miércoles, febrero 24, 2016

Breakthough

EWPC is a breakthrough that is poised to transform the electricity industry. As the state of Ohio is in the process to re-regulate the industry, they should make the transition to the EWPC market architecture and design, instead of a costly retrocession to vertically integrated utilities.

Thank you once again Don,

Edison "invented" the vertical integration electric monopoly; Insull added the “invention” of regulation to get political insulation from the Sherman Act. Hence, you too can be absolutely sure that Insull was the mastermind that “invented” the scams. In the process, he completed the non-trivial vertically integrated utilities (VIUs) paradigm, which regulators have never learned. The results: scams then, scams now.

IOUs “… continued transfixed by the lore of…” VIUs “… that have served the country so well - until the world changed.” Many of the essential assumptions of the VIUs industry are fictitious and no longer hold. Long run generation contracts bets, Inactive demand, average rates, yearly demand charge, supply orientation, lack of competition, demand can be forecasted, planning under certainty, incremental rate cases to incorporate “innovations,” perverse incentives, many customers (most of the best) have alternatives to avoid the system, etc, etc,

While not a VIU, the industry is already in the process of being torn apart, as you can see from the case of the state of Ohio. As there is only one stable end-state (EWPC) for the future, if the state of Ohio goes back to VIUs, it will have lost the best opportunity to get a competitive power sector.

Going from the old paradigm to the new paradigm cannot be done incrementally, as it brings a lot of waste, by paying rates (the higher the rates, the better the scam) for each incremental feature (demand response, energy efficiency decoupling, NERC standards, etc., and getting many costly unneeded things in the process. There is a need for a breakthrough process, and the knowledge to get there is already available. All tinkering have already been done with deregulation. There is a great difference between tinkering and non-trivial system design, done by professionals.

IOUs should look closely to Detroit. Ma Bell did not bring cell phones. IBM lost to MS. The financial industry is already transformed.

While EWPC is a true paradigm, deregulation is a false one. As simple as that.

Reference and context: An Analysis of the Carbon Emissions Impact of the Senate Energy Bill, by Chris Neil, Energy Economist.