Business model competition for retail services is the key to a breakthrough in utilities services. Economies of scale and scope of electricity, gas and water will enhance their business models. The general public should be aware of the harm of extending utilities business model of winning rate cases to the regulator as we enter the Third Industrial Revolution.
Breakthrough Suggestions for Today's Utilities Environments
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
First posted in the GMH Blog, on April 23rd, 2008.
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 firstname.lastname@example.org to contact the author for any kind of engagement.
Instead of the utility centered "Modest Efficiency Suggestions for Today's Energy Environment, proposed by Philip Hanser, Principal, The Brattle Group, the article EWPC Leadership (w/o links) is offering breakthrough suggestions that “brings absolute clarity and direction to enable a cultural shift to the power industry of the Third Industrial Revolution. Demand Integration by 2GRs [will] result in large coordination savings for society as a whole, both in customers' multiyear investments and operation costs.”
Until recently, utilities have concentrated on the development of the resources of the supply side, where modest incremental results can be expected. Breakthrough is about the development of the resources of the demand side in electricity, gas and water.
I interpret the author’s “Utilities must be made financially whole if they are expected to be a means by which energy efficiency is achieved,” as begging to help utilities develop the resources of the demand side to extend their business model of winning rate cases to the regulator. In that regard, Len Gould asked a question whose answer is already available under EWPC: “For some reason item 4) in your article bothers me. Is electricity service so unique that governments must employ only the services of the seller of the product to encourage customers to buy lees [change to less] of that product?”
The answer is in the EWPC article Shrinking the Regulator’s Jobs, whose summary says: “There is a need for a shared vision to restructure the power industry, shrinking regulators jobs to price controls of the remaining transportation electric utilities and letting end-customers make their own investments and purchasing decisions of electricity. The shared vision needs to go to the public opinion so that high level political decisions are enabled to restructure the electricity industry and shrinking regulators jobs.”
In the Third Industrial Revolution, that same answer applies to gas (GWPC) and water (WWPC) market architecture and design paradigms. Three different independent regulated transportation utilities companies and Second Generation Retailers that will be able to increase their federal economies of scale by developing economies of scope in gas and water will be the result, here and below.
Demand today is still an externality to the power system in a wide open market for customers’ investments in energy efficiency (EE) products, among other products available, making EE (integration to system planning, operation and control) a power system disruptive technology in its own right.
As soon as the EWPC EPAct described in the article Leadership Answers What to do First is adopted, R&D on EE and other disruptive technologies will all be pumped with a lot of R&D money. In fact, those are well known technologies also waiting to become power system disruptive technologies all the way to Main Street (as Geoffrey Moore calls it). As the most viewed EnergyBlogs article The Sixth Disruptive Technology (with 1218 hits at the time of this writing) explains, business model innovations developed by 2GRs will tightly integrate the other five technologies. In gas and water, similar disruptive technologies will be available.