systemic risk management of system failure (system security) responds to uncertainty. Supply side management of systemic risk of system failure should be complemented by demand side management of systemic risk of system failure. See An Alternative Business Case for Demand Response and a Dominican strategy.

4) UG best performance will come from balancing areas, in which generators are widely dispersed and mostly located in the distribution system. Open transmission access is insufficient to integrate UG generation in the state of the art.

5) There is thus a need for full transportation access. Transmission and distribution reintegration requires dismantling native loads, which changes the concept of a utility to wires only utility. See NERC Compliance and Power Sector Structure.

6) Fully functional and competitive wholesale and retail markets can then allow the development of the resources of the demand side. See We Need 2GRs as the Forecast is Always Wrong.

All of the above implies an emerging EWPC is Pragmatics' Winning Market Architecture and Design. [Since that time EWPC emerged as the winning market in the first phase of competition.]

To go forward to EWPC as the End-State of the electricity industry for quite some time, I made a presentation at Carnegie Mellon University that can be found on the Grupo Millennium Hispaniola Blog, as A Generative Dialogue to Reach the End-State of the Power Industry.