Jose Antonio Vanderhorst-Silverio | Jul 21, 2010
Prediction #1: Recognizing the emerging global power industry in the complete context around the Intelligent Utility Inside article Baltimore G&E: AMI Comeback? and that of this EWPC article, the Maryland PSC “No so fast” decision on the BGE proposal is highly likely the 1st domino of the chain reaction that is going to start “knocking over the next” state regulator’s utility case, “which upsets the next one, and so on.”
Prediction #2: Rethinking the old utility compact with an obligation to serve to an emergent compact on the T&D Grid side of the EWPC-AF with an obligation to deliver, the end-to-end “smart grid” will play out as part of the Enterprise side of the EWPC-AF.
Prediction #3:Repositioning the utilities that missed the opportunities to learn the lessons of other industries is bound to be in a restricted T&D Grid space that will sooner or later be "painfully consolidated."
Three Smart Grid Predictions for Initiating the Global Power Industry Transformation
By José Antonio Vanderhorst-Silverio, Ph.D.
Creator of the EWPC-AF
Systemic Consultant: Electricity
First posted in the GMH Blog, on July 21st 2010.
Copyright © 2010 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 firstname.lastname@example.org to contact the author for any kind of engagement.
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Using the synthetic Electricity Without Price Controls Architecture Framework (EWPC-AF) to update the comprehensive white paper written by Jesse Berst, named by the Edison Electric Institute as The First Push: How a utility positions itself for success as smart technologies transform markets means seeing what domino falls first enables to make the predictions to respond in a more generalized way Phil Carson’s questions posed under his very insightful and attractive Intelligent Utility Inside article Baltimore G&E: AMI Comeback?The specific questions are: “Anyone care to predict how the Aug. 5 hearing and subsequent decision will go? And why?:
Selecting the following from the EWPC-AF article should suffice:
The EWPC-AF is a two tiered architecture that greatly simplifies regulations. The first level is an intermediate architecture aimed for an energy policy act, which separates the whole emergent complex system into two less complex systems. Those systems are highly cohesive with lightly coupled interfaces among them:
1) A primary regulated power (integrated transmission and distribution) transportation service system (RPTSS) compact with a responsibility to transport electricity of commercial quality (EoCQ) of a given area; and
2) A complementary open market business system (OMBS) on the value chain generation, retail, pro-sumer (consumer that may produce).
To organize his whitepaper, Jesse writes that utilities “… strategic adjustment includes three Rs: recognizing the size and scope of the transformation, rethinking the organization’s role to determine the best opportunities in the new era, and repositioning the organization to optimize for the new role (or roles).” This article also follows the three Rs organization, which are in synchronicity with the underlying assumptions on my comment Let's Initiate the SG Transformation While T&D Jobs Comeback.
The underlying assumption “the whole power industry that is emergingsatisfies the first R, as this is not doubt a global transformation. To lead into such a transformation, Jesse describes a “chain reaction that occurs when the first domino topples, knocking over the next one, which upsets the next one, and so on”. My first prediction is that the Maryland PSC “No so fast” decision on the BGE proposal is highly likely the 1st domino of the chain reaction that is going to start “knocking over the next” state regulator’s utility case, “which upsets the next one, and so on. ”However, if BGE is not the 1st domino, the conditions described in this whole context are sufficient to enable the 1stdomino in another state jurisdiction in the world interested to take the leadership of the global transformation of the power industry.
About the second R, rethinking, the utilities missed completely the underlying assumption that “As existing regulations were designed for a homogeneous population, governments all over the place need to enact regulations for a heterogeneous population striking a better balance between markets and regulation.” Jesse writes that “Utility executives must rethink things while remaining bound by the fundamental contracts of electric power. Unlike Apple or Google, utilities have an obligation to serve, to maintain exceptional reliability, and to keep their systems secure in an era of increasing cyber-terrorism.”
Since the EWPC-AF emerged (see above “transportation service system (RPTSS) compact with a responsibility to transport electricity of commercial quality (EoCQ) of a given area”), that the fundamental contract with the obligation to serve is not longer needed. Rethinking the transportation (delivery) issue, the EWPC-AF uses the architecting imperative of ultraquality (“to maintain exceptional reliability, and to keep their systems secure in an era of increasing cyber-terrorism”) to design the T&D Grid compact with the emergent obligation to deliver.
The architecting flaw in the simplistic Open Transmission Access was introduced in the 1992 Energy Policy Act because of a misunderstanding of the non-trivial nature of the power industry. That flaw is the culprit that somehow blocked until now the necessary rethinking based on an incomplete market structure with an obligation to serve.
I disagree with Jesse that “It may be too early to predict exactly how the end-to-end smart grid will play out.” My second prediction is that it is going to play as described by the EWPC-AF. He gives the example of Wal*Mar end-to-end system that operates near real time. It is evident to everyone that Wal*Mart does not control the delivery infrastructure. However, the smart grid, which I call as the smart grid that is being pushed, hangs on the obsolete responsibility to serve to try to keep control of a larger and more complex than necessary end-to-end system using interoperability architecture.
In addition, the regulated smart grid that is being pushed violates the insight (taken from Jesse’s whitepaper) that “When industries transform… companies can ‘have any part of the market they choose, but not everything. If they fail to choose, and try to hold on to it all, they will lose the best parts.’” That is the real source of customer backlash.
As designed for the EWPC-AF, instead of a regulated homogeneous Smart Grid, a fully competitive heterogeneous Smart Enterprise (the OMBS) side emerged. While the smart grid process on the competitive Enterprise side is already ongoing for companies with high tech marketing advantage, most utilities are just unprepared to participate.
Finally, on the third R, repositioning, the underlying assumption is that “…regulations for upgrades to the T&D system that does not target the population might still be done with the old regulations.”Jesse writes that "Only rarely are they mistakes of execution. In most cases, their execution was fine, but they were executing the wrong strategy." The wrong strategy is the result a poor job on the first and second Rs, recognizing and rethinking. For lack of where else to be positioned, my third prediction is that the T&D Grid utilities space, using Jesse’s example about the railroads, will be "painfully consolidated." The fate of the railroads has come to the T&D utilities.
For the above reasons, all stakeholders of the power industry should disagree with the Edison Electric Institute conclusion that “The good news is that electric power utilities still have time to recognize, rethink, and reposition themselves for the changes ahead. And they have the opportunity to minimize their mistakes by learning from the lessons of previous infrastructure transformations.”