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Which Country Will Take the Leadership of a Global Vision for Advancing Grids for Customers?

Jose Antonio Vanderhorst-Silverio | Sep 19, 2010

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As the US and Europe are overtaken by their complex political processes, it seems that with a high likelihood they stands to lose their parts of the leadership of the global power industry, as they have not taken fully into account the prerequisite techno-economic advances of the industry itself in retail markets. A global vision for advancing grids for customers to reap the increased productivity gains by enacting an energy policy based on the EWPC-AF radical meaning innovation is available to fill the leadership gap. It remains to be seen if, instead of the US and Europe, China, Korea, Japan, the Dominican Republic, or any other country, will be able to take the opportunity to fill said gap.
 
Which Country Will Take the Leadership of a Global Vision for Advancing Grids for Customers?
  
By José Antonio Vanderhorst-Silverio, Ph.D.
Creator of the EWPC-AF
Systemic Consultant: Electricity
 
First posted in the GMH Blog, on September 19th2010.
 
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 tojavs@ieee.org to contact the author for any kind of engagement.
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As will be seen from this article, the emerging strategy is to transform the global electric power industry with the shared vision of Advancing Grids for Customers [1] with vibrant retail and wholesale markets that mutually reinforce each other [2]. To do it, it is first necessary to restructure the industry in accordance with the holistic, minimalist, emerging, radical meaning innovation [3] of the Electricity Without Control Architecture Framework (EWPC-AF) [4].
 
Most readers might be surprised that I have included the Dominican Republic, together with the US, Europe, China, Korea and Japan, as one of the potential candidates to initiate the transformation of the electric power industry. I did that because that transformation is more dependent on a mental model shift about energy policy than a technological one to satisfy customers’ needs and to reduce industry strategic risk.
 
It should be clear that having a power industry in the lowest places of the global market means that the Dominican Republic has one of the greatest potential benefits from a systemic leverage restructuring turn around. The country was one of the first in the world to experience a large and ongoing value migration out of utilities to the demand side, which is an emerging characteristic of all global markets as we have been shifting from the Mass Market to the Systems Revolution.
 
As a result, Dominicans already have huge customers’ investments on the resources of that side, but are completely out of alignment with the energy policy that to makes things much worst, includes inverted rates and require large government subsidies. Those customers’ investments have been available even before the industry was restructured with an organized wholesale market that guarantees full value to generators and large users, but not to distribution companies that remain in a deep no profit zone from which it will be very unlikely to get out by keeping its obsolete business model [5].
 
The World Bank and the Inter American Development Bank continue to expect fixing that business model with better managers in the understanding that the value migration is mainly about electricity theft. Instead, this is a case for EWPC-AF integral restructuring, which is very long delayed, urgent, load, and clear leadership call to open the industry to competitive business model innovations. For all of those reasons, the Dominican Republic is one of the best playgrounds to attract foreign investment with long run production capital in order to initiate the transformation of the global power industry.
 
Three years ago, I predicted that the “US Congress and the European Commission need to digest EWPC very fast. The political distortions in the power industry at the state level in the USA and at the country level in Europe can be strongly mitigated by performing a paradigm shift to EWPC [6].” Half a year later, E.ON ‘became the first major continental power company to propose a break-up of major parts of its network,’ apparently ‘handing a victory to the European Commission in its efforts to break the stranglehold the Continents dominant players have on the market [7].’”
 
I claim that “Such structural separation of utilities is a low leverage intervention that doesn’t level the playing field as it was demonstrated in Spain, where incumbents made a lot of distortions. In addition, in such separation, the business critical issue of customer satisfaction is left unaddressed by first generation retailers. I suggest that the European approach needs to change to empower the customer [7].”
 
The US has its last chance in the foreseeable future to keep the lead of the global power industry. Its last chance will be available at the Lame Duck session announced by Senator Harry Reid [8]. The best policy needs to be one that integrates the most pressing cross-cutting issues [9]. However, current policy, which has been developed on an incremental basis for too long a time, has led to a much larger demand than necessary [10]. For example, DOE is expecting that energy efficiency in the demand side to reduce cost effectively at least 40 percent excess in buildings [11].  What that means is that utilities have over expanded their capacity and that the policy needs to change as soon as possible.
 
As a result, the USA is stuck in a losing strategy of advancing grids for utilities, as it is reflected from an insightful review of the IEEE-USA POSITION STATEMENT: National Energy Policy Recommendations. Adopted by the IEEE-USA Board of Directors on 12 February 2010, the strategic goals are:
 
#1. To ensure that we can reliably meet energy needs, we must upgrade our electrical generation and delivery systems.
 
#2. We must break our dependence on oil, which threatens the U.S. economy, national security and environmental health.
 
#3. We must mitigate the adverse effects of climate change by transforming our energy systems and our economy to one that is carbon free, carbon neutral or which successfully captures and stores carbon emissions. This will require a cultural shift in the way we use energy, a modernizing and strengthening of the electrical infrastructure and changes in the way costs are recovered.
 
#4. Finally, we must ensure that the cost of energy does not diminish our economy or impede its development. 
 
An insightful analysis of those strategic goals reveals that: Goal #1 is a mostly technical policy that aims to protects the utilities status quo of vertical integration and organized wholesale market; Goal #2 is a mostly political US policy about its oil addiction; Goal #3 mixes a mostly global warming political policy with the prerequisite seeds of the mostly economic creative destruction of the electric power industry [12]; and Goal #4 is a mostly economic policy that also aims to protect the status quo.
 
A synthesis of the reviewed strategic goals reveals that: by separating from Goal #3 the seeds of the creative destruction and integrating with Goal #1, the result is a new Goal #1 mostly techno-economic policy of the creative destruction of the power industry; the new Goal #1 is a prerequisite predetermined element for Goal #2 and for Goal #3; Goal #4 gets dissolved with the high systemic leverage provided by the new Goal #1.
 
As Goal #2 is a US policy and the global Goal #3, as the uncertain replacement of the Kyoto Protocol is delayed at the moment, what remains to be taken at the moment is the global leadership of the industry, which as a prerequisite is needed anyway to place the industry at a higher productivity plateau, resulting from the EWPC-AF radical meaning innovation. The emerging strategy is to transform the global electric power industry with the shared vision of Advancing Grids for Customers with vibrant retail and wholesale markets that mutually reinforce each other.
 
References:
 
[1] A Strong IEEE Coalition Might be Required to Start Transforming the Power Industry Part 1Part 2Part 3Part 4Part 5 and Part 6.
 
 
[3] Design-Driven Innovation: Changing the Rules of Competition by Radically Innovating What Things Mean, by Roberto Verganti, 2009.
 
 
[5] Value Migration: How to Think Several Moves Ahead of the Competition, by Adrian J. Slywotzki, Harvard Business School Press, 1996.
 
 
 
 
 
 
 

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