miércoles, marzo 23, 2016

David and Goliath

Jose Antonio Vanderhorst-Silverio | Dec 31, 1969

David is EWPC re-regulation and Goliath is the Vertically Integrated Utilities. Both markets architectures and designs are non-trivial paradigms of the power industry. It is argued, that the paradigm shift to EWPC is waiting to happen as engineers take back its control on the controlled market, while the complementary open market is developed to integrate demand into the power system. It is just a matter of David beeting Goliath once again.

To all writers and readers
Dear Mr. Giegler,
Thank you very much for a decent comment at your stature and for reading with interest something I wrote.
While I have not read about Nassim Nicholas Taleb's books, I have read about Samuel Insull, Edison’s Secretary, which you quote on many earlier posts. I suggest you also read Gordon L. Weil’s, “Blackout: How the Electric Industry Exploits America.” Insull's world’s, - the business model of wining rate cases to regulators that do not understand the non-trivial vertical integration - is not today's world, when the information technology revolution is claiming the transformation of most industries, market architecture and design.
My strong opinion is that vertically integrated utilities are just plainly obsolete and abusive. EWPC is emerging to allow the introduction of competition in the open market value chain - generation, retail, customer-, under prudential regulations. System engineering and ultraquality transportation of electricity controlled market do without the need of inefficient NERC mandatory rules, in line with my response to Edward A Read Jr. first question about a (worldwide) single market structure [and rules].
As a reminder, I copy a paragraph of my response to Edward about my opinion: “Although it is highly worthy, my confidence on EWPC doesn’t depend on the carbon tax. It depends on a non-trivial truth about electric power systems, which is a very complex machine whose design and operation is not a subject of debate, but on the work of a systems architect. It also depends on large changes experienced on fuel [costs] and transactions costs. Lowering of transactions costs allows the integration of demand to the power system with the development of the resources of the demand side, which leads to the development of robust, complete and fully functional retail and wholesale markets.” Forget Sam Insull, his scams are not longer needed!
The whole debate with deregulation was designed to be easily won by incumbents that don't want to compete. Thanks to the non-trivial EWPC such a debate can now be shown to be a hell of a great waste of time and resources for the whole world, and incumbents which don’t deserve the helm of IOUs, for lack of leadership. Engineers need to take back the leadership of the industry, by claiming the controlled (not the open) market of EWPC. The IEEE would do its job by recognizing the challenge.
I believe there were intelligent people in the US, Japan and Europe, working for the utilities that could have developed EWPC much earlier, but maybe there were not.
Maybe not; because there was not anyone left that really understood the non-trivial vertically integrated utilities as a whole with the system’s architecting background. Defending the vertically integrated utilities paradigm, Jack Casazza has written at length of the loss of institutional memory in the power industry. Professor Fred C. Schweppe, a system control genius at MIT, understood the great complexity of the non-trivial vertical integration paradigm, and led the development of Spot Pricing of Electricity, but died in 1988 when he was most needed. Besides Casazza and Schweppe, how many people do you know that truly understood or understand the non-trivial vertically integrated utilities paradigm?
The origin of EWPC is 1996, when I was retained to "solve" the electricity problem in the Dominican Republic. I am glad that my clear 1996 vision, based on Schweppe´s and Casazza’s work is becoming a reality, as my intuitive understanding can now be ascertain as another true and non-trivial paradigm (EWPC). It seems that unintentionally and subconsciously, I was working hard until 2003, to prove that my vision is needed. Since then, I became aware of my capacity to fight Goliath. While, I am not my opinion, let's just leave it to the test of time whether David will win once again.
Best regards,
José Antonio Vanderhorst Silverio, Ph.D.


Electric power industry financing

Jose Antonio Vanderhorst-Silverio | Jul 30, 2013

The Spanish electricity crisis is an outstanding example of the failure of the state institution to provide the necessary incentives for electric power industry financing. As can be seen in the post Great electricity service, industry restructuring in the United States and elsewhere has led to a “Doom Cycle,” which is, for example, the result of an unfair short term capital financing of central generation. The state institution privatizes central generation benefits while socializing the risks of the customers.
The source of the Spanish “rates deficit” is exactly the privatization of the benefit to central generators. That crisis gets now worldwide visibility by the state having extended short term financial capital also to distributed generation. Now El País editorial Promoting renewable energy is trying to feed into the “Doom Loop” by saying to the state institution that they “… must revise proposed legislation that discourages home solar power.”
To get out of the “Doom Cycle,” governments must restructure away commercial activities from the state institution into the market institution. They can do it by changing the electricity law to enable long term production capital financing, by opening the retail market to business model innovations, for example, on the internet infrastructure, as described in the mentioned post. The incentives will come from fair central and distributed generation competition with equal risks and benefits.


Great electric service

Jose Antonio Vanderhorst-Silverio | Jul 22, 2013

Great electric service will be the result of the development of business model innovations in the retail market, for example, on the internet infrastructure. This blog post repeats a comment posted under the article Energy: The smart-grid solution, by Massoud Amin, published online in Nature on 10 July 2013, in which Dr. Amin “…outlines how the United States should make its electricity infrastructure self-healing to avoid massive power failures.”
In the well-researched book “Good to Great: why some companies make the leap… and others don’t” by Jim Collins, HarperCollins 2001, there are three overlapping circles whose intersection defined as the Hedgehog Concept result the required simplicity that guarantees sustainability. Similar work like “Change by design: how design thinking transforms organizations and inspires innovation,” HarperCollins 2009, by Tim Brown leads to the same result with different wording: overlapping innovation criteria is at the intersection of 1) (technological) feasibility, 2) (economic) viability, and 3) (social) desirability. The smart-grid solution meets the first and second criterions but not the third as a result of two scoping flaws in its underlying architecting act done in 2002 and 2003. The flaws are in industry organizational change scope and in the customer scope.
It is the lack of the social “what you are deeply passionate about” on the Hedgehog Concept that makes the smart-grid industry organizational scope unsustainable, making a non-positive sum game that goes into a start-stop changes in direction mediocre (Good) “Doom Loop”, probably like the one being proposed for making “its electricity infrastructure self-healing to avoid massive power failures.” Examples of changes in direction in the United States of America started with EPAct 92 wholesale markets, open transmission access, the California Crisis, Capacity Markets, NERC mandatory requirements.
Back in 1978, the late MIT professor Fred C. Schweppe, wrote that there was actually not need to avoid massive power failures. He introduced the concept of a societal definition of a blackout to contrast it to the technical definition that is being used in the United States, China and other countries said to be following suit with smart-grid projects. Once that is understood, the public will respond by having supplemental energy sources.
To manage supplemental energy resources, customer scope needs to take into account, for example, the internet infrastructure in the development of electric retail (not wholesale) markets. To develop product and services that people love in that internet infrastructure, after returning to Apple, Steve Jobs said that "You've got to start with the customer experience and work back to the technology, not the other way around." From Jobs standpoint, that smart-grid solution is being been done the other way around.
At present, there are at least two “smart-market and smart-grid” alternatives to the smart-grid solution: the one announced in January 2012 by Germany’s Federal Network Agency Bundesnetzagentur and the unprecedented December 2009 Electricity Without Price Controls Architecture Framework, which defines a minimalist (only two systems-of-systems), top level system architecture that I posted on the EWPC Blog and which meets the three above mentioned criterion, making a positive sum game that goes into Great non-stop “Flywheel Effect” in one direction. To guarantee the positive sum game, a business model (architecture) competition that starts with the customer experience will be set up in the smart-market.


There is an update to this post in http://www.energyblogs.com/ewpc/index.cfm/2013/11/24/Great-electric-service-first-correction
Jose Antonio Vanderhorst-Silverio


Systemic leverage to economies doesn't depend on climate change (has video)

Jose Antonio Vanderhorst-Silverio | Jul 8, 2012

In response to the article Systemic leverage to economies via their electric link, I received a private comment (see below), which I think deserves a public response by itself.

My response to the private comment was: "Thank you very much for the video. It shows the big bet that Europe’s politicians seems to be making. Systemic leverage to economies is valuable on either generation scenario: a lot of gas or a lot of renewable resources."

As a complement, I repeat now the first comment under the post What Would Steve Jobs Do About Energy Innovation? that says:

Under the Technology Review article one person disagreed with my suggestion. To get a better understanding of the approach, next is my response:

Thank you very much for your inquiry. What I am suggesting is that the real cause is bad electricity regulation (the same may apply to gas and water networks) designed to protect the PSQ. Think there are two sequential stages of energy innovation: the first to upgrade the power industry as a whole to the digital revolution and the second to introduce new energy technologies.

Because of the bad electricity regulation enacted in the Energy Policy Act of 1992, the small systemic changes introduced under the name of deregulation produced huge value destruction, instead of the equally huge value creation that was expected, based on MIT's great research led by the giant late professor Fred C. Schweppe, as described in the book Spot Pricing of Electricity. Schweppe's warnings about the deregulation in the making were not considered because of the PSQ.

An example of the value destruction can be found in [the] post that is carried by the tweet:

@YoQPagoTolaLu: FERC's Order 1000 as a Potential Example of Over-Regulated America #EWPC http://bit.ly/GMH055

Similarly, to see an example of value creation look at the post that is carried out by the tweet:

@gmh_upsa: Will Germany be the First Country to Adopt the #EWPC-AF? http://bit.ly/GMH051

The private comment included a 4 minute video and said: "Fast forward to the second half of this - it is very pertinent to the topic (sound on).Idealism can be put ahead of economies by the zealots, but without a sound economy, nothing can succeed, and nations will regress."

." yyy

Why and How the Status Quo Should Respond to Criticism on Current Smart Grid Developments

Jose Antonio Vanderhorst-Silverio | Apr 13, 2012

Catherine Wollard recalls that - Begin quote - California-s private companies have began claiming that HVDC was impractical for the Intertie, and hired a consulting firm to ferret out flaws in the ASEA plan. The showdown came at the Winter General Meeting in New York in early 1963. The consultants read their report, and Lamm spoke in rebuttal, pointing out that the consultant had not even visited existing HVDC installations. She again adds “’to what is common practice in meetings like this’ Lamm says ‘the authors refuse to stand up to answer the criticism, even when the chairman ask them directly.’ The audience of engineers shifted to Lamm’s position. - End of quote.-  Is there any doubt on whether that audience acted ethically?

To continue reading, please take a look at the article First Draft: Let’s Emulate Uno Lamm’s Accomplishments Through Imagination and Truth