EWPC as a Timely Basic Innovation
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
First posted in the GMH Blog, on February 22nd, 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 email@example.com to contact the author for any kind of engagement.
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Up to know, I have been writing about electricity without price control (EWPC) market architecture and design as a paradigm. It is a new paradigm for the power industry that has a very different center of attraction than that of the investor owned utilities (IOUs) paradigm, that served us so well in the Industrial Age, but that for all practical purposes its pervasive influence needs to end. From now on, I suggest that the EWPC creation will be recognized also as a basic innovation by an increasing number of people.
In chapter 5, “Never Doubt What One Person and a Small Group of Co-Conspirators Can Do,” of its book “The Necessary Revolution,” Peter Senge recalls:
… a timeless story of what historians call ‘basic innovations,’ fundamentals changes in technology and organization that create new industries, transform existing ones, and, over time reshape societies. Basic innovations – such as the emergence of electrification, the automobile, commercial air travel, digital computing, and most recently the Internet – involve not just a single new technology but a collection of new inventions, practices, distribution networks, businesses and business models, and shifts in personal and organizational thinking.
By reading closely to what Senge recalls as basic innovations, I recognized that EWPC is one of them. As any insight, which is the result of lateral thinking, the idea of EWPC as a basic innovation is now very easily explained. By becoming a systemic consultant, I have been emulating Senge´s suggestion of the Leader’s New Work [see chapter 15 of the revised edition of The Fifth Discipline] while EWPC emerged.
Quoting the first edition of The Fifth Discipline, the case of commercial air travel was mentioned in my 2005 rebuttal article An Alternative Business Case for Demand Response, where I wrote that:
The DC-10 [it was actually the DC-3] initiated commercial air travel at the time of the Great Depression, it happened when all required technologies became available, and were tightly integrated…. In that same sense, electric power systems will also “fly” reliably (a very low frequency and duration of crashes) and experience commercial quality electricity under complete deregulation [that later emerged as the EWPC reregulation], when Demand Response gets tightly integrated with AMI and other existing technologies under a proper market design. DR will enable the system to operate within the Normal Operating State, returning back as soon as possible from the Alert and Emergency States with Demand Response actions. This is poised to be the End-State of the electricity industry for the long run [I replaced ‘the long run’ later on to ‘quite some time.’]
As can be inferred from that rebuttal article, EWPC is an extension of the seminal work of the late M.I.T. professor Fred Charles Schweppe and his colleagues, which was recently recognized, once again, in the EWPC article I will Tell You Who is Going to Get the Power, from which the following August 2005 quote is taken:
Contrary to the belief that IEEE Spectrum was wrong, Professor Fred C. Schweppe, of MIT, brilliantly predicted a mayor tech breakthrough in electric power, when he said [in 1978] that “There is a good chance that by the year 2000 the term blackout (societal definition) will be considered to be a term out of the Dark Ages." The chance has been there all along, except that a powerful lobby has prevented it, by keeping the natural monopoly of distribution related or integrated with non monopoly retail marketing.
Going over the collection of more than 140 EWPC articles, that I claim each is a “holographic image from a different perspective of the whole EWPC market architecture and design paradigm shift,” it is easy to convince readers that EWPC has all the characteristics of a basic innovation. Most of those characteristics are specified in the single EWPC article The Sixth Disruptive Technology, whose summary states:
A set of 6 disruptive technologies can be identified “To do a better job of managing our dwindling energy resources…” AMI and the Smart Grid are the fourth and fifth disruptive technologies to allow a breakthrough paradigm of the power industry for the 21st Century, as the required technologies become available, and will be tightly integrated by business model innovations - the sixth disruptive technology - developed by 2GRs into a systemic superior solution. The first three disruptive technologies are demand response, distributed generation and storage, and energy efficiency.
The characteristics of “shifts in personal and organizational thinking,” mentioned above, are summarized by EWPC being a paradigm shift to transform the power industry away from the IOUs paradigm. An explanation of the paradigm shift can be found in the recent EWPC article To Dr. Chu: Align Stimulus to Clean Energy Reform, from which I quote:
It is well known that the IOUs paradigm has a strong inertia against energy efficiency… Its strong magnetic attraction perverse incentive cannot be sufficiently mitigated with artificial decoupling of profits and sales … Something else is needed to apply an urgent policy …
What is needed … 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) … aiming to the development of federal business model innovations.
One of the most important discoveries of EWPC is the need for applying the system architecture ultraquality imperative heuristic to the power system, leading to the policy of Reliability First, Economy Second (R1E2). The key deregulation flaw was in fact the destruction of the system by not recognizing the high importance of preserving a key element of the institutional memory of the IOUs paradigm, by shifting to an unstable E1R2 policy. As a representative to the policy is the EWPC article Free Market and Central Planning, Under R1E2, which is summarized as [I know it is not very humble, but that is how it emerged]:
This is my synthesis of the EWPC paradigm shift that maximizes social welfare. Although it is a non-trivial subject, it seems that many intelligent and important readers of earlier posts may just understand it. Maybe, I could get a prize for it, as it goes against the politically correct and the popular consensus of our time.
All along, I have spent a lot of patient time to try to develop EWPC first, and foremost, in my country, the Dominican Republic, which has a definite advantage to recoup very large coordination savings which are the result of an uncoordinated and vibrant Everyone for Himself (EFH) wide open market. That EFH market, as large as one half of the formal market, is also available in the U.S., as described in EWPC article Handling Smart Grid & Intelligent Utility High Complexity.
For that, and many other reasons, I have shown that DOE and non risk averse IOUs have all the justification they need to get involved in the development of EWPC. In fact, EWPC will be much less expensive that business as usual, as explained in the EWPC article How to Increase the Leverage of Stimulus Bill to Global Green Energy.
Recently, I was invited the Caribbean Regional Negotiating Machinery (CRNM) to participate in an Energy Services Consultation, where I proposed an offensive trade and investment service strategy, which is intended to capitalize the mentioned advantages of the Dominican Republic. Later on, I stressed the proposal by sending a message that included as an example the EWPC article Propelling the Power Industry to a Superior Solution Path. I promised then to try to develop the strategy by forming a virtuous team of Caribbean nationals.
I strongly and humbly believe that EWPC is in fact a fundamental organizational innovation to restructure the global power industry to help enable a sustainable world. Explaining the case of the U.S. Green Building Council (USGBC), in The Necessary Revolution, Senge quotes Jim Hartzfeld of Interface, who became its president saying “In retrospect, it’s crazy to think that a small group of people could think about transforming a whole industry that represents 8 percent of the U.S. GDP, but that’s exactly what we had in mind.” Similar to case of the USGBC which mutually reinforces EWPC, with all due respect, that’s exactly what I have had in mind all along.
In any case, as the EWPC system architect, I like to be able to interview, select, and work together in partnership, with a small group of global co-conspirators consultants’ insiders, that represent the larger whole system to form a virtuous EWPC team, to get sufficient resources for the start up phase, and to develop the needed theory and practice of profound knowledge. If you think you are such a remarkable consultant, and want to “cross the threshold,” as Joseph Jaworski defines it in his book Synchronicity, to the EWPC paradigm, please write to me at firstname.lastname@example.org, by sending a brief statement of what you are able to do to help complete the documentation to transform the power industry.