miércoles, enero 30, 2008

Value Creation for the Customers

To end value destruction at the interface between the utility grid and the utility enterprise and at the interface between transmission and distribution, a shift from financial to production capital can be enabled by a restructuring of the power industry, to enable value creation at the customer interface under competition and by expediting the smart grid.

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

Copyright © 2008 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. This article is an unedited, an uncorrected, draft material of The EWPC Textbook. Please write to javs@ieee.org to contact the author for any kind of engagement.
Value Creation for the Customers

As can be seen in the EWPC article Innovation and Risk Taking in the Power Industry, value destruction occurs at the interface of the utility grid with the utility enterprise, as well as the interface of transmission and distribution. Value creation requires competition at the federal level among entities (see the GMH article Second Generation Retailer - 2GR) that replace the state utility enterprises and the reintegration of transmission and distribution leading to the smart grid. That is how the EWPC market architecture and design paradigm shift creates value for the customers. See also the EWPC article Full Retail Choice Emerges .

This is what has been happening in the larger economic environment. The communication (systems and information technology) paradigm can be understood to be installed since the dot.com bubble exploded. Now, after that turning point, the communication paradigm is modernizing the whole productive structure of the economy and raising the general level of productivity and quality to a higher plateau, as Dr. Carlota Perez suggested.

Fred Schweppe’s et al Spot Pricing of Electricity 1988 book and research was about the transformation of the power industry by a shift under the communication paradigm to create value for the customers under a regulated energy marketplace, which no longer applies as EWPC re-regulation emerged on the Energy Central Network by extending that research work.

I am sorry to say, that the 1992 power industry restructuring has led the U.S. and the world into incredible value destruction, as the fight between the old and the new paradigms played out so far (see the EWPC article Creative Destruction of the Old Electric Paradigm). Such destruction has its early origin in an Open Transmission Access that separated transmission from distribution as financial capital replaced incumbent production capital.

To create value for the customers in the power industry, innovative and disruptive (see the EWPC article The Sixth Disruptive Technology) production capital long term interest must be allowed to replace financial capital short term interest, by government intervention to restructure the global power industry as suggested in the EWPC article Global Electric Service Shared Vision. I think that as vested interest seems to be very strong in the U.S. and Europe, any of the BRIC countries may take their leadership away.


martes, enero 29, 2008

7 Notas sobre Cooperativas de Comercialización

Estas son varias notas publicadas anteriormente sobre Cooperativas de Comercialización que pueden ayudar a desarrollar una visión compartida de la actividad.

1. EDESUR Cuestiona Factibilidad Cooperativa Eléctrica
13 Aug 2007 La estructura tarifaria diseñada bajo los preceptos de la Ley General de Electricidad 125-01 pone “en veremos” el éxito de la Cooperativa Eléctrica Fronteriza (CEF), que un grupo de comunidades impulsa con miras a ser independientes y ...

2. Cooperativas y ESCP
11 Jul 2007 Creo que la iniciativa de Cooperativas es muy sana y compatible con la ESCP de manera un tanto distinta a lo que ocurrió en los Estados Unidos en el pasado, cuando los costos de transacción eran prohibitivos. En efecto, bajo la ESCP las ...

3. Orsini Sugiere Cooperativas Eléctricas
11 Jul 2007 Resultado: tener el país mas electrificados del mundo con 6000 (ahora, en su momento fueron 13000) cooperativas electivas. El problema no radica en los Contratos de Madrid, ni en la transmisión, ni en la francachela de los generadores, ...

4. Cooperativas Eléctricas, Normas Prudenciales y Fondos de Pensión
11 Jul 2007 Mi contesta anterior sugería que las cooperativas de comercialización se desarrollaran en una segunda etapa, luego de que las empresas detallistas regulares hubiesen desarrollados sus modelos de negocio innovadores. ...

5. Cooperativas Eléctricas con Fondos de Pensión
11 Jul 2007 He propuesto la formación de cooperativas en las zonas rurales y diversidad de distribuidoras en las zonas eléctricas, todo esto como complemento de tu electricidad sin control de precio. Ahora bien, de los grandes problemas por ...

6. Mensaje a NRECA: Integremos el Mercado y Hagamos Competitiva la ...
10 Sep 2005 Dicen que para cada tipo de sectores hay soluciones de distribución. Eso contradice la propuesta de desarrollar soluciones divisionista tal como comenté en Cooperativas de NRECA y la Comercialización al Detalle: Una Carta a Danilo. ...

7. Cooperativas de NRECA y la Comercialización al Detalle: Una Carta ...
4 Jul 2005 Este es el inicio de una serie sobre las cooperativas que NRECA está desarrollando en el país. Luego de asistir a uno de los talleres que desarrolló la CNE en el 2003, conversé con Danilo Carranza de NRECA y me dijo que en El Salvador ...



lunes, enero 28, 2008

El Hurto NO es el Problema Parte 2

Recibí un comentario al artículo El Hurto NO es el Problema (pueden verlo pulsando el enlace al final del artículo) que respondo a continuación:

Estimado Rodrigo,

Mira todos los periódicos y encontraras a Freddy Beras Goico en una campaña contra el robo.

El robo si estuvo en la SEIDE. La Cámara Británica de Comercio trajo a un expositor Inglés, John Heath, de la consultora Adam Smith International, cuya presentación fue "Energía para el Desarrollo Económico y Social, ¿ Quién Paga ?,"

En una de sus láminas aparece titulada como "Energía para el Pueblo – más verdades desafortunadas" la detalla así:

-- Los costos reales de la Electricidad gratuita – robada o subsidiada – son …
---- Baja calidad en el servicio – apagones para todos
---- Reducción del bienestar económico
---- Uso ineficiente de los fondos del Estado
-- --Desperdicio e ineficiencia de uso
---- Abuso del marco de acción del subsidio – los ‘colmados’ (beer shops) PRA
-- Alguien tiene que pagar por la energía robada o no cobrada
---- Los fieles clientes, el Gobierno o los propietarios de las distribuidoras

Fue precisamente esa presentación la que motivó una pregunta mia al Sr. Heath relativa al problema fundamental y a este artículo. Asimismo, en un panel de los pocos que asisití, los inversionistas en parques eólicos argumentaron enfáticamente contra el robo.

Como podrás ver, estoy de acuerdo contigo de que es una verdad que se ha querido ocultar. A principio de los años 80, siendo encargado de la División de Diseño de la CDE di la voz de alarma de que el robo, como tú también le llamas, era un grave problema para la CDE. La administración de la CDE contrató unos consultores canadienses para resolver el problema.

Con base al informe de esos consultores, el USAID financió el Proyecto de Mejoramiento de Ingresos que se diseño e implementó cuando era Director de Ingeniería de la CDE y que empezó a reducir grandemente el robo. No obstante, el "sistema" prevaleciente logró desarmar el esfuerzo. Más tarde la banca multilateral, el BID y el BM financiaron proyectos de distribución para enfrentar también los robos.

En 1996, también con fondos de USAID, me contrataron para proponer una solución al problema eléctrico del país. El resultado fue plasmado en el documento Necesidad de una Politica Integral de Electricidad para la República Dominicana. En la página 14 del mismo escribí:

Estrategias para la transformación. Afortunadamente, los problemas del sector eléctrico dominicano son tan generalizados, que habrá mucho trabajo para transformar el sector. No hay experiencia regulatoria, no hay experiencia en despacho económico, hay un grave problema de robo de electricidad, la confiabilidad de las plantas de CDE es baja. Además, excepto los relacionados con los proyectos turísticos, no hay grandes intereses creados todavía en la distribución. Esos proyectos en zonas turísticas pueden y deben mantener sus derechos hasta el cumplimiento de sus contratos. Junto a la necesidad imperativa de resolver los problemas del robo de electricidad y de los cobros, la competencia entre empresas públicas y privadas también es una fuente potencial de problemas.

Asimismo, en la página 16 dije:


Expansión de la generación. La próxima urgencia es concluir el proceso de licitación de las dos plantas de 125 MW. Como veremos más adelante es imperioso aumentar el nivel de reservas del sistema, exigiendo la expansión de capacidad, bajo el supuesto de una solución al problema de riesgo financiero a causa del robo de electricidad.


Hasta aquí debe quedar bien claro que he sabido desde hace mucho tiempo y sé que el robo es un problema que necesita ser resuelto, pero no es EL PROBLEMA. Es solamente un síntoma más. De resolverse sin cambiar el "sistema" para garantizar calidad traerá otros efectos secundarios.

En realidad, ya hay un efecto secundario muy visible: el gobierno ha pospuesto la aplicación porque teme un efecto negativo en la votación de las próximas elecciones. Para los inversionistas privados del sector eléctrico puede que el hurto sea EL PROBLEMA, pero no para la nación dominicana. La solución del hurto por sí sola es una intervención que es muy seguro resulte en un bajo apalancamiento.

Mi conclusión en la presentación en la SEIDE fue:

-- La Electricidad Sin Control de Precios es un paradigma emergente de arquitectura y diseño de mercado que contribuye a una solución viable y de bajo impacto ambiental a los problemas eléctricos, convirtiéndolos en grandes oportunidades.

-- EL SERVICIO ES DE MÍNIMO COSTO Y/O MÁXIMO VALOR AL CLIENTE INDIVIDUAL

Esa solución de EL PROBLEMA es un cambio estructural para introducir la competencia plena, resolviendo más fácilmente el hurto y logrando un elevado nivel de apalancamiento por las grandes oportunidades.

Al introducir la competencia plena generaremos crecimiento y desarrollo para el país y el mundo, con nuevos negocios, nuevos empleos, y hasta transformar la electricidad en nuestra marca-país.

Con la nota Modelo Dinámico, lo invito a leer y estudiar lo que significa un cambio estructural.

Para más informaciones lo invito a indagar más en esta Bitacora Digital del GMH.

Saludos,

José Antonio Vanderhorst Silverio, Ph.D.
Consultor Sistémico: Electricidad





viernes, enero 25, 2008

Innovation and Risk Taking in the Power Industry

Open Transmission Access was a great mistake made at the outset of restructuring to preserve utilities rights. To introduce innovation, risk taking and create value for the customers, transmission must be integrated with distribution to enable a future smart grid transportation utility, while the existing utility retail enterprise is open to retail competition at the federal and global levels.

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

Copyright © 2008 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. This article is an unedited, an uncorrected, draft material of The EWPC Textbook. Please write to javs@ieee.org to contact the author for any kind of engagement.

Kevin and Bob,

Kevin’s article is a welcome contribution on the future of the electricity industry. Bob comment reflects the difficulties of utility monopolies to innovate and for regulators unable to take on technology risks. My comment will show a necessary shift on the utility of the future to become just a transportation utility. As can be seen, I am taking the opportunity to integrate a few of EWPC articles to show how to create value by introducing innovations and risk taking to the electricity industry after making a necessary paradigm shift.

In order to create value in the electricity industry, it is first necessary to restructure the industry with a high leverage intervention (please see Creative Destruction of the Old Electric Paradigm). Today’s utilities join together the grid and the enterprise under Open Transmission Access, which has resulted in a low leverage intervention of the old vertically integrated utility (VIU) paradigm that involved the industry in a looming systemic crisis. Please read The Anti-System Utility to get a feel of the value destruction under today’s utilities and The End of Electric Monopoly Retail to understand a reality that is long overdue.

Further value destruction comes from the separation of transmission and distribution (please read The Natural Monopoly Transportation System). When demand is inactive, distribution is also inactive, and the interface between transmission and distribution can be assumed to be simple and dependent. When demand is active, in time and space, distribution is very active, and the interface between transmission and distribution becomes highly interdependent and complex, under power system planning, operation and control. Transmission and distribution integration is a must to reap the value creation of the smart grid transportation (T&D) utility.

EWPC is a high leverage proposition that opens the industry to value creation at the customer interface with the development of business model innovations. EWPC restructuring separates the old utility grid (please see Disintegrating the Grid and Retail Worlds) and reintegrates to transmission and distribution to become the new utility smart grid transportation utility, opening all state utility enterprises to federal and global competition by Second Generation Retailers. Please read The Sixth Disruptive Technology which is the business model innovation of 2GRs. See also K2007 Retailers’ Enterprise Solutions to learn about an alternative to the electric industry intelligent enterprise.

Regards,

José Antonio

Reference and context: Creating Value is the Key for the Utility of the Future, by Kevin Walsh, Industry Principal, Utilities, SAP Americas, Inc.



jueves, enero 24, 2008

The End of Electric Monopoly Retail

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

Copyright © 2008 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. This article is an unedited, an uncorrected, draft material of The EWPC Textbook. Please write to javs@ieee.org to contact the author for any kind of engagement.

The EWPC article PCT One of Many Business Model Innovations reveals a very important precedent for any potential business model innovation of utility retail service: they should be voluntary. As electric utilities monopoly retail discriminates against customers that don’t require the full system reliability needed by the most demanding customers, regulators are no longer able to ensure compliance of fair rates and prevent free riding. As customers reliability needs can be differentiated, believe it or not, this is finally the beginning of the overdue end of electric monopoly retail.

Once again, California takes the leadership in the U.S. in a very important issue. This time the decision on the proposal for "Programmable Communicating Thermostats" (PCT) should have wider implications on electricity retail. According to Claudia Chandler, assistant executive director of the commission, PCT “will be written to ensure it is completely voluntary… It is not going to be required . . . It will always be used in a voluntary mode, if it's used at all." This precedent can apply to other potential retail business model innovations.

Joseph Somsel article “Who Will Control Your Thermostat?” was apparently instrumental in the decision, by pointing out the discrimination behind the proposed mandate which I summarized with his statements “Your desires and needs can and will be overridden by the state of California through its public and private utility organizations. All this is for the common good, of course . . . But the discomfort of compliance will fail unevenly across the state. Come the next heat wave, the elites might be comfortably lolling in La Jolla’s oceans breezes or basking in Berkeley by the Bay, while the Central Valley’s poor peons are baking in Bakersfield and frying in Fresno. California’s coastal climate, where the elites live, seldom requires air conditioning . . . How will the state ensure compliance and prevent free riders? . . . Sweating for the common good is for the chumps.”

From there on, Somsel was on to defend the vertically integrated industry and nuclear power using as evidence of reality his own 2003 EnergyPulse article Deregulation and Nuclear Power. The article is already obsolete as a lot of progress has developed since then, especially on EWPC.

But, how a regulator ensures compliance and prevents free riders under yesterday and today’s utilities, when every customer is forced to pay for the same ideal reliable service. Regulators don’t; they have been unable to do so since reliability needs of customers have become widely spread everywhere in the world.

It is a fact that every customer, like Central Valley’s, or any third world country, poor peons have a level of reliability that is optimal for him or her. However, the power system needs to offer high enough reliability to satisfy the most demanding customers, a limit which is no longer able to do and the basis for the need to develop a smart grid. But anyway, let’s assume the power system can operate at 99.99 percent reliability. In this case all customers whose optimal level of reliability is below 99.99 percent are subsidizing the rest and thus being discriminated upon by the utility and the regulator. Also, every customer that needs 99.99 percent or more reliability is thus free riding.

Since rates are designed for neat customers’ classes, and all customers are supposed to receive the same reliable service, many customers are forced to pay for investments they don’t need. Hence, utilities the world over have been unfair with many customer by discriminating them for quite some time. This is the end of monopoly retail and the beginning of retail competition of several business model innovations.


martes, enero 22, 2008

BM ve sector eléctrico requiere US$165,000 MM

Original del Listín Diario:
DESAFÍO MUNDIAL
BM ve sector eléctrico requiere US$165,000 MM


Según un reporte del Banco Mundial, más de 2,500 millones de personas siguen usando leña o biomasa para cocer sus alimentos y para la calefacción.

En el informe sobre el desafío mundial de la energía el organismo multilateral señala los efectos negativos que implica usar leña como combustible, por la deforestación y por la contaminación del aire en lugares cerrados, que, según la Organización Mundial de la Salud, origina 1.5 millones de muertes al año (más que el paludismo y la tuberculosis juntos).

Según pronósticos del Organismo Internacional de Energía, de mantenerse la tendencia actual, en 2030, alrededor de 1,400 millones de personas seguirán careciendo de acceso a la electricidad y 2,600 millones usarán combustibles de biomasa. Se espera un aumento de la demanda de energía en países pobres, de aquí a 2050, por lo que durante esta década se necesitarían destinar al sector de la energía US$165,000 millones al año, pero se calcula que en la actualidad el financiamiento equivale a la mitad de esa cifra.

A menos que se encuentren maneras de reducir este déficit, las tasas de acceso a la electricidad seguirán siendo bajas en los países más pobres y el suministro será poco confiable y de mala calidad, lo que provocará cortes de energía y bajas de tensión, frenará el crecimiento económico y provocará la degradación del medio ambiente. www.bancomundial. org


domingo, enero 20, 2008

PCT One of Many Business Model Innovation

California panel removes proposed mandate for utility-controlled thermostats (NOTE: This article link expires on: 02/17/2008) - Bowing to public pressure, the California Energy Commission has removed its proposed mandate for utility-controlled thermostats from its 2008 energy efficiency building code. A hearing on that code is set for Jan. 30.

Under EWPC, PCT qualifies as one great business model innovation. As such, it should be open to competition with others business models in the making or that will emerge worldwide as the market evolves. The point is that PCT should not be allowed as a monopoly business model.

Customer choice should be enabled to a new level by introducing federal competition at the retail level. The remotion of the mandate by the Califonia panel is a strong signal of the end of the utility monopoly as we know it. Today's utilities have two main components: the grid and the enterprise. The enterprise as a state retail monopoly should be replaced by retail competition at the federal level of the U.S.

The grid is evolving to the smart grid utility to offer ultraquality transportation only electricity services, but the monopoly enterprice is acting as a restraing force on its progress.

Open Transmission Access is to evolve to Open Transportation (integrated transmission and distribution) to be developed at least costs under a controlled smart grid market to enable maximum welfare in the open retail and wholesale markets, as envisioned under EWPC market architecture and design.

Joseph Somsel, a former utility engineer who opposes the [original PCT] plan, said he was pleased to hear of the official change of heart at the commission.

"I'd call this a victory in the first battle since they've shifted venues in strategic retreat -- but a victory nonetheless," said Somsel, who raised awareness of the plan's mandatory nature in the Jan. 4 issue of the American Thinker, an online magazine.

However, Michael Shames, executive director of San Diego's Utility Consumers' Action Network, a critic of the plan's mandatory nature, wasn't impressed with the energy commission's statement.

"Most of the announcement is garbage," Shames wrote in an e-mail. "For us, the most important part of the announcement was the last line: 'Technology can be a powerful tool in managing our energy use. However, it is of utmost importance that consumers make their own energy decisions.'

"It is my plan to use this sentence again in the future when the next CEC or some other agency attempts to use good (remote energy services) for evil (non-overridable remote commands)," Shames wrote.

"Emerging advanced energy services will only be embraced by consumers if they have confidence that these technologies will not be used against them. It appears as though the CEC got that message this time around. We'll see if the message sticks," he wrote.


miércoles, enero 16, 2008

Cambio de Paradigma en la Industria Eléctrica

En ocasión de la Primera Semana Internacional de la Energía, organizada por la Comisión Nacional de Energía de la República Dominicana, en esta fecha ofrecí la presentación "Cambio de Paradigma en la Industria Eléctrica: Servicio sin control de precios al mínimo costo al cliente individual."

Una impresión en formato PDF de la presentación puede ser descargada de la margen izquierda de esta Bitácora debajo del renglón "Evolución Electricidad Sin Control de Precios (ESCP)."

Se invita a los lectores a convertir esta visión personal en una visión compartida, integrando dicha visión a sus propias visiones personales. Esto puede ser realizado en un grupo de interés, en su empresa, en una asociación, en un estado o provincia, en un país, o en una unión de países.

Como se puede deducir de la presentación, todos los habitantes del planeta que tienen acceso a la electricidad somos parte de la industria eléctrica. Es decir, que no solamente las empresas eléctricas y los sectores públicos forman parte de la industria. Por lo tanto es muy importate transformar esa vision personal en una visión compartida a fin de iniciar un proceso de opinión pública internacional sobre el servicio de electricidad universal.

Es muy probable que ese servicio universal derive en la Tercera Revolución Industrial como la concibe el Dr. Jeremy Rifkin. El Dr. Rifkin ofreció una estupenda conferencia el primer dia de la Semana Internacional.

Si tienen algún comentario público favor de colocarlo en el enlace que aparece a seguidas.

domingo, enero 13, 2008

Creative Destruction of the Old Electric Paradigm

The economic theory of creative destruction is the key force to the destruction of the vertically integrated industry and the emergence of a new paradigm of global or universal electric service. Companies, states and countries need to develop shared vision initiatives of the new paradigm.

Creative Destruction of the Old Electric Paradigm

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

Copyright © 2008 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. This article is an unedited, an uncorrected, draft material of The EWPC Textbook. Please write to javs@ieee.org to contact the author for any kind of engagement.

The new shared vision of the electricity industry is about universal or global electricity service as described in the EWPC article Global Electric Service Shared Vision. This is a follow up from the EWPC article Vertical Integration/Deregulation Debate vs. EWPC Generative Dialogue, which suggests once again ending the old debate to concentrate on a much needed generative dialogue as exemplified in the GMH article Solving the Tough Electric Power Market Problem to face the looming (systemic) crisis.

Such systemic crisis on electricity is the basis for the emergent markets, different from the vertical integration and total deregulation markets, as the system and information technology revolutions are making their inroads. In economics this is about creative destruction waiting to happen to the “Old Paradigm” of vertical integration.

For example, as Bob Amorosi explained in the reference, “there are many big players in the electronics industry that are developing or already have developed home automation technologies, smart appliances, real-time in-home energy monitors, and smart communicating thermostats, to name a few. They are viewed as consumer products that consumers will generally be willing to buy if it helps them to become more energy efficient and practice more energy conservation.” Those new technologies are now available to develop the resources of the demand side.

Those technologies are in effect waiting to destruct all vestiges of the vertical integrated utilities (the Old) paradigm by allowing integrating demand to power system planning, operation and control, thus changing the Old Paradigm centered only on the development of the resources of the supply side. Power system planners and operators will be able to plan and operate the power system by changing generation “stocks” and now also demand “stocks” after the processes of long term planning and of security constraint unit (supply and demand) commitment. For more details read the EWPC article Power System Operation Stocks and Flows.

As most readers learned from Professor Banks, that is not based on the first chapters of Econ 101, but taking into account inventories of generating capacity and inventories of customers demand response (from agreements made with 2GRs) available to plan (assuring long run system adequacy) and available to operate (assuring short run system security) the power system reliably.

Any company, state or country that wishes to develop a shared vision of the power industry is able to get a head start with rich information available in the GMH Blog, the EWPC Blog or the many comments under EnergyPulse articles.

Reference and context: Continental Grid Vision Needed, by Martin Rosenberg, Editor-in-Chief, EnergyBiz Magazine.


viernes, enero 11, 2008

Vertical Integration/Deregulation Debate vs. EWPC Generative Dialogue

Thanks Bob,

I know that I will not be able to convince anyone that has its own agenda. That is not my intention. I will only respond to clarify what I meant.

Adding only that EWPC is about one controlled market and one open market that operate interdependently, to offer reliable service while opening the industry to business model innovations, I am glad to be able to say what I intended in my first post under Grooming Wind, where the same response was posted to your partially repeated comment. Please read it like this: “…extending incrementally the old central station paradigm (with very complex rules and regulations that lead to simple and stupid behavior) is alive and well, allowing that in a given area there might be two transmission systems so the natural monopoly concept is changed.”

The pure and original vertically integrated utility (which is what I meant by the “old central station”) paradigm and EWPC have both very simple rules and regulations that lead to complex and intelligent behavior. This is what the generative dialogue should be about to come up with the emerging market.

As you know, my interest is about the market vs. market competition and not the company vs. company competition. All the public debate has been on market vs. market competition centered on only two paradigms: the pure vertically integrated utilities paradigm (VIU), witch now has many incremental extensions towards wholesale and full deregulation. The Cato Institute “recommend total abandonment of restructuring,” meaning going back to the pure Old Paradigm.

The incremental extensions occurred first under PURPA; then under EPAct 1992 that enabled FERC to order wholesale competition and Open Transmission Access, implemented with FERC orders 888 and 889, and 2000. In addition, several events have impacted the progress and the debate of deregulation, the meltdown of California, FERCs SMD, and the Northeast Blackout. Those events led to 2005 Energy Bill, which resulted in NERC mandatory requirements and the introduction of Demand Response.

Two systems architecting heuristics says that “the most dangerous assumptions are the unstated ones” and “that all serious mistakes are made on the first day.” The assumption that the separation of federal and state jurisdictions does not have a distorting impact on electric markets restructuring needs to be reviewed. Under that assumption transmission and distribution seem to be two separate entities. A generative dialogue aiming to find the best argument should consider this item as the first. So, maybe in other places, like the BRIC countries which don’t have those unnecessary restrictions EWPC snared vision will have a better opportunity to emerge first.

As you all know, in the past two years, EWPC emerged as the third market under a generative dialogue, which is very simple market architecture and design: retail [and wholesale] competition, demand integration and ultraquality transportation. The first two are implemented by Second Generation Retailers (that handle all revenue streams from retail customers) as part of a value chain generation, retail, and customer. Ultraquality transportation is the result of demand integration to power system planning, operation and control, by Second Generation Retailers. The only utility company remaining is the transportation utility.

If I understand correctly, IMEUC is about wholesale competition, without retailers, without demand integration and without ultraquality transportation, leaving intact the incremental extensions of the Old Paradigm, which is exactly what the Cato Institute recommended to abandon. New hardware[/software] solutions should be left for company vs. company competition.

Reference and context: Continental Grid Vision Needed, by Martin Rosenberg, Editor-in-Chief, EnergyBiz Magazine


lunes, enero 07, 2008

Global Electric Service Shared Vision

By extending the suggestion of Martin Rosenberg, Editor-in-Chief, EnergyBiz Magazine, a global electric service shared vision is needed. Such shared vision is open to gain a foothold for company vs. company competition in a state of the U.S., a country of Europe, or any of the BRIC countries.

Global Electric Service Shared Vision

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

Copyright © 2008 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. This article is an unedited, an uncorrected, draft material of The EWPC Textbook. Please write to javs@ieee.org to contact the author for any kind of engagement.

In the Fifth Discipline there is quote by Robert Fritz that says “In the presence of greatness, pettiness disappears.” Peter Senge rephrases it as: “In the absence of a great dream, pettiness prevails.” Senge adds: “Shared visions foster risk taking and experimentation. When people are immersed in a vision, they often don’t know how to do it. They run experiments. They change direction and run another experiment. Everything is an experiment, but there is not ambiguity. It’s perfectly clear why they are doing what they are doing. People aren’t saying ‘Give me a guarantee that it will work.’ Everybody knows that there is no guarantee. But the people are committed nonetheless.”

Earlier in my interventions, I followed the suggestion of Geoffrey Moore to divide competition in two stages: 1) market vs. market competition and 2) company vs. company competition. Since my interest on EWPC is concentrated in the first stage, I now feel very comfortable to keep working towards a shared vision as if pettiness has disappeared.

So, the opportunities towards as to how EWPC will evolve a shared vision of universal electricity service might be initiated in a state of the US, in a country of Europe, or maybe with a higher likelihood in one of the BRIC countries, as I suggested in the EWPC article A Global Standard Market Architecture and Design.

For those reasons, I respect Professor Ferdinand E Banks decision not to participate in a generative dialogue. Many of his inputs, that seem to be intended to oppose EWPC, have been very useful to the generative dialogue insights that have emerged. Obviously, every person has the same right. However, more money is to taken out of the pockets with today’s experiments in Sweden and elsewhere because of all the ambiguity as they lack a clear vision (see more below about NERC and FERC).

I recall from a whitepaper I wrote in 1996, to propose the vision that has evolved as EWPC, that I quoted Odgers Olsen Jr. of Ernst & Young as saying something like this “In the discussions that we had with people in the power industry some visions are clearly defined, others are quite clouded. For those that are clouded, some say: ‘let’s go forward and refine the vision as we go; we need to have certain flexibility.’ Others don’t understand that the vision itself is clouded. Those people will start, and restart, again and again, until they are behind in the game.”

There are many people that will not be convinced that going for a shared vision is correct. There are many people that don't believe that there is a looming (systemic) crisis that is long overdue. Those people should be left behind as it is a waste of precious time trying to convince them, when they are not open to dialogue or to have the courage to be open to be convinced. Peter Senge said that “… I find that I spend very little time trying to convince people of my view, and I can honestly say that it makes life a lot easier and more fun.”

Time is better expended working with the many others that are open to be convinced that going for a shared vision is correct and believe that there is a looming (systemic) crisis that is long overdue. In addition they have the freedom to have their personal visions which they wish to become shared visions of an emergent solution to the systemic crisis.

My vision is NOT about deregulation, but re-regulation. The Old Paradigm of the power industry has stocks of capacity (provided under regulation under a responsibility to serve) which are under the control of the system operator as the mean to provide ultraquality service for the whole system. But that ultraquality only results by overbuilding transmission and generating capacity.

The New Paradigm of the power industry (wide open to be enhanced to become a shared vision) gives the system operator (under a responsibility to transport) the control the stocks of capacity (provided from the open market under prudential regulations), in addition to the control of stocks of demand, in accordance with the commitments that customer make in the open market under contractual relationships with Second Generation Retailers (also under prudential regulations) to provide ultraquality service for the whole system. Under EWPC the long run investments expansion plans in transportation (integrated transmission and distribution) will be at least costs. Generation investments of base load power plants in the open market will lead to the development of a futures market.

As the incremental extensions (symptomatic solutions) to the Old Paradigm like Open Transmission Access that have later required the introduction of NERC mandatory rules (to give the incentives to invest in transmission, which will not be at least costs) in response to very costly blackout and as FERC is implementing Demand Response by introducing modifications to NERC rules, excessive investments in unnecessary transmission and bureaucracy will lead to more costs that in the end will have to be paid by the end-customer. Each ambiguous and unclear symptomatic solution has generated its own stranded costs that now involve “massive investments.”

The resulting shared vision of universal (global) electricity service is a more efficient power sector leading to fewer costs for the whole and for individual customers after a while. EWPC is open to gain a foothold for company vs. company competition in a state of the U.S., a country of Europe, or any of the BRIC countries, to implement such certainly needed vision.

Reference and context: Continental Grid Vision Needed, by Martin Rosenberg, Editor-in-Chief, EnergyBiz Magazine



domingo, enero 06, 2008

A Global Standard Market Architecture and Design

One of the BRIC countries (Brazil, Russia, India or China) is poised to be the enabler of a global Standard Market Architecture and Design, if U.S. companies decide to stay behind by keeping in place several inefficient statewide incremental extensions of the Vertically Integrated Utilities paradigm, none of which is able to become a U.S. standard, let alone a global standard. The EWPC standard will enable important global economies of scale.

A Global Standard Market Architecture and Design

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. This article is an unedited, an uncorrected, draft material of The EWPC Textbook. Please write to javs@ieee.org to contact the author for any kind of engagement.

The last two comments that I posted, yesterday under the post Oil Prices Torching from Marty Rosenberg, which is a good introduction to the second which I posted today under the reference cited below. A development of the optimal mix of resources that satisfy the needs of end-customers, will come from the demand side and from the supply side.

While developed countries will have initially very high percentages of resources from the supply side, developing countries will be able for the first time to provide commercial quality reliable service (almost no unintended blackouts) with lower percentages of resources from the supply side, as EWPC becomes a global Standard Market Architecture and Design.

Marty’s article concludes with “…BIG NEWS with huge implications for consumers, the energy industry, the American and world economy, global politics, global terrorism... You name it. So when you read about high oil prices, don't agonize. It may be just the birth pangs of a much better world. And a new era of human enterprise,” as he wrote. This is my first comment:

Hello Mr. Rosenberg,

Happy New Year,

The key sentence on the quotes of Arthur Kressner, director fo R&D for Consolidated Edison, is "If properly integrated with the grid, we could do this in a very effective manner benefiting the environment, consumer and the company." Readers are advised to take a look at the EWPC article Demand Integration is NOT the Province of Politics (please the link … to read it).

Under EWPC the utilities become just wires only T&D transportation utilities under an obligation to transport at ultraquality. Centralized and distributed resources should go to the open market with competition at wholesale and retail. The integration of demand should be done through a new institution that I call Second Generation Retailers. For more information, please go to the EWPC Blog . . .


The second comment says:

Dear Don,

California and other states of the U.S. seem to have foregone a great opportunity by locking in their power sectors in an increasingly inefficient development path. Other states that are in a wait and see attitude should consider EWPC, as an emergent worldwide standard market architecture and design.

The reality that FERC SMD ended in failure can't be taken as an assumption that a single worldwide standard is impossible. Important economies of scale are the best incentives that the standard will provide.

If just one BRIC country undertakes the development of EWPC, it will extend very fast towards many other developing countries under reinforcing feedback. The resulting convergence will comeback to find states and countries and their companies locked with non-compatible rules losing business later on in the game.

¡El que ríe último, ríe mejor!

Best regards,

José Antonio

Reference and context of the second post: Grooming Wind, by Ken Silverstein, Editor-in-Chief, EnergyBiz Insider.


sábado, enero 05, 2008

No Te Lo Van a Publicar

El viernes 4 Diario Libre publicó DL: Ed. - Energía. El sábado 5 agregó DL: Espejo de papel. - Palabras. Ambos son críticas que se resumen en la concentración en soluciones sintomáticas a expensas de las soluciones fundamentales del sector energía y muy en particlar el sector eléctrico.

Desde el 15 de mayo del 2005 he venido publicando en esta Bitácora Digital del Grupo Millennium Hispaniola una solución que inicié en 1996 y que ha pisado los periódicos muy brevemente. Es una solución fundamental al problema eléctrico.

Una posible razón por la que no llega al a prensa es porque los métodos de la dictadura trujillista siguen campantes. Para entender esos métodos dictatoriales que corrompen al Cuarto Poder vale la pena escuchar la entrevista que hizo ARISTEGUI al autor del libro "La Otra Guerra Secreta," en el siguiente enlace. Me impactó la expresión No Te Lo Van a Publicar, pero sí se lo publicaron.

En la contraportada del libro aparece lo siguiente:

Cuánto costaba el silencio en México?
¿Quién decidía lo que se decía durante los sexenios del PRI?
¿Qué hicieron los dueños de los medios cuando el gobierno silenciaba a los opositores?
¿Dónde estuvieron los líderes de opinión, los columnistas, los reporteros?
¿Quién protestó?
¿Desde qué dependencia se callaba a los periodistas?
¿Los callaron a todos o hubo quienes prefirieron callar por voluntad propia?

En La otra guerra secreta el lector encontrará muchas de las respuestas que hacían falta. Un país que se busca a sí mismo, que trata de hacer las paces con su pasado y con su historia, necesita desnudarse para encontrar la verdad. En este libro, a partir de fuentes primarias del Archivo General de la Nación #de los fondos correspondientes a los órganos de inteligencia de la Secretaría de Gobernación: Dirección Federal de Seguridad y Dirección de Investigaciones Políticas y Sociales#, se desvelan los modos y las estrategias del gobierno, así como las posiciones y predilecciones de los comunicadores y dueños. No queda sin tratar ningún asunto, ningún #particular#. La mayoría de los reporteros, periodistas, líderes de opinión y dueños de medios #demuestra Jacinto Rodríguez Munguía# callaron por voluntad propia. Fueron los tiempos de la guerra sucia, una guerra clandestina y soterrada, una guerra implacable. Los tiempos en que los medios de comunicación fueron el aliado fundamental de las botas, las torturas y las eliminaciones extrajudiciales. Fue ésta la otra guerra, la guerra secreta, la de la alianza de los medios y el poder, la de la complicidad y las canonjías.

DL: Ed. - Energía

Ed. - Energía
Diario Libre: Opinión, 3 de Enero del 2008

Hasta ahora el Gobierno se ha mostrado muy tímido frente a las alzas del petróleo. El Presidente le habló al país, se están instalando semáforos inteligentes y se dice que se incautarán los vehículos oficiales que circulen sin necesidad los fines de semana.

Esas son curitas contra una hemorragia.

Lo importante es lo que se pueda hacer en las grandes políticas públicas, como es la energía renovable, que avanza a paso de tortuga dormida; como es el análisis serio de los costos en nuestro sistema eléctrico, que está lleno de grasa y de desperdicio por la gran cantidad de energía que se pierde o no se cobra.

Al Gobierno le ha faltado energía para atacar el problema de la energía, pues ni siquiera los proyectos a los que apostó, las plantas de carbón, ha podido iniciarlos


DL: Espejo de papel. - Palabras

El presidente Fernández afirmó que el problema eléctrico es el gran reto para la Nación. La idea, aunque cierta, sorprende. Leonel no se ha mostrado enérgico ante el problema energético. Los apagones son tanto de luz como de ideas. La verdad es que esta administración, como las anteriores, no acierta a definir una política eficaz para solucionar el problema. El Gobierno prefiere paliar que resolver, por eso pone toda su fe en los subsidios al sector. Los subsidios sólo sirven para mantener prendidos los bombillos, pero apagan las finanzas públicas y oscurecen el camino de las soluciones definitivas. ¡Palabras, palabras!

hfigueroa@diariolibre.com


viernes, enero 04, 2008

Power System Operation Stocks and Flows

An important discovery about the non-trivial aspects of power system planning, operation and control is in the making, under a generative dialogue. Resources are needed to develop an update of Jason Black's PH.D. M.I.T thesis to simulate the EWPC architecture and design paradigm shift of the power industry.

Power System Operation Stocks and Flows

Thank you Fred,

Your post is very good, as you engage the generative dialogue as I asked.

From what you wrote, I infer that you confirm that Len “. . . is seduced by the early chapters in his econ 101 textbook, and so he didn't bother to read the later chapters, where he might have been informed that regulating [and re-regulating under EWPC as explained below] the electric industry makes a lot of sense.”

You are probably right that Prof. Schweppe didn’t take explicitly into account stocks and flows into his regulated (not deregulated) energy marketplace, but he included the criterion “Utility Control, Operation and Planning: Consider the engineering requirements for controlling, operating and planning an electric power system," which suffices to me to extend the regulated marketplace to a re-regulated one.

That criterion is the ultraquality imperative which is a true and non-trivial essential characteristic of vertical integration that also belongs to EWPC, but is missing from IMEUC. So, thanks to you, maybe we are discovering something new. This is what I see about introducing stocks and flows to the power industry, which necessarily is in draft form and thus wide open to enhancements.

The vertically integrated utilities (VIU) paradigm developed under the assumption of demand as an externality. Under the VIU paradigm, the job of the power system dispatcher is to accumulate generating capacity “stock” by interconnecting (and disconnecting) generating units to the power system according to a process called “security constraint unit commitment” to find out the proper places and the proper rates thereby operating the power system at ultraquality to satisfy the accumulated external load “stock” at each time and location. It is a tough job that involves important delays that result in the disequilibrium dynamics of the power system.

Under EWPC, demand is integrated to power system planning, operation and control with the aim of ultraqualty service, under the tough job to be planned (long run and short run) by 2GRs to aggregate “dispatchable” load stock in the wholesale market, by making contractual agreements with customers at the retail market.

It is in those agreements that most of the leverage is to be found to increase the efficiency of power sectors (i.e. avoidance of excesive capacity). Such agreements are already being executed in several states of the U.S. by demand response aggregators. However, the lack of a proper market architecture and design is the source of the FERC action on NERC mandatory requirements mentioned in the above post under today’s mess.

The lack of long run and short run planning of stocks (i.e. inventories) of customer demand response in the California debacle was one important missing item that let the incredible price spikes and costly rotating blackouts result.

As it cost a lot of money, instead of sending my heros to Upsala, I am sending through you this post to get their feedback. With regard to money, my priority now is to find the funds to develop the stock and flow diagram of power system planning, operation and control for EWPC to update the system dynamic model of Jason Black’s M.I.T. Ph.D. theses.

Best regards,

José Antonio

Reference and context: Grooming Wind, by Ken Silverstein, Editor-in-Chief, EnergyBiz Insider.