domingo, febrero 08, 2009

To Dr. Chu: Align Stimulus to Clean Energy Reform

A system architect should lead a high leverage clean energy reform transformation of the power industry for DOE to distribute as soon as possible the funds of the stimulus package. Dr. Steven Chu will be able to use the state’ financial delivery mechanisms with highest leverage with this advice for each state that is able to open competition at the federal market by introducing the EWPC paradigm.

To Dr. Chu: Align Stimulus to Clean Energy Reform

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

First posted in the GMH Blog, on January 26th, 2009.

Copyright © 2009 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 to contact the author for any kind of engagement.

The Department of Energy (DOE) will have a very large stimulus package that Dr. Steven Chu wants to distribute as soon as possible. One part of that stimulus should go to the smart grid. But the smart grid is something confusing and inefective under the status quo of the investor owned utilities (IOUs) paradigm. DOE is in the best position to pay for a well defined smart grid [1], as described in this advice.

Clean energy reform is certainly needed, as this is the right moment to start to end the vicious pervasiveness of fossil fuels with a lot of cash at hand [2, 3]. In this article Dr. Chu will find the bests clues he needs to pay for the smart grid. Now we know that IOUs know that they themselves are the enemy [4]. So what remains is convincing states governments to once and for all have their regulators let go the obsolete price control business model [5]. That can be done by using wisely the stimulus package one state government at a time.

It is well known that the IOUs paradigm has a strong inertia against energy efficiency [6]. Its strong magnetic attraction perverse incentive cannot be sufficiently mitigated with artificial decoupling of profits and sales [7]. Something else is needed to apply an urgent policy, like the 80-20 challenge that Peter Senge suggested [8]. Describing that challenge, Senge wrote “Though the details of these goals differ, their central message is the same: To stabilize CO2, in the atmosphere at levels that minimize the threat of catastrophic consequences will require a 60 to 80 percent reduction in emissions within the next two decades!”

What is needed to meet the 80-20 challenge is a paradigm shift to a new center of magnetic attraction with a very large inertia, where natural decoupling of profits and sales exists. That is the survival mechanism of competing retailers to get sales from customers that add value to them. The new paradigm replaces the magnetic attraction of the obsolete business model of having IOUs win cases to the regulator with the new source of attraction of competitive business models to be developed by Second Generation Retailers (2GRs) [9], aiming to the development of federal business model innovations.

The new paradigm is the electricity without price control (EWPC) market architecture and design, where the emergent power industry is separated into a state regulated transportation market, that takes the center stage, and the wholesale and retail open federal market, where business transactions will develop. The smart grid transportation (transmission and distribution) only utility (SGToU) [10] is the key development that interfaces with 2GRs’ Enterprise Solutions [11].

The open markets (i.e., week ahead) should regularly close during the parallel operations planning process and the firm commitments of supply and demand to produce a set of time (i.e., hourly), and space, reference spot prices schedules for a reliable electricity commodity. After the regular market closes, the SGToU takes control of the whole power system that goes beyond the power meter. During real time operation a balancing markets results for supply and demand deviations from the firm commitments. The balancing market results in the payment of economic transaction in the wholesale market for generators and 2GRs that deviate from their committed schedules to those that respond to said deviations.

If the stimulus package is to have enough effectiveness this is the time to have the states governments that want to receive funds to make commitments to shift from price control regulation to prudential regulations to open their retail markets to federal competition, by adopting the EWPC paradigm. Dr. Chu has an opportunity to use the funds through the states financial delivery mechanism with highest leverage with this advice. The electricity reform effort should be lead by a single system architech available to all state goverments.


[1] Will Anyone Pay for the SmartGrid?

[2] The End of the Vicious Pervasive Fossil Fuels is Near

[3] To Cut Carbon ASAP the IOU Paradigm Must End

[4] Just as Pogo, IOUs Found the Enemy

[5] Will Dr. Chu Turn Around the Power Industry?

[6] Steven Chu: Four Years of Low Hanging Fruits

[7] Forget Decoupling Under Price Controls

[8] Peter Senge et al, The Necessary Revolution: How individuals and organizations are working together to create a sustainable world, Doubleday Press, 2008.

[9] Second Generation Retailers

[10] The Emerging SmartGrid

[11] K2007 Retailers’ Enterprise Solutions

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