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
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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.