martes, noviembre 13, 2012
IMF to encourage professional decisions about electricity
I am trying to get my professional systemic advice to the mission of the International Monetary Fund that is visiting the Dominican Republic through several channels. If you are able to use any channel, in any other country, please make them, the World Bank, and the Inter-American Development Bank, aware of this post as soon as possible and please supply me with evidence you have done so.
That mission will be leaving our country next Friday, November 16, and I hope they will incorporate the following in their statement of the conclusions reached on the country's economy:
1. The excessively prolonged Dominican electricity sector crisis is a systemic crisis.
2. Multilateral financial institutions are important parts of the Dominican electricity system.
3. Multilateral financial institutions will come prepared to participate with other traditional and non-traditional representatives of the system to define the new Dominican electricity sector model.
Looking at the emerging model of the power industry, I have written several articles and posts about the Smart Grid that's being pushed. Now I am adding two words to write about the regulator oriented Smart Grid that's being pushed, which, as a systemic consultant on electricity, I strongly believe is bound to be replaced by the customer oriented Smart Market that's being pulled, under the Value Added Electricity minimalist architecture (formerly EWPC-AF).
The emerging whole system top level of said architecture has one market and one grid subsystems that mutually reinforce each other. Most value creation is to be related to the Smart Market, which is where high systemic leverage network effect increasing returns are available.
The problems that show up in the post Customer oriented electricity are universal, signaling a power system whole that’s trying to emerge to replace the current system. They only showed up earlier in the Dominican Republic, because we have had very bad reliability since 1972. That year was also the year where the guarantee of cheap energy disappeared under the OPEC crisis. In those days we didn’t have the guarantee of cheap information we have nowadays, so very high customers’ transaction costs mutually reinforced themselves with regulator oriented electricity.
As customers’ reliability performance requirements range increases, for example, from an analog to a digital world, at some point regulator oriented electricity under vertical integration was unable to cope. That’s what restructuring and deregulation were supposed to address, but in most jurisdictions it made things a lot worst as some variant of regulator oriented electricity system remained in place, as political decisions overrode systemic professional decisions.
From there on, whether it can be identified or not, a systemic crisis starts if political decisions keep overriding professional decisions. Until systemic professional decision makers are allowed to address the non trivial issues behind the crisis, it will go on and on. Sooner or later, I understand that customer oriented electricity will emerge to replace regulator oriented electricity, which reinforces itself with the guarantee of cheap information to enable very low transaction costs.
At that point, after huge value destruction, I strongly believe that regulator oriented Smart Grid that's being pushed will be replaced by customer oriented Smart Market that's being pulled, under the Value Added Electricity minimalist architecture.