Fred C. Schweppe said that “The demand forecast is always wrong!” To mitigate forecasts errors and introduce stability in the power industry, EWPC integrates demand to power system planning. To integrate demand, each 2GR will concentrate their effort to develop a business model innovation, which is the Sixth Disruptive Technology of EWPC, to offer customers through the retail market a competitive portfolio of service plans, from which they can choose the one that best fits their needs for low costs, added value, or both. Each service plan integrates a mix of applications from several disruptive technologies services, such as, demand response, distributed generation & storage, AMI, energy efficiency, and the smart grid.
Demand Integration Under EWPC
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 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. Please write to javs@ieee.org to contact the author for any kind of engagement.
The first and fourth FACTS of Mr. Blalock seem undeniable. The second and third should be the result of a paradigm shift away from the obsolete vertically integrated utilities (VIUs) paradigm, to the EWPC paradigm which increases the capacity factor of generation and transportation facilities, as well as the integration of the resources of the demand side as explained below. The fourth will give the opportunity to develop the corresponding smart grid.
I have seen many forecasts, like those, from prestigious official sources with enormous and unsustainable increases in demand for the long run. To satisfy such increases in demand, the same, other sources, or both project large increases in generation and transmission capacity. Still other are puzzled that quality of life conditions are for the worst, as they see no possibility to develop all those facilities under present and future perceived circumstances. All of this says is that intelligent and important people have theories in use, or mental models, which are based on assumptions that no longer hold and need to be questioned.
In reality, high electricity prices are already being curved by customers when a good proposition is given to them to reduce demand, such as energy efficiency investments supported by other governmental institutions. A view of the whole is in order, as an introductory application of the disciplines of system thinking and mental models.
In the long run, key electric power systems variables follow a systemic reinforcing circle, which closes a feedback loop. The loop is closed by integrating demand to long run power system planning. Before the OPEC embargo, the circle was virtuous, but after the embargo it became only virtuous at times.
The SAME simple causal loop model travels price, demand, generation capacity, sequentially, as follows, first for the virtuous, and then for the vicious circle. With other things being equal: 1) as price decreases, demand increases, generation increases, price decreases … resulting in a virtuous circle; and 2) as price increases, demand decreases, generation decreases, price increases … resulting in a vicious circle.
Under the virtuous circle before OPEC, as price was always decreasing in a stable environment, there was not a need to consider integrating demand at all. However, as an uncertain environment kicks in, where prices are sometimes decreasing, other times increasing, the need to learn how demand is behaving is crucial, especially because of the systemic time delays involved, i.e. to avoid costly boom-bust behavior, in building generating capacity.
Adding to complexity, demand growth has two main sources not necessarily correlated: one external, from economic forces, and the internal mentioned above, as a response to power price signals. Hence, power system planning needs to integrate demand in its decision making process as soon as possible, to help generators, transporters and customers invest under a more stable environment.
This means that business as usual open loop demand forecasts mental models, that project large increases in demand, like the author mentions, are no longer reliable and must be watched carefully. MIT professor and lead author of the book “Spot Pricing of Electricity,” is quoted in the dedication as “Shortly before completion of this book Fred C. Schweppe, our friend, colleague, and senior author died suddenly. Fred created spot pricing and proved, again, that “The forecast is always wrong!”
In order to extend Spot Pricing of Electricity and to mitigate the demand forecast problem, I have discovered the need to integrate demand into power system planning. That approach is the key mission of Second Generation Retailer - 2GR (please hit red link here and below) – an institution - under the EWPC paradigm, which will help increase total social welfare. 2GRs have evolved from my finding about two years ago of The Birth of the Global Electric Retailer, as the utilities enterprise solutions were bound to be replaced by competitive enterprise retailers solutions, as it will now happen with the paradigm shift to EWPC.
To increase social welfare, each 2GR will compete successfully by developing a business model innovation for a market segment, which is The Sixth Disruptive Technology of the industry. As a result, 2GRs will be in the retail market to offer customers a competitive portfolio of service plans, from which they can choose the one that best fits their needs for low costs, added value, or both. 2GRs service plans will integrate several disruptive technologies services, such as, demand response, distributed generation & storage, AMI, energy efficiency, and the smart grid. Many applications will result from the implementation of the business models. The investments commitments to be made by customers are not necessarily part of the service plans of 2GRs.
The obsolete utilities business model is unable to offer such complex integration, which should be offered directly to customers under competition and not a by incremental investments bets of regulators under a monopoly compact with utilities. As a result, customers will be able to choose, when they want, both the 2GR and the integrated service plans available in the market, instead of being imposed through several costly incremental propositions, which extend the VIUs paradigm far away from its possibilities, and that are decided when the utility wins a case to the regulator and not when the customer needs it.
Generators and Second Generator Retailers interchange with the System Engineer their proposed investments and other key information to allow the System Engineer develop the transportation utility expansion plans for the long run, in order to optimize the future grid by minimizing total system costs (not just the transportation costs) in order for 2GRs to enable a potential maximum social welfare in the national economic context, and not just the financial viewpoint of the utility as the VIUs paradigm calls for.
In sum, while generators and the transportation utility must always be prepared to design, operate and maintain their facilities, there is not conclusive evidence that a building boom in generation should be expected from the first FACT and the above analysis. However, even though transportation facilities will be operated less congested with EWPC, from the fourth FACT a most likely building boom may happened for the smart grid implementation and the replacement of old transportation structures.
I would appreciate the author's considerations and those of other readers to this rebuttal-article post.
Reference: Coming Building Boom Means Utilities Must Prepare to Design, Operate, Maintain, by Michael Blalock , Director of Business Development, Utilities, IFS North America
domingo, septiembre 30, 2007
The Sixth Disruptive Technology
A set of 6 disruptive technologies can be identified “To do a better job of managing our dwindling energy resources…” AMI and the Smart Grid are the fourth and fifth disruptive technologies to allow a breakthrough paradigm of the power industry for the 21st Century, as the required technologies become available, and will be tightly integrated by business model innovations - the sixth disruptive technology - developed by 2GRs into a systemic superior solution. The first three disruptive technologies are demand response, distributed generation and storage, and energy efficiency.
The Sixth Disruptive Technology
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
The Sixth Disruptive Technology
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 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. Please write to javs@ieee.org to contact the author for any kind of engagement.
Mr. Miller contribution, on the critical reality of AMI, helps further the case for Electricity Without Price Controls (EWPC), in unsuspected ways, “to do a better job of managing our dwindling energy resources,” as a set of 6 disruptive technologies emerge. AMI and the Smart Grid are the fourth and fifth disruptive technologies to allow a breakthrough paradigm of the power industry for the 21st Century, as the required technologies become available, and are tightly integrated into a systemic superior solution in the coming years.
The first three disruptive technologies are demand response, distributed generation and storage, and energy efficiency. Just like System Thinking in the Fifth Discipline contemplates the whole, the Sixth Disruptive Technology to be developed under competition by a new institution, the true competitive retailers, which I call Second Generation Retailer - 2GR (hit link here and further down to get more details) will contemplate the whole relationship with customers, by tightly integrating the other five disruptive technologies with their business model innovations. As Albert Einstein said: "Technological progress is like an axe in the hands of a pathological criminal."
My hero, the Swedish Uno Lamm and the father of HVDC, who won the Pacific Intertie Project for ASEA after facing a strong opposition by [the same] California IOUs [referred below], and later estimated to save customers more than a billion dollars a day, after negotiating a license agreement with General Electric is quoted saying something like this in an interview in 1988: “among Americans, when the heat of the combat ends and a decision has been arrived at, all the trouble disappears and the people work hard to implement the decision in the best way.” I strongly hope this will be the case of EWPC.
Mr. Len Gould has insisted against the idea of competitive retailers, ever since the beginning of downloads, debates, reflexive dialogues, and generative dialogues, that have occurred in the Energy Central Network environment. I am glad to submit to the general audience that the business model innovations that 2GR competitors should develop will be the sixth, and most important, disruptive technologies to integrate demand in power system planning, operation and control. Thanks to Mr. Gould once again for being such a great sounding board. I hope that all the trouble should disappear as the paradigm shift to EWPC gets underway.
I agree with just one exception the assessment Mr. Miller makes that reads “. . . the magnitude of the problem and the opportunity in addressing energy management requires a more expansive and advanced definition of AMI as the use of smart meters, with advanced two-way communication technologies, that enables utilities to:
0 Meet their business & operational needs for meter data collection
0 Empower all their customers to actively and frequently participate in demand response and energy conservation
0 Help move toward a smart grid
The exception is that the utility concept is obsolete. Under EWPC the commercial role utilities play is replaced 2GRs. The utility itself becomes just the wires only integrated transportation (T & D) system, which will have the center stage of the industry (I extended Dr. Richard Tabors, of MIT, idea of a center stage transmission utility). Private utilities will help avoid the inefficiencies of public officials in many jurisdictions.
The industry is poised once again to the competition virus, only this time we will know what we are doing. Instead of deregulating the industry under the principle Economy First, Reliability Second (E1R2), which led to large scams, competition will be introduced by re-regulation, under the principle of Reliability First, Economy Second (R1E2), which is the most economic for society as a whole.
My suggestion is that the open market should be under prudential regulations, with generation and retail becoming worldwide independent activities under WTO discipline, so global merger and acquisition activity won’t undermine a truly competitive industry (this is a good inside from deregulation scams).
The Economy First concept referred to above did not take into account all of the customers costs, but up to the meter, so a perverse incentive of price spikes led to low reliability, as power systems were operated close to capacity frequently. So the Economy First was good for scams. Incremental remedial action with NERC mandatory standards is insufficient and inefficient, as can be seen in NERC Compliance and Power Sector Structure.
The above difficulties are also explained in a different way by Jack A. Casazza, as the scrambled egg, that can’t be unscrambled. That would mean that The BIG California LIE was supposed to get away with a much larger scam than the Enron’s scam, as vested interests extended the obsolete VIUs paradigm well beyond its useful life, by tilting the competitive balance in an equilibria away from the best economic outcome for society. That is what is fueling a backward movement away from real retail liberation in Europe now. It is to the best equilibria that EWPC is concerned. As Einstein said; "We can't solve problems by using the same kind of thinking we used when we created them."
The Reliability First concept of EWPC, which I claimed to have discovered, preserves the aim of the regulatory compact of the VIUs, which is to plan, in this case the integrated transportation system itself, for maximum welfare of the whole. That said, the VIU that has demand as an externality, can be separated in two parts without any loss of generality, in order to improve the efficiency of the power sector as a whole by integrating demand: 1) an electric transportation system that interfaces with 2) the money system operating under an open market, with a value chain generation, retail, and customer.
The above idea, and what is to follow, has emerged, in the discussion with intelligent and important people without which it would have not result as fast and as cheaply, from the 2005 EnergyPulse [seminal] article An Alternative Business Case for Demand Response, where I wrote: “A new value chain is required in the power business for commercial activities, from generators and wholesale brokers, to competitive retailers, to end-users; while transmission and distribution monopolies are forbidden to interfere with those activities, charging a toll for their services. This is an essential element of the market design.”
To dig further into my discoveries (as you will see as leader-designer), in the same article, I also wrote:
Professor [Fred C.] Schweppe [of MIT] "envisioned a world of customer-based electrical generation and storage, "which has been happening in the Dominican Republic, for quite some time, missing only the Demand Response [DR] System and a truly competitive retail deregulation to fulfilled the dream of a country without blackouts. There is an example of the airline industry that will help explain the importance of DR. The DC-10 initiated commercial air travel at the time of the Great Depression, it happened when all required technologies became available, and were tightly integrated.
In that same sense, electric power systems will also “fly” reliably (a very low frequency and duration of crashes) and experience commercial quality electricity under complete deregulation, when Demand Response gets tightly integrated with AMI and other existing technologies under a proper market design. DR will enable the system to operate within the Normal Operating State, returning back as soon as possible from the Alert and Emergency States with Demand Response actions. This is poised to be the End-State of the electricity industry for the long run.
By the way, as I read the analogy of Peter Senge’s Fifth Discipline, once again, I see that I have been following unconsciously the section “Leader as Designer,” which I recommend to potential leaders in relation to what they think their role is, as Senge’s states that “it eclipses them all in importance. Yet, rarely does anyone think of it.” Well, I forgot about it, but kept thinking of it, without being fully aware! As Einstein said: "The secret to creativity is knowing how to hide your sources."
As I envisioned in my article, AMI technology is one of the key technologies to change demand as an externality forever. Demand integration will occur under a different paradigm breakthrough shift. The shift I discovered is retail competition and ultraquality transportation (see Synthesis Proposal Agreement of EWPC), which (I now articulate) should be tightly integrated by 2GRs business model innovations. Albert Einstein said: "Everything should be made as simple as possible, but not simpler" and "Any intelligent fool can make things bigger, more complex, and more violent. It takes a touch of genius -- and a lot of courage -- to move in the opposite direction."
So, a new generation of energy measurements is just one of the technologies to be integrated. The new utility will be a wires only utility in charge of transportation (T& D integrated) at every location under a federal regulatory compact, which by the way solves the federal state jurisdictional problems (see A Warning to the US Congress and the European Commission). The new Energy Policy Act of the US should definitely consider another New Deal restructuring, this time under EWPC. Europeans can do so easier, as their mandate calls for retail liberation to be implemented already.
Four days ago I wrote the article 2nd Disruptive Technology Crossed Chasm, and it should have been recognized energy efficiency as the 3rd Disruptive Technology to Cross the Chasm of Geoffrey Moore’s Technology-Adoption Life Cycle model, by decoupling sales and profits. So, we can certainly recognize from the article that AMI is a the 4th disruptive technology that have crossed the Chasm, as AMI seems to be in the process of leaving the Bowling Alley and entering the Tornado, while energy efficiency is the bowling alley at a few locations, although they are costly incremental shifts away from the VIUs paradigm.
The interface standards mentioned in the article should enable the separation of transportation and retail, which no longer will be regulated with price controls, as retail will be the subject of competition. As firmware downloads may differentiate 2GRs business plans, I am happy to recall the business case of a very low cost worldwide meter that I envisioned in my article a Dominican strategy, which was published in the May-June 2006 issue of the IEEE Power&Energy Magazine, just like they are doing for the US$100.00 laptop computer and the US$40.00 or so cellphone. Such low cost meter could be very promising for power service in the Bottom of the Pyramid.
By the way, it would be nice to know where the Smart Grid is in the Technology-Adoption Life Cycle model. I suspect it is already in the Early Market, and trying to cross the chasm. In the article Solving Smart Grid Cost Recovery are elements to help the smart grid cross it.
To get further details, readers could go the Electricity Without Price Controls Blog of the Energy Central Network, where another 22 articles already support the paradigm shift to EWPC. Even more complete is the Grupo Millennium Hispaniola blog, which already has more than 1,800 entries, and several articles, and presentations, in Spanish and English, most of which are about EWPC. All that information has been posted in the name of the progress of humanity.
To close my comments, I would like to suggest a very important activity. Next Year will be 10 years of the death of Professor Schweppe. I suggest a movement should be organized to go to MIT (readers should write letters to MIT management to make it possible) to give thanks for his great achievements in the name of humanity. As Einstein said: "Peace cannot be kept by force. It can only be achieved by understanding."
In addition, as I claim to have extended Schweppe’s regulated energy marketplace to become a competitive environment, I took the risk to write what seems to be an egotistic Conspiracy Theory Against Mr. X. I can’t deny it is egotistic, however, as those who were supposed to say that EWPC won the first phase of competition, I wrote it as a theory because I think is the fastest way to mitigate the negative influence that politicians have in the power industry. As Einstein said: "Weakness of attitude becomes weakness of character."
To further rationalize my attitude, if I didn’t make the above claim, it may happen that Lao-tzu (quoted from the Fifth Discipline) would be right once again, as “The bad leader is he who the people despise. The good leader is he who people praise. The great leader is he who the people say, “We did it ourselves.” My claim is not based on “either/or thinking.” but on the end of the “tyranny of the OR” and the embracing the “genius of the AND,” as Collins and Porras suggested in 1994. Einstein also said: "Common sense is the collection of prejudices acquired by age eighteen."
If after reading the above, you agree getting EWPC underway bypassing Casazza’s scrambled egg, and agree with the conclusion of suggesting me as a candidate for a Nobel Prize (I am told that only alive persons can be candidates) or agree with both, please by all means do so. The effect of the suggestions will send a strong message to governments across the world and especially to my loved Dominican Republic that has wasted for 11 years the opportunities to have electricity become our most precious country brand. Think of my contributions about EWPC as equations written with the input from other brilliant people, like all the thinkers quoted in my work so far and add the Einstein quote that says: "Equations are more important to me, because politics is for the present, but an equation is something for eternity."
Reference: The Critical Role of Advanced Metering Infrastructure in a World Demanding More Energy , by Eric Miller , Vice President, Itron Software Solutions.
jueves, septiembre 27, 2007
Conspiracy Theory Against Mr. X
A conspiracy theories against Mr. X being a Nobel Prize candidate is written to provide an ordered a framework to understand the chaotic events that happened or will happen in the Energy Central Network.
Conspiracy Theory Against Mx. X
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 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. Please write to javs@ieee.org to contact the author for any kind of engagement.
At the beginning of this month I wrote A Vertical Integration Conspiracy Theory for the US Judiciary, following Eamonn Kelly’s advice that “conspiracy theories can, ironically, provide an ordered framework with which to understand chaotic events.” In what follows the author will use only comments made by the original characters, in order to try to come up with a consistent story that might explain a conspiracy. This is an attempt to place together the pieces of a very complex puzzle and at the same time look at the larger picture.
Writing this under the principle that I am not my opinion, I will develop a hypothetical “Conspiracy Theory Against Mr. X” in an effort to understand the chaotic events that took place and that may continue to take place in EnergyPulse.net and EnergyBlogs.com.
An underlying intention of the conspiracy theory is to send a strong message to investors and Wall Street, that the unstable environment of the industry is about to end, and that financial capital is set to be replaced by production capital, as the industry becomes once again very predictable with the implementation of EWPC.
The characters will be disguised to protect their identities from occasional readers. They are intelligent and important people, which may not understand certain non-trivial constructs.
As the characters that were supposed to confirm that EWPC became the winner of the first phase of competition have become silent, with this conspiracy theory we will be expecting the silence to end and start receiving feedback from the characters themselves. Maybe if the silence continuous, it is just that readers should expect to confirm that the conspiracy took place in reality.
Mr. X is the proponent and creator of the EWPC paradigm, which emerged in the energyPulse.net environment, as it evolved from his earlier 1996 visionary proposal to the Dominican government. He is the enemy of the deregulation and the vertically integrated utilities (VIUs) paradigms.
Mr. M is an old military servant whose reason of being is to be the greatest enemy of deregulation. He is absolutely correct that deregulation is a scam. The scam is produced by operating under the principle economics first, reliability second (E1R2). One of his heroes is Dr. Alfred E. Kahn. It seems he was in favor of the Vertically Integrated paradigm, but recently has kept silent as the EWPC paradigm was emerging. Now that it has emerged it would be nice to learn if he is in favor of the VIUs scams, which led to the BIG California LIE.
Mr. Y is the scientist minded fellow which appointed himself to be an arbiter between EWPC and IMEUC, after Mr. X had shown the Final: IMEUC not a Market Architecture and Design. One of his role model is Einstein.
Mr. G. is the man that never loses. He is a consultant that has been proposing the meter based IMEUC Market, but was never able to characterize it. When confirming the victory of the EWPC paradigm Mr. X wrote: “In response to the suggestion by Mr. Y about simulations, it is shown that there is not a need to look further, as a simulator already exists, and its information’s confirm the EWPC is the winner of the first phase of competition with the VIUs, as IMEUC doesn’t even qualify.”
Still today, Mr. G is denying the process as he seems to be a skeptic. It is important to understand the opinion Mr. Y has of Mr. G, which might explain why he is so stubborn, while being an important and intelligent man:
Mr. Y sets the most important rule of the EnergyPulse media, which is not followed by some characters: “Mr. G., I was hoping this discussion would not degrade to name calling, and resent the following insinuation: ‘I find it very offensive to have fools such as these ...’ Perhaps in your world-view I am a fool, but out here in the real world I decidedly am NOT. I thought this site was intended for exactly what the banners that attracted me to it in the first place say, "Insight, Analysis and Commentary on the Global Power Industry". From various posts and article contributions here, I believed this site was populated by serious professionals endeavoring to do serious work and contribute to real world, workable solutions. If instead it is merely another mental masturbation club by all means let me know so I can reset the bookmark as porn site.
Almost two years ago, Mr. X tried to disclose non-trivial elements of a fix to deregulation, on what later emerged as the EWPC re-regulation paradigm.
Mr. M wrote to Mr. X that Dr. Kahn had said "I am worried about the uniqueness of the electricity markets. I've always been uncertain about eliminating vertical integration. It may be one industry in which it works reasonably well." Today we know that the uniqueness of electricity markets disappears with the reliability first, economy second, R1E2, concept. Electricity markets are no longer unique.
It is important to recall that as Mr. Y had appointed himself as an arbiter, who knew nothing, Mr. X researched who Mr. Y was and found a few intelligence insights. First he found Mr. M opinion of Mr. Y as “That master of misinformation, …will almost certainly be at your throat before this debate is off the airwaves.” That remark made Mr. X proceed very carefully after learning that.
In addition, Mr. Y had said “Well, Einstein is merely the most famous and recent example of a scientist who went against the popular CONSENSUS of the time, Mr. M.”
Identifying the discovery that the EWPC paradigm maximizes social welfare, based on Mr. Y statement, Mr. X wrote “This is my synthesis of the EWPC paradigm shift that maximizes social welfare. Although it is a non-trivial subject, it seems that many intelligent and important readers of earlier posts may just understand it. Maybe, I could get a prize for it, as it goes against the politically correct and the popular consensus of our time.”
Then Mr. G understood Mr. X message to Mr. Y, as being sent to himself, as Mr. Y had abandon him already by keeping silent to this day, and said “And BTW, Mr. X, I haven't heard exactly a chorus (or even any) other than yourself declaring EWPC any sort of rational strategy. From the small fragments of hard information you've so far provided, I conclude it's not either rational OR innovative. Perhaps all the self-promotion is drowning the information?”
Mr. X replied urging Mr. G “I like to read what Mr. M and Mr. Y have to say.” They have not said one word up to this moment. We expect they will come back and say “Mr. X should be awarded a Nobel Prize on the spot,” as Mr. M had written in the opening comment under this article “… Whoever comes up with the optimal solution here deserves to be awarded a Nobel Prize on the spot.”
And lo and behold, Mr. X had certainly come up the optimal solution and many other recent discoveries:
Discovery: The BIG California LIE. The BIG LIE is that retail competition is impossible in electric markets. The implementation of a competitive retail market was the center of the debate in California. Instead of cooperating to implement it, the three big California utilities, that didn't care about the end-custumers, acted very irresponsibly. EWPC is the paradigm shift to show that retail competition is not only possible, but absolutely necessary to turn the electricity industry into a vibrant value added business for all stakeholders.
Discovery: A comparison between the power industry vertical integration and electricity without price controls (EWPC) non-trivial paradigms, will show that EWPC should be adopted in the new US Energy Bill, as part of a new deal, like the one of the 1930s, to get the world power industry in a superior development path.
Discovery: Vertically integrated utilities don't operate as a system because of a monopoly mindset of incumbents’ investor owned utilities and political interference. To operate as a system a paradigm shift to EWPC is required to offer customers competitive services and to neutralize political interference.
Discovery: To solve the Smart Grid cost recovery dilemma requires a restructuring of the electric industry in such a way that the regulator gets the right signals. A shift from The Anti-System Utility to EWPC solves the problem, as cost recovery of AMI technologies are sent to the market with an international standard interface, which will restrict business model innovations by Second Generation Retailer - 2GR.
Discovery: Relative to the VIUs paradigm, EWPC will lead to lower costs, lower profits and lower prices after a reasonable delay. To accomplish that engineers need to take the transportation function that allow the market between supply and demand run efficiently.
Discovery : The uniqueness of electricity markets disappears with the reliability first, economy second, R1E2, concept. A structural change that separates transportation and the (generation, retail, customer) value chain and applying ultraquality transportation planning to produce maximum social welfare, the non-trivial essential elements of vertical integration are preserved in the transportation side. R1E2 is all that is needed to make the open EWPC a market architecture and design no longer unique.
Discovery : Breakthrough… going from VIUs 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.”
Recommendation: 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.
Recommendation: As a result of David killing Goliath, US Congress has the great opportunity to introduce EWPC to the USA. In addition, the state of Ohio has the first opportunity to reap the benefits of retail competition, by developing 2GRs and integrating active demand to power system planning, operation and control. The Dominican Republic has one of the best positions to implement EWPC, but needs to place the Very Short Electricity Law in the waste basket.
Recommendation: A paradigm shift to EWPC is urgently needed to change the status quo and start integrating distributed resources and good ideas into power sectors all over the world.
Recommendation: 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.
Recommendations: The US Congress, the European Commission, the state of Ohio, and the Dominican Republic, are some the most likely candidates to start the paradigm shift to EWPC, ending demand forever as an externality. It has been shown that the days of the obsolete VIUs paradigm are counted. A paradigm shift to EWPC is the next source of business innovations, jobs with a lot of future and increasing exports. Those governments that take the lead, and avoid the risks of market implementation failure by retaining high caliber professional team advice, will reap most of the benefits.
Conclusions and recommendations:
Mr. M had written two years ago: "Electricity deregulation as it has been practiced is an illogical fad. Mr. X is completely correct about the shortcomings of linear economics, but as for finding a new paradigm to get to what he calls "true" (electricity) market deregulation, well..."
By joining the above statement, the one about the Nobel Prize and the assertion that Dr. Alfred Kahn worries about eliminating vertical integration are over, and that a true electricity market re-regulation (no deregulation) with the optimal solution to produce maximum social benefits, can Mr. M and Mr. Y conclude NOW that Mr. X deserves to be awarded a Nobel Prize on the spot?
Conspiracy Theory Against Mx. X
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 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. Please write to javs@ieee.org to contact the author for any kind of engagement.
At the beginning of this month I wrote A Vertical Integration Conspiracy Theory for the US Judiciary, following Eamonn Kelly’s advice that “conspiracy theories can, ironically, provide an ordered framework with which to understand chaotic events.” In what follows the author will use only comments made by the original characters, in order to try to come up with a consistent story that might explain a conspiracy. This is an attempt to place together the pieces of a very complex puzzle and at the same time look at the larger picture.
Writing this under the principle that I am not my opinion, I will develop a hypothetical “Conspiracy Theory Against Mr. X” in an effort to understand the chaotic events that took place and that may continue to take place in EnergyPulse.net and EnergyBlogs.com.
An underlying intention of the conspiracy theory is to send a strong message to investors and Wall Street, that the unstable environment of the industry is about to end, and that financial capital is set to be replaced by production capital, as the industry becomes once again very predictable with the implementation of EWPC.
The characters will be disguised to protect their identities from occasional readers. They are intelligent and important people, which may not understand certain non-trivial constructs.
As the characters that were supposed to confirm that EWPC became the winner of the first phase of competition have become silent, with this conspiracy theory we will be expecting the silence to end and start receiving feedback from the characters themselves. Maybe if the silence continuous, it is just that readers should expect to confirm that the conspiracy took place in reality.
Mr. X is the proponent and creator of the EWPC paradigm, which emerged in the energyPulse.net environment, as it evolved from his earlier 1996 visionary proposal to the Dominican government. He is the enemy of the deregulation and the vertically integrated utilities (VIUs) paradigms.
Mr. M is an old military servant whose reason of being is to be the greatest enemy of deregulation. He is absolutely correct that deregulation is a scam. The scam is produced by operating under the principle economics first, reliability second (E1R2). One of his heroes is Dr. Alfred E. Kahn. It seems he was in favor of the Vertically Integrated paradigm, but recently has kept silent as the EWPC paradigm was emerging. Now that it has emerged it would be nice to learn if he is in favor of the VIUs scams, which led to the BIG California LIE.
Mr. Y is the scientist minded fellow which appointed himself to be an arbiter between EWPC and IMEUC, after Mr. X had shown the Final: IMEUC not a Market Architecture and Design. One of his role model is Einstein.
Mr. G. is the man that never loses. He is a consultant that has been proposing the meter based IMEUC Market, but was never able to characterize it. When confirming the victory of the EWPC paradigm Mr. X wrote: “In response to the suggestion by Mr. Y about simulations, it is shown that there is not a need to look further, as a simulator already exists, and its information’s confirm the EWPC is the winner of the first phase of competition with the VIUs, as IMEUC doesn’t even qualify.”
Still today, Mr. G is denying the process as he seems to be a skeptic. It is important to understand the opinion Mr. Y has of Mr. G, which might explain why he is so stubborn, while being an important and intelligent man:
“It doesn't surprise me AT ALL that you didn't follow the link, you NEVER follow a link, because you are a textbook example of someone suffering from dissociative cognitive dissonance. You won't follow THIS link either, but everyone else will, to be amused along with me at the inside joke. The mark of the mature intellect is to overcome such dissonance with creative willpower. Hence I have NO PROBLEM reading views that conflict with my own, but keep my focus on the issue at hand, and assiduously utilize critical thinking to ensure that I'm not guzzling someone else's Kool Aid.”
Your dissonance filter is set so high, that it is virtually impossible to break through it. However, in a forum like this, others are seeing the real story come through, THEY follow the links, THEY see that 260 feet of NEW ICE formed over the airplanes and THEY have the intelligence to question how something can be shrinking and growing at the same time. THEY are the ones I am talking to, since convincing you of anything that isn't already in your world view is totally impossible.
Mr. Y sets the most important rule of the EnergyPulse media, which is not followed by some characters: “Mr. G., I was hoping this discussion would not degrade to name calling, and resent the following insinuation: ‘I find it very offensive to have fools such as these ...’ Perhaps in your world-view I am a fool, but out here in the real world I decidedly am NOT. I thought this site was intended for exactly what the banners that attracted me to it in the first place say, "Insight, Analysis and Commentary on the Global Power Industry". From various posts and article contributions here, I believed this site was populated by serious professionals endeavoring to do serious work and contribute to real world, workable solutions. If instead it is merely another mental masturbation club by all means let me know so I can reset the bookmark as porn site.
Almost two years ago, Mr. X tried to disclose non-trivial elements of a fix to deregulation, on what later emerged as the EWPC re-regulation paradigm.
Mr. M wrote to Mr. X that Dr. Kahn had said "I am worried about the uniqueness of the electricity markets. I've always been uncertain about eliminating vertical integration. It may be one industry in which it works reasonably well." Today we know that the uniqueness of electricity markets disappears with the reliability first, economy second, R1E2, concept. Electricity markets are no longer unique.
It is important to recall that as Mr. Y had appointed himself as an arbiter, who knew nothing, Mr. X researched who Mr. Y was and found a few intelligence insights. First he found Mr. M opinion of Mr. Y as “That master of misinformation, …will almost certainly be at your throat before this debate is off the airwaves.” That remark made Mr. X proceed very carefully after learning that.
In addition, Mr. Y had said “Well, Einstein is merely the most famous and recent example of a scientist who went against the popular CONSENSUS of the time, Mr. M.”
Identifying the discovery that the EWPC paradigm maximizes social welfare, based on Mr. Y statement, Mr. X wrote “This is my synthesis of the EWPC paradigm shift that maximizes social welfare. Although it is a non-trivial subject, it seems that many intelligent and important readers of earlier posts may just understand it. Maybe, I could get a prize for it, as it goes against the politically correct and the popular consensus of our time.”
Then Mr. G understood Mr. X message to Mr. Y, as being sent to himself, as Mr. Y had abandon him already by keeping silent to this day, and said “And BTW, Mr. X, I haven't heard exactly a chorus (or even any) other than yourself declaring EWPC any sort of rational strategy. From the small fragments of hard information you've so far provided, I conclude it's not either rational OR innovative. Perhaps all the self-promotion is drowning the information?”
Mr. X replied urging Mr. G “I like to read what Mr. M and Mr. Y have to say.” They have not said one word up to this moment. We expect they will come back and say “Mr. X should be awarded a Nobel Prize on the spot,” as Mr. M had written in the opening comment under this article “… Whoever comes up with the optimal solution here deserves to be awarded a Nobel Prize on the spot.”
And lo and behold, Mr. X had certainly come up the optimal solution and many other recent discoveries:
Discovery: The BIG California LIE. The BIG LIE is that retail competition is impossible in electric markets. The implementation of a competitive retail market was the center of the debate in California. Instead of cooperating to implement it, the three big California utilities, that didn't care about the end-custumers, acted very irresponsibly. EWPC is the paradigm shift to show that retail competition is not only possible, but absolutely necessary to turn the electricity industry into a vibrant value added business for all stakeholders.
Discovery: A comparison between the power industry vertical integration and electricity without price controls (EWPC) non-trivial paradigms, will show that EWPC should be adopted in the new US Energy Bill, as part of a new deal, like the one of the 1930s, to get the world power industry in a superior development path.
Discovery: Vertically integrated utilities don't operate as a system because of a monopoly mindset of incumbents’ investor owned utilities and political interference. To operate as a system a paradigm shift to EWPC is required to offer customers competitive services and to neutralize political interference.
Discovery: To solve the Smart Grid cost recovery dilemma requires a restructuring of the electric industry in such a way that the regulator gets the right signals. A shift from The Anti-System Utility to EWPC solves the problem, as cost recovery of AMI technologies are sent to the market with an international standard interface, which will restrict business model innovations by Second Generation Retailer - 2GR.
Discovery: Relative to the VIUs paradigm, EWPC will lead to lower costs, lower profits and lower prices after a reasonable delay. To accomplish that engineers need to take the transportation function that allow the market between supply and demand run efficiently.
Discovery : The uniqueness of electricity markets disappears with the reliability first, economy second, R1E2, concept. A structural change that separates transportation and the (generation, retail, customer) value chain and applying ultraquality transportation planning to produce maximum social welfare, the non-trivial essential elements of vertical integration are preserved in the transportation side. R1E2 is all that is needed to make the open EWPC a market architecture and design no longer unique.
Discovery : Breakthrough… going from VIUs 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.”
Recommendation: 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.
Recommendation: As a result of David killing Goliath, US Congress has the great opportunity to introduce EWPC to the USA. In addition, the state of Ohio has the first opportunity to reap the benefits of retail competition, by developing 2GRs and integrating active demand to power system planning, operation and control. The Dominican Republic has one of the best positions to implement EWPC, but needs to place the Very Short Electricity Law in the waste basket.
Recommendation: A paradigm shift to EWPC is urgently needed to change the status quo and start integrating distributed resources and good ideas into power sectors all over the world.
Recommendation: 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.
Recommendations: The US Congress, the European Commission, the state of Ohio, and the Dominican Republic, are some the most likely candidates to start the paradigm shift to EWPC, ending demand forever as an externality. It has been shown that the days of the obsolete VIUs paradigm are counted. A paradigm shift to EWPC is the next source of business innovations, jobs with a lot of future and increasing exports. Those governments that take the lead, and avoid the risks of market implementation failure by retaining high caliber professional team advice, will reap most of the benefits.
Conclusions and recommendations:
Mr. M had written two years ago: "Electricity deregulation as it has been practiced is an illogical fad. Mr. X is completely correct about the shortcomings of linear economics, but as for finding a new paradigm to get to what he calls "true" (electricity) market deregulation, well..."
By joining the above statement, the one about the Nobel Prize and the assertion that Dr. Alfred Kahn worries about eliminating vertical integration are over, and that a true electricity market re-regulation (no deregulation) with the optimal solution to produce maximum social benefits, can Mr. M and Mr. Y conclude NOW that Mr. X deserves to be awarded a Nobel Prize on the spot?
miércoles, septiembre 26, 2007
2nd Disruptive Technology Crossed Chasm
Distributed generation joins demand response as disruptive technologies keeps penetrating the power industry. It is shown the need to change from an incremental change to a breakthrough pace, and from a VIUs supply orientation to a EWPC customer orientation to integrate active demand into power system planning, operation and control.
2nd Disruptive Technology Crossed Chasm
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 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. Please write to javs@ieee.org to contact the author for any kind of engagement.
Dear Mr. Causey,
Once again, you are welcome!
Your observations are very timely and your positive contributions, as a historian in the middle of the action, will make the train wreck even more visible. They are also, as you will see very good news for industry growth and sustainability.
In the post, Take EWPC Lead & Reap Large Benefits, I wrote that “AMI and demand response are getting out from the Bowling Alley and entering the Tornado of Geoffrey Moore’s Technology-Adoption Life Cycle model. To get to Main Street, however, it will be much easier, cheaper, and faster with a paradigm shift to EWPC. What you report “about integrating distributed generation to the grid,” says that they got out of the Early Market and crossed the Chasm to get into the Bowling Alley. However, Mr. Pullins is talking about Main Street. What I am suggesting is not just about the physical integration to the grid, but the institutional one.
Vertically Integrated Utilities (VIUs) decision making is normally done incrementally and under a supply orientation, with close attention to the business model of winning rate case to the regulator. As has been written elsewhere customers’ costs are secondary. That tells loudly that the business model is totally obsolete.
The approach of EWPC is in breakthrough ways and under a customer orientation. I have been writing that one of the key elements of EWPC is the development of the resources of the demand side. As Christensen and Raynor’s The Innovator Solution explains and that I have interpreted, the competitive advantage is in the integration of the (disruptive technologies) resources of demand side, because distributed generation, demand response, energy efficiency, and other technologies are highly interdependent, from the customers costs point of view. So, different business models under competition are required for taking into account customers’ costs and enabling choice.
While distributed generation has been around for quite some time, it is a very recent phenomenon to interconnect them to the grid as you report. Demand response has also been around, but not the systems to fulfill the integration of retail and wholesale markets. There are important interdependencies between the two technologies to fulfill system services. Even more important is energy efficiency interdependency with demand response, as can be seen from the above post.
The need for the development of business model innovations to integrate those disruptive technologies is the reason that I have recommended and identified Second Generation Retailer - 2GR to perform that job under competition.
Power industry “leaders” of the past decade concentrated their attention on wholesale competition, but it is known since the 80s that system efficiency improvements were to come from the retail side, which is where information, telecommunication, and control technology could be deployed to replace supply side system coordination mechanism, that were non-trivial to outsiders.
As I explained, at a conference at Carnegie Mellon University this march (see slide 7 of the presentation), the death of Fred C. Schweppe [of MIT] in 1998 and a misunderstanding by William Hogan [of Harvard] in 1992 of Schweppe’s work on the [regulated] energy marketplace were “small chance events early in the history of deregulation that tilt[ed] the competitive balance, to an inferior solution path…” Recently I learned to characterize Hogan’s misunderstanding as the lack of knowledge of the non-trivial VUIs paradigm, even though he is a very intelligent and important economist.
On the second point, I agree with you that “this is a fascinating time-period,” that I envisioned very clearly in 1996, because I am a non-trivial insider. In the introduction of the whitepaper, financed with fund from American tax payers, I wrote “From time to time the local government utility retained consultants to develop expansion plans, which analyzed and articulated the strategies to be followed. In practice, however, because of exaggerated political influence, instead of professional advice, the explicit strategies resulted in general intuitive and faulty.”
Best regards,
José Antonio Vanderhorst-Silverio, Ph.D.
Reference: All the issues crux of the matter, by Warren Causey.
P.D: If you want use just one of my lastnames, please use Vanderhorst. I know this is a culture specific item that is confusing.
2nd Disruptive Technology Crossed Chasm
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 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. Please write to javs@ieee.org to contact the author for any kind of engagement.
Dear Mr. Causey,
Once again, you are welcome!
Your observations are very timely and your positive contributions, as a historian in the middle of the action, will make the train wreck even more visible. They are also, as you will see very good news for industry growth and sustainability.
In the post, Take EWPC Lead & Reap Large Benefits, I wrote that “AMI and demand response are getting out from the Bowling Alley and entering the Tornado of Geoffrey Moore’s Technology-Adoption Life Cycle model. To get to Main Street, however, it will be much easier, cheaper, and faster with a paradigm shift to EWPC. What you report “about integrating distributed generation to the grid,” says that they got out of the Early Market and crossed the Chasm to get into the Bowling Alley. However, Mr. Pullins is talking about Main Street. What I am suggesting is not just about the physical integration to the grid, but the institutional one.
Vertically Integrated Utilities (VIUs) decision making is normally done incrementally and under a supply orientation, with close attention to the business model of winning rate case to the regulator. As has been written elsewhere customers’ costs are secondary. That tells loudly that the business model is totally obsolete.
The approach of EWPC is in breakthrough ways and under a customer orientation. I have been writing that one of the key elements of EWPC is the development of the resources of the demand side. As Christensen and Raynor’s The Innovator Solution explains and that I have interpreted, the competitive advantage is in the integration of the (disruptive technologies) resources of demand side, because distributed generation, demand response, energy efficiency, and other technologies are highly interdependent, from the customers costs point of view. So, different business models under competition are required for taking into account customers’ costs and enabling choice.
While distributed generation has been around for quite some time, it is a very recent phenomenon to interconnect them to the grid as you report. Demand response has also been around, but not the systems to fulfill the integration of retail and wholesale markets. There are important interdependencies between the two technologies to fulfill system services. Even more important is energy efficiency interdependency with demand response, as can be seen from the above post.
The need for the development of business model innovations to integrate those disruptive technologies is the reason that I have recommended and identified Second Generation Retailer - 2GR to perform that job under competition.
Power industry “leaders” of the past decade concentrated their attention on wholesale competition, but it is known since the 80s that system efficiency improvements were to come from the retail side, which is where information, telecommunication, and control technology could be deployed to replace supply side system coordination mechanism, that were non-trivial to outsiders.
As I explained, at a conference at Carnegie Mellon University this march (see slide 7 of the presentation), the death of Fred C. Schweppe [of MIT] in 1998 and a misunderstanding by William Hogan [of Harvard] in 1992 of Schweppe’s work on the [regulated] energy marketplace were “small chance events early in the history of deregulation that tilt[ed] the competitive balance, to an inferior solution path…” Recently I learned to characterize Hogan’s misunderstanding as the lack of knowledge of the non-trivial VUIs paradigm, even though he is a very intelligent and important economist.
On the second point, I agree with you that “this is a fascinating time-period,” that I envisioned very clearly in 1996, because I am a non-trivial insider. In the introduction of the whitepaper, financed with fund from American tax payers, I wrote “From time to time the local government utility retained consultants to develop expansion plans, which analyzed and articulated the strategies to be followed. In practice, however, because of exaggerated political influence, instead of professional advice, the explicit strategies resulted in general intuitive and faulty.”
Best regards,
José Antonio Vanderhorst-Silverio, Ph.D.
Reference: All the issues crux of the matter, by Warren Causey.
P.D: If you want use just one of my lastnames, please use Vanderhorst. I know this is a culture specific item that is confusing.
martes, septiembre 25, 2007
Engineers Needed for Lower Prices
The paradigm shift from the vertically integrated utilities to the electricity without price control paradigm will leed to lower costs, lower profits and lower prices after a reasonable delay. To accomplish that engineers need to take the transpotation function that allow the market between supply and demand run efficiently.
Engineers Needed for Lower Prices
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 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. Please write to javs@ieee.org to contact the author for any kind of engagement.
Jack A. Casazza has written at length on reliability.
He wrote of some basic realities that were not heard:
1) “Everyone is for reliability until it costs them money.” Reliability has two faces: system and customer. System reliability is first, economy second (R1E2) under EWPC. Customer reliability after R1E2 is one of the most important elements that 2GRs use to develop business model innovations, and as a result produce rational rationing when needed. Under the VIUs paradigm rationing is irrational.
2) "Reliability and commercial interest cannot be separated." Under EWPC they are not, as shown above for the customers. For generators, system reliability returns to be a power pool cooperative game under the leadership of the system engineer because of R1E2.
3) "Reliability problems are both institutional and technical." R1E2 sets the priorities.
4) "Technical and institutional solutions must be coordinated." There is not better coordination than R1E2.
He also wrote on existing beliefs
1) "Customers believe electricity will cost less." Yes It will, after the transition period ends, when transaction costs of new demand side electronics and information technologies go below the extra costs of coordination with excesses of the transportation and generation capacity and operation costs.
2) "Power suppliers, transmitters, distributors – all expect higher profits." Under EWPC, transportation should be less costly than under vertical integration, as central station generation and its associated transportation will be lower. With a market operated under proper prudential regulations scams will not result.
3) "Engineers tell us:"
a. "Extra transmission capacity will be needed requiring extra investment." It is actually the contrary under EWPC as it was explained in item 2.
b. "Systems will not be operated as efficiently." Also the contrary, since the integration of demand and the differentiation of customer reliability will make much more efficient than the VIUs paradigm.
c. "Risk of larger regional outages will increase." Also the contrary, as there will be just one transportation entity in charge in a given area under a federal regulatory compact.
d. "New technologies will be needed at significant additional costs." Under EWPC true competition will replace the bets made by regulators when they lose the cases to the utilities.
e. "Much additional training and software will be needed." Yes to get a much more efficient system to replace the obsolete one.
"Perpetual motion? Cost up, profit up, prices down?" Not at all. Cost down, profits down, prices down, after a systemic delay, all with respect the VIUs paradigm!
What we need is to place engineers back to the part of the industry where they belong: in the transportation companies, to plan, design, and operate the largest machine on earth running at ultraquality. Businessmen should takeover the business and innovate to give customers much better propositions.
Engineers Needed for Lower Prices
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 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. Please write to javs@ieee.org to contact the author for any kind of engagement.
Jack A. Casazza has written at length on reliability.
He wrote of some basic realities that were not heard:
1) “Everyone is for reliability until it costs them money.” Reliability has two faces: system and customer. System reliability is first, economy second (R1E2) under EWPC. Customer reliability after R1E2 is one of the most important elements that 2GRs use to develop business model innovations, and as a result produce rational rationing when needed. Under the VIUs paradigm rationing is irrational.
2) "Reliability and commercial interest cannot be separated." Under EWPC they are not, as shown above for the customers. For generators, system reliability returns to be a power pool cooperative game under the leadership of the system engineer because of R1E2.
3) "Reliability problems are both institutional and technical." R1E2 sets the priorities.
4) "Technical and institutional solutions must be coordinated." There is not better coordination than R1E2.
He also wrote on existing beliefs
1) "Customers believe electricity will cost less." Yes It will, after the transition period ends, when transaction costs of new demand side electronics and information technologies go below the extra costs of coordination with excesses of the transportation and generation capacity and operation costs.
2) "Power suppliers, transmitters, distributors – all expect higher profits." Under EWPC, transportation should be less costly than under vertical integration, as central station generation and its associated transportation will be lower. With a market operated under proper prudential regulations scams will not result.
3) "Engineers tell us:"
a. "Extra transmission capacity will be needed requiring extra investment." It is actually the contrary under EWPC as it was explained in item 2.
b. "Systems will not be operated as efficiently." Also the contrary, since the integration of demand and the differentiation of customer reliability will make much more efficient than the VIUs paradigm.
c. "Risk of larger regional outages will increase." Also the contrary, as there will be just one transportation entity in charge in a given area under a federal regulatory compact.
d. "New technologies will be needed at significant additional costs." Under EWPC true competition will replace the bets made by regulators when they lose the cases to the utilities.
e. "Much additional training and software will be needed." Yes to get a much more efficient system to replace the obsolete one.
"Perpetual motion? Cost up, profit up, prices down?" Not at all. Cost down, profits down, prices down, after a systemic delay, all with respect the VIUs paradigm!
What we need is to place engineers back to the part of the industry where they belong: in the transportation companies, to plan, design, and operate the largest machine on earth running at ultraquality. Businessmen should takeover the business and innovate to give customers much better propositions.
Electricity in the Presidential Elections
This eMail was sent on September 17, 2007.
Dear writers and readers,
The opportunities for the Dominican Republic are for every political party to give its support to EWPC in order to become our most precious country mark. It does not matter what the building blocks of the scenario the party is promoting for the future, we should make sure that EWPC is one of its predetermined elements, to be discussed from now on in any strategic political conversation. The Very Short Electricity Law should be thrown on the wastebasket any time soon.
Below is what I posted in Energy Pulse and Energy Blogs that should gives us the confidence we need to solve the systemic electricity crisis of the Dominican Republic and reap a lot of opportunities under DR-CAFTA and the EPAs to help develop our country with Dominican multinationals.
In the post Great Opportunities Under New Energy Bills, you may find the following:
In the copyright protected link Extra, Extra… Goliath is Defeated Once Again!, you may find out how vertically integrated utilities will very soon start to be erased from the face of the earth. The US Congress, the European Commission, and legislative bodies all over the world, have the information they need to make the right decisions to transform the electric utilities to a very familiar business environment of wholesale, retail, customer value chain competition, under a very clear vision of the End-State of the electricity industry as provided by EWPC.
The state of Ohio and the Dominican Republic have the opportunity to be the first places in the world to implement the paradigm shift and introduce enough predictability to avoid throwing good money after bad, as EWPC signals the end of financial capital and the reintroduction of production capital to the power industry. A partnership between the state of Ohio and the Dominican Republic, which have a great export and job development potential under DR-CAFTA, can be negotiated.
Best regards,
José Antonio Vanderhorst Silverio, Ph.D.
Systemic Consultant: Electricity
P.D.: Comments are invited on the Electricity Without Price Controls blog of the Energy Central Network.
Dear writers and readers,
The opportunities for the Dominican Republic are for every political party to give its support to EWPC in order to become our most precious country mark. It does not matter what the building blocks of the scenario the party is promoting for the future, we should make sure that EWPC is one of its predetermined elements, to be discussed from now on in any strategic political conversation. The Very Short Electricity Law should be thrown on the wastebasket any time soon.
Below is what I posted in Energy Pulse and Energy Blogs that should gives us the confidence we need to solve the systemic electricity crisis of the Dominican Republic and reap a lot of opportunities under DR-CAFTA and the EPAs to help develop our country with Dominican multinationals.
In the post Great Opportunities Under New Energy Bills, you may find the following:
In the copyright protected link Extra, Extra… Goliath is Defeated Once Again!, you may find out how vertically integrated utilities will very soon start to be erased from the face of the earth. The US Congress, the European Commission, and legislative bodies all over the world, have the information they need to make the right decisions to transform the electric utilities to a very familiar business environment of wholesale, retail, customer value chain competition, under a very clear vision of the End-State of the electricity industry as provided by EWPC.
The state of Ohio and the Dominican Republic have the opportunity to be the first places in the world to implement the paradigm shift and introduce enough predictability to avoid throwing good money after bad, as EWPC signals the end of financial capital and the reintroduction of production capital to the power industry. A partnership between the state of Ohio and the Dominican Republic, which have a great export and job development potential under DR-CAFTA, can be negotiated.
Best regards,
José Antonio Vanderhorst Silverio, Ph.D.
Systemic Consultant: Electricity
P.D.: Comments are invited on the Electricity Without Price Controls blog of the Energy Central Network.
Take EWPC Lead & Reap Large Benefits
The US Congress, the European Commission, the state of Ohio, and the Dominican Republic, are some the most likely candidates to start the paradigm shift to EWPC, ending demand forever as an externality. It has been shown that the days of the obsolete VIUs paradigm are counted. A paradigm shift to EWPC is the next source of business innovations, jobs with a lot of future and increasing exports. Those governments that take the lead, and avoid the risks of market implementation failure by retaining high caliber professional team advice, will reap most of the benefits.
Take EWPC Lead & Reap Large Benefits
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 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. Please write to javs@ieee.org to contact the author for any kind of engagement.
Let’s congratulate the author and Chartwell Inc. for a timely reality AMI based article on demand response that also touches energy efficiency issues.
Since, as the author writes, “The electricity delivery industry is likely to see several utilities use advanced metering infrastructure (AMI) for demand response programs on an unprecedented scale over the next five years,” AMI and demand response are getting out from the Bowling Alley and entering the Tornado of Geoffrey Moore’s Technology-Adoption Life Cycle model. To get to Main Street, however, it will be much easier and faster with a paradigm shit to EWPC. For earlier comments on Moore’s model, as it applies to demand response, see IMEUC: Unreliable Service and Price Spikes (please hit read links here and below for more details).
By the way, even though Mr. Len Gould’s opinions about IMEUC do not lead to an acceptable paradigm shift, I have a lot of respect for him, even if he may be considered as a skeptic about EWPC. At the same time, Mr. Gould is one of the most intelligent, important and hard working persons in the debates and dialogues aiming to find the truth here in EnergyPulse.net. As he clearly is not his opinion, he may change it any time soon. However, readers should still expect more negative opinions from him about EWPC in the short run.
The shift to demand response based on AMI is an incremental paradigm shift away from the existing vertically integrated utilities (VIUs) paradigm, which is itself the result of earlier unstable paradigm shifts. The author identifies also energy efficiency based AMI incremental paradigm shift being mandated by governments, which need to be made by artificial means such as decoupling sales from profits, as the VIUs paradigm has perverse incentives on energy efficiency.
Every time an incremental paradigm shift occurs, constitutional rights are transferred to utilities thru a win – lose process, based on the utility business model of winning rate cases to the regulator. The result is higher than normal rates to customers and an extension of the life of the VIUs paradigm.
In addition, decisions taken by regulators on demand response result in a large free riding effect that requires general rate increases discriminating to non-responding customers, without customers ever learning what's going on. Retail competition avoids that altogether.
As the decision to invest by a customer to become responsive for the short run (demand response) is contradictory to a decision to invest for the long run (energy efficiency), incremental shifts will result in a lack of coordination by customer and as a result more costly than necessary for them. How can that be avoided?
The solution is to change demand as an externality, and integrate it to power system control, operation and planning, with a real paradigm shift. Such shift away from the VIUs paradigm, can be done with EWPC, the winning market on the first phase of competition, as can be seen on the downloads, debates, reflexive dialogues and generative dialogues, under the article An Analysis of the Carbon Emissions Impact of the Senate Energy Bill.
In accordance to the issues that the Chartwell reports, about perceived shortage in future energy supplies, it is energy efficiency that will have the largest impact both in reliability increase and real demand energy reduction. This means that demand response projects incremental paradigm shifts may result from optimistic cost benefit analysis in rate cases presented by utilities. It is important to note that energy efficiency reduces demand at the meter, but does not reduce the useful effects of electricity to the end-customer. Implementing the EWPC paradigm shift can reduce demand and avoid a large percentage of the supply generation forecasted (which are not very reliable anyway) with a very clean solution of integrating demand, thereby lowering the need to build expensive generation facilities.
In the real paradigm shift under EWPC all benefits from the development of the resources of the demand side (demand response, energy efficiency, distributed generation, distributed storage, etc.) are considered at once by a Second Generation Retailer - 2GR under competition, and not under a monopoly by a regulator, which although intelligent and important, may no know enough to understand the non-trivial elements of the proposed solution packages. Instead of letting regulators make bets, it is the competition in the market that finds conclusive evidence of which of the technologies of the demand side is more cost effective.
As can be seen from The BIG California LIE, “The BIG LIE is that retail competition is impossible in electric markets. The implementation of a competitive retail market was the center of the debate in California. Instead of cooperating to implement it, the three big California utilities, that didn't care about the end-customers, acted very irresponsibly. EWPC is the paradigm shift to show that retail competition is not only possible, but absolutely necessary to turn the electricity industry into a vibrant value added business for all stakeholders.”
The LIE has led to an inefficient regulatory compact as can be seen in The Anti-System Utility, which also explains why penetration is still low. However, knowing that EWPC is the best market solution may not even touch at all the present regulatory compact. Mr. Jack Casazza uses the analogy of a scrambled egg to explain that the regulatory compact can’t be unscrambled.
If EWPC were not to have any chance at all, I would have not been invited to Carnegie Mellon University this past march, where I presented A Generative Dialogue to Reach the End-State of the Power Industry (please hit link to download the presentation). As shown in slide 5, the conference had a supply side approach to
Since then, EWPC has emerged, and is ready for real governement leaders to consider it!
In the slide # 7 of the presentation two small chance events have lead to an inferior solution path, preceded the California LIE. I wrote then that “The events were naturally pulled by strong vested interest communit [of which the BIG LIE is representative], by neo-leberalization, by the debating system approach, and by the regulatory design, which [mutually] reinforced each other.” EWPC has a lot of potential right now, because of very high fuel costs, the necessary integration of demand, and the highly likely integration of the environmental externality to power system planning, operation and control. See also Utility Trends and Real Paradigm Shift.
The US Congress, the European Commission, the state of Ohio, and the Dominican Republic, are some the most likely candidates to start the paradigm shift to EWPC, ending demand forever as an externality. It has been shown that the days of the obsolete VIUs paradigm are counted. A paradigm shift to EWPC is the next source of business innovations, jobs with a lot of future and increasing exports. Those governments that take the lead, and avoid the risks of market implementation failure by retaining high caliber professional team advice, will reap most of the benefits.
Reference and context: AMI-enabled Demand Response in the Crosshairs of Many Utilities, by Mark Hall, Research Analyst, Chartwell Inc.
Take EWPC Lead & Reap Large Benefits
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 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. Please write to javs@ieee.org to contact the author for any kind of engagement.
Let’s congratulate the author and Chartwell Inc. for a timely reality AMI based article on demand response that also touches energy efficiency issues.
Since, as the author writes, “The electricity delivery industry is likely to see several utilities use advanced metering infrastructure (AMI) for demand response programs on an unprecedented scale over the next five years,” AMI and demand response are getting out from the Bowling Alley and entering the Tornado of Geoffrey Moore’s Technology-Adoption Life Cycle model. To get to Main Street, however, it will be much easier and faster with a paradigm shit to EWPC. For earlier comments on Moore’s model, as it applies to demand response, see IMEUC: Unreliable Service and Price Spikes (please hit read links here and below for more details).
By the way, even though Mr. Len Gould’s opinions about IMEUC do not lead to an acceptable paradigm shift, I have a lot of respect for him, even if he may be considered as a skeptic about EWPC. At the same time, Mr. Gould is one of the most intelligent, important and hard working persons in the debates and dialogues aiming to find the truth here in EnergyPulse.net. As he clearly is not his opinion, he may change it any time soon. However, readers should still expect more negative opinions from him about EWPC in the short run.
The shift to demand response based on AMI is an incremental paradigm shift away from the existing vertically integrated utilities (VIUs) paradigm, which is itself the result of earlier unstable paradigm shifts. The author identifies also energy efficiency based AMI incremental paradigm shift being mandated by governments, which need to be made by artificial means such as decoupling sales from profits, as the VIUs paradigm has perverse incentives on energy efficiency.
Every time an incremental paradigm shift occurs, constitutional rights are transferred to utilities thru a win – lose process, based on the utility business model of winning rate cases to the regulator. The result is higher than normal rates to customers and an extension of the life of the VIUs paradigm.
In addition, decisions taken by regulators on demand response result in a large free riding effect that requires general rate increases discriminating to non-responding customers, without customers ever learning what's going on. Retail competition avoids that altogether.
As the decision to invest by a customer to become responsive for the short run (demand response) is contradictory to a decision to invest for the long run (energy efficiency), incremental shifts will result in a lack of coordination by customer and as a result more costly than necessary for them. How can that be avoided?
The solution is to change demand as an externality, and integrate it to power system control, operation and planning, with a real paradigm shift. Such shift away from the VIUs paradigm, can be done with EWPC, the winning market on the first phase of competition, as can be seen on the downloads, debates, reflexive dialogues and generative dialogues, under the article An Analysis of the Carbon Emissions Impact of the Senate Energy Bill.
In accordance to the issues that the Chartwell reports, about perceived shortage in future energy supplies, it is energy efficiency that will have the largest impact both in reliability increase and real demand energy reduction. This means that demand response projects incremental paradigm shifts may result from optimistic cost benefit analysis in rate cases presented by utilities. It is important to note that energy efficiency reduces demand at the meter, but does not reduce the useful effects of electricity to the end-customer. Implementing the EWPC paradigm shift can reduce demand and avoid a large percentage of the supply generation forecasted (which are not very reliable anyway) with a very clean solution of integrating demand, thereby lowering the need to build expensive generation facilities.
In the real paradigm shift under EWPC all benefits from the development of the resources of the demand side (demand response, energy efficiency, distributed generation, distributed storage, etc.) are considered at once by a Second Generation Retailer - 2GR under competition, and not under a monopoly by a regulator, which although intelligent and important, may no know enough to understand the non-trivial elements of the proposed solution packages. Instead of letting regulators make bets, it is the competition in the market that finds conclusive evidence of which of the technologies of the demand side is more cost effective.
As can be seen from The BIG California LIE, “The BIG LIE is that retail competition is impossible in electric markets. The implementation of a competitive retail market was the center of the debate in California. Instead of cooperating to implement it, the three big California utilities, that didn't care about the end-customers, acted very irresponsibly. EWPC is the paradigm shift to show that retail competition is not only possible, but absolutely necessary to turn the electricity industry into a vibrant value added business for all stakeholders.”
The LIE has led to an inefficient regulatory compact as can be seen in The Anti-System Utility, which also explains why penetration is still low. However, knowing that EWPC is the best market solution may not even touch at all the present regulatory compact. Mr. Jack Casazza uses the analogy of a scrambled egg to explain that the regulatory compact can’t be unscrambled.
If EWPC were not to have any chance at all, I would have not been invited to Carnegie Mellon University this past march, where I presented A Generative Dialogue to Reach the End-State of the Power Industry (please hit link to download the presentation). As shown in slide 5, the conference had a supply side approach to
Getting adequate resources of the right technologies for generation, transmission and distribution over the next three decades,” missing “the need for the emergent market architecture and design paradigm, where the development of the resources of the demand side take a key role to reach the End-State of the power industry… Venture capitalists know that good money should not be thrown after bad. Now is a great time to shift course… The new paradigm introduces elements that should be researched and taught, on MS and PhD levels education, as well as the training of skilled blue collar workers.
Since then, EWPC has emerged, and is ready for real governement leaders to consider it!
In the slide # 7 of the presentation two small chance events have lead to an inferior solution path, preceded the California LIE. I wrote then that “The events were naturally pulled by strong vested interest communit [of which the BIG LIE is representative], by neo-leberalization, by the debating system approach, and by the regulatory design, which [mutually] reinforced each other.” EWPC has a lot of potential right now, because of very high fuel costs, the necessary integration of demand, and the highly likely integration of the environmental externality to power system planning, operation and control. See also Utility Trends and Real Paradigm Shift.
The US Congress, the European Commission, the state of Ohio, and the Dominican Republic, are some the most likely candidates to start the paradigm shift to EWPC, ending demand forever as an externality. It has been shown that the days of the obsolete VIUs paradigm are counted. A paradigm shift to EWPC is the next source of business innovations, jobs with a lot of future and increasing exports. Those governments that take the lead, and avoid the risks of market implementation failure by retaining high caliber professional team advice, will reap most of the benefits.
Reference and context: AMI-enabled Demand Response in the Crosshairs of Many Utilities, by Mark Hall, Research Analyst, Chartwell Inc.
lunes, septiembre 24, 2007
Utility Trends and Real Paradigm Shift
A paradigm shift to EWPC is urgently needed to change the status quo and start integrating distributed resources and good ideas into power sectors all over the world.
To all writers and readers,
Dear Mr. Pullins,
Your comments on utility trends are very interesting and timely. If I understand correctly your post, your opinion is that:
1) Nothing is being done about integrating distribute resources to control, operation and planning of the grid.
2) Good utilities ideas die at the utility-commission interface.
My opinion is that to integrate distributed resources and to absorve good ideas, power sectors all over the world need to undergo a proper paradigm shift as explained in article "Free Market and Central Planning, Under R1E2 ," which I posted today on EnergyBlogs.com.
Regards,
José Antonio Vanderhorst-Silverio, Ph.D.
Ref: All the issues in the same room
Updated from original.
To all writers and readers,
Dear Mr. Pullins,
Your comments on utility trends are very interesting and timely. If I understand correctly your post, your opinion is that:
1) Nothing is being done about integrating distribute resources to control, operation and planning of the grid.
2) Good utilities ideas die at the utility-commission interface.
My opinion is that to integrate distributed resources and to absorve good ideas, power sectors all over the world need to undergo a proper paradigm shift as explained in article "Free Market and Central Planning, Under R1E2 ," which I posted today on EnergyBlogs.com.
Regards,
José Antonio Vanderhorst-Silverio, Ph.D.
Ref: All the issues in the same room
Updated from original.
Free Market and Central Planning, Under R1E2
This is my synthesis of the EWPC paradigm shift that maximizes social welfare. Although it is a non-trivial subject, it seems that many intelligent and important readers of earlier posts may just understand it. Maybe, I could get a prize for it, as it goes against the politically correct and the popular consensus of our time.
Free Market and Central Planning, Under R1E2
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 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. Please write to javs@ieee.org to contact the author for any kind of engagement.
Dr. Stephen Lee has written the timely article Free Market or Central Planning?
My answer to his question is both: free markets and central planning, but with the added condition of electric system reliability first, money system economy second (R1E2).
The Vertically Integrated Utilities paradigm became obsolete in the 70s. The obvious elements had to do with the excesive capacity required and corresponding high rates and the change in the range of customers supply security needs. After that, many incremental paradigm shifts have occurr.
It is necessary that the industry should undergo a real paradigm shift. The electric system and the money system should be functionally separated. As the money system has supply and demand, and generation and retail are fully competitive activities, the functional separation has good cohesion.
The natural monopoly transportation system is what remains as the electrical system. To optimize the transportation system, it is required to consider total social (demand, transport, supply) welfare needs, and not just the optimization of transmission, distribution, or both, by themself.
By applying the reliability first, economy second, criterion, the development of the smart grid can proceed and as each competitive retailer develops, with business model innovations, the resources of the demand side, to integrate demand into power system planning, operation and control, a robust, vibrant, and fully functional, electrical and market, power sector can evolve.
Transmission open access and the native load requirement by IOUs are an incremental step and a strong barrier to competition, respectively. The case for reintegration of T&D is clear. The case for optimization of distribution and regulated retail under a business model of IUOs winning rate case to the regulators is dead wrong, as it is a win-lose proposition.
Those are some of the concept that have emerged on what is now electricity without price controls (EWPC) that I have developed since 1996.
Thanks once again to all that have serve as a sounding board, without whose help I would no gotten this far.
José Antonio
Free Market and Central Planning, Under R1E2
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 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. Please write to javs@ieee.org to contact the author for any kind of engagement.
Dr. Stephen Lee has written the timely article Free Market or Central Planning?
My answer to his question is both: free markets and central planning, but with the added condition of electric system reliability first, money system economy second (R1E2).
The Vertically Integrated Utilities paradigm became obsolete in the 70s. The obvious elements had to do with the excesive capacity required and corresponding high rates and the change in the range of customers supply security needs. After that, many incremental paradigm shifts have occurr.
It is necessary that the industry should undergo a real paradigm shift. The electric system and the money system should be functionally separated. As the money system has supply and demand, and generation and retail are fully competitive activities, the functional separation has good cohesion.
The natural monopoly transportation system is what remains as the electrical system. To optimize the transportation system, it is required to consider total social (demand, transport, supply) welfare needs, and not just the optimization of transmission, distribution, or both, by themself.
By applying the reliability first, economy second, criterion, the development of the smart grid can proceed and as each competitive retailer develops, with business model innovations, the resources of the demand side, to integrate demand into power system planning, operation and control, a robust, vibrant, and fully functional, electrical and market, power sector can evolve.
Transmission open access and the native load requirement by IOUs are an incremental step and a strong barrier to competition, respectively. The case for reintegration of T&D is clear. The case for optimization of distribution and regulated retail under a business model of IUOs winning rate case to the regulators is dead wrong, as it is a win-lose proposition.
Those are some of the concept that have emerged on what is now electricity without price controls (EWPC) that I have developed since 1996.
Thanks once again to all that have serve as a sounding board, without whose help I would no gotten this far.
José Antonio
domingo, septiembre 23, 2007
IMEUC: Unreliable Service and Price Spikes
In response to the suggestion by Mr. Jeff Presley about simulations, it is shown that there is not a need to look further, as a simulator already exists, and its information’s confirm the EWPC is the winner of the first phase of competition with the VIUs, as IMEUC doesn’t even qualify.
IMEUC: Unreliable Service and Price Spikes
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 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. Please write to javs@ieee.org to contact the author for any kind of engagement.
In an attempt to compare IMEUC with EWPC as the wining market architecture and design, Mr. Len Gould started yesterday (September 22nd, 2007), the Energy Market Simulator Design – Software Design Blog. Its second post is entitled Opening discussion.
Mr. Gould states that “The reason for this initiative is that it is my response to a prod by Jeff Presley.” In what follows it is shown that there is not a need to look further, as a simulator already exists, and its information’s confirm the EWPC is the winner of the first phase of competition with the VIUs, as IMEUC doesn’t even qualify.
Using systems dynamics, Dr. Jason Black’s, Ph.D. theses at MIT, already simulated a shift from the Vertically Integrated Utilities paradigm to an incremental paradigm that apparently integrates Demand Response. Dr. Black’s simulations did not consider the most important criterion of electric power utility service, which was suggested by the late Professor Fred C. Schweppe, also of MIT. That criterion, "considers the engineering requirements for controlling, operating and planning an electric power system," being the key distinctive element of the Electricity Without Price Controls (EWPC) paradigm; In layman's terms, the criterion can be expressed as "reliability first, economy second (R1E2)."
By the way, the R1 part is the key to develop the optimal transportation system, which results from the minimization of the sum of all the costs of investments (included those of supply and demand), costs of operation, costs of maintenance and costs of outages, so in a sense “reliability first” is about developing the best economic transmission system for the expected supply and demand of society.
Because of the lack of the R1E2 criterion, the thesis leads the untrained observer to the false general conclusion of “pernicious effect from… increase price volatility due to reductions in generation capacity reserve margins.” The R1E2 criterion prevent the possibility of price spikes occurring under EWPC, but which will occur under IMEUC, making it just another faulty deregulation experiment candidate.
The model system includes three alternatives: IMEUC distributed end-user level (so now we have IMEUCs paradigm available), a Disco incumbent retailer and an alternative First Generation Retailers (1GRs), whereas, EWPC is centered on Second Generation Retailers (2GRs). 1GRs have low competitive capacity as they operate under the VIUs paradigm in which the incumbent Disco retailer can foreclose competition. Incumbents are afraid of 1GRs cherry picking their customers.
Under EWPC, there is no Disco retailer, nor cherry picking, as 2GRs compete with each other. 2GRs have incentives to innovate – by developing business model innovations - to maximize value, minimize costs, or both, for individual customers, and, as a group, have the potential to maximize social welfare, something IMEUC cannot do. They optimize by obtaining as close as possible the required information of the (changing perceptions) preferences and conditions of all customers. While getting that information, they satisfy as close as possible the R1E2 criterion, something that is prohibitive and excessively complex to do by the system operator.
Systems operators all over the country are already operating with especial demand response retailers. In Geoffrey Moore’s Technology-Adoption Life Cycle model, Demand Response has already crossed the Chasm to the Bowling Alley in a few jurisdictions, as Pragmatics “Stick with the herd!” Many others are in the Early Market as “visionary companies get ahead of the herd!”
In the mean time, many Conservative VIUs, under the lack of leadership of IOUs and regulators want to “Stick with what’s proven!” By starting the new blog, Mr. Gould is trying to get into the Techies “Just try it!” stage, but it not possible, as they are trying to avoid the retailers, one of whose essential role is to fulfill the R1E2 criterion.
At the same time, there are other secondary economic requirements, the E2 part of R1E2 that should be mentioned. 2GRs compete and use the increasingly detailed information to reduce free riding. A IMEUCs benefit, such as being better at curving free riding, is insufficient to be the wining market, as the system operator or market manager will need to perform the required and unavoidable essential retail function to maximize social benefits. In addition, IMEUC would need to receive a large subsidy under a mandate to get implement it.
IMEUC: Unreliable Service and Price Spikes
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 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. Please write to javs@ieee.org to contact the author for any kind of engagement.
In an attempt to compare IMEUC with EWPC as the wining market architecture and design, Mr. Len Gould started yesterday (September 22nd, 2007), the Energy Market Simulator Design – Software Design Blog. Its second post is entitled Opening discussion.
Mr. Gould states that “The reason for this initiative is that it is my response to a prod by Jeff Presley.” In what follows it is shown that there is not a need to look further, as a simulator already exists, and its information’s confirm the EWPC is the winner of the first phase of competition with the VIUs, as IMEUC doesn’t even qualify.
Using systems dynamics, Dr. Jason Black’s, Ph.D. theses at MIT, already simulated a shift from the Vertically Integrated Utilities paradigm to an incremental paradigm that apparently integrates Demand Response. Dr. Black’s simulations did not consider the most important criterion of electric power utility service, which was suggested by the late Professor Fred C. Schweppe, also of MIT. That criterion, "considers the engineering requirements for controlling, operating and planning an electric power system," being the key distinctive element of the Electricity Without Price Controls (EWPC) paradigm; In layman's terms, the criterion can be expressed as "reliability first, economy second (R1E2)."
By the way, the R1 part is the key to develop the optimal transportation system, which results from the minimization of the sum of all the costs of investments (included those of supply and demand), costs of operation, costs of maintenance and costs of outages, so in a sense “reliability first” is about developing the best economic transmission system for the expected supply and demand of society.
Because of the lack of the R1E2 criterion, the thesis leads the untrained observer to the false general conclusion of “pernicious effect from… increase price volatility due to reductions in generation capacity reserve margins.” The R1E2 criterion prevent the possibility of price spikes occurring under EWPC, but which will occur under IMEUC, making it just another faulty deregulation experiment candidate.
The model system includes three alternatives: IMEUC distributed end-user level (so now we have IMEUCs paradigm available), a Disco incumbent retailer and an alternative First Generation Retailers (1GRs), whereas, EWPC is centered on Second Generation Retailers (2GRs). 1GRs have low competitive capacity as they operate under the VIUs paradigm in which the incumbent Disco retailer can foreclose competition. Incumbents are afraid of 1GRs cherry picking their customers.
Under EWPC, there is no Disco retailer, nor cherry picking, as 2GRs compete with each other. 2GRs have incentives to innovate – by developing business model innovations - to maximize value, minimize costs, or both, for individual customers, and, as a group, have the potential to maximize social welfare, something IMEUC cannot do. They optimize by obtaining as close as possible the required information of the (changing perceptions) preferences and conditions of all customers. While getting that information, they satisfy as close as possible the R1E2 criterion, something that is prohibitive and excessively complex to do by the system operator.
Systems operators all over the country are already operating with especial demand response retailers. In Geoffrey Moore’s Technology-Adoption Life Cycle model, Demand Response has already crossed the Chasm to the Bowling Alley in a few jurisdictions, as Pragmatics “Stick with the herd!” Many others are in the Early Market as “visionary companies get ahead of the herd!”
In the mean time, many Conservative VIUs, under the lack of leadership of IOUs and regulators want to “Stick with what’s proven!” By starting the new blog, Mr. Gould is trying to get into the Techies “Just try it!” stage, but it not possible, as they are trying to avoid the retailers, one of whose essential role is to fulfill the R1E2 criterion.
At the same time, there are other secondary economic requirements, the E2 part of R1E2 that should be mentioned. 2GRs compete and use the increasingly detailed information to reduce free riding. A IMEUCs benefit, such as being better at curving free riding, is insufficient to be the wining market, as the system operator or market manager will need to perform the required and unavoidable essential retail function to maximize social benefits. In addition, IMEUC would need to receive a large subsidy under a mandate to get implement it.
sábado, septiembre 22, 2007
So Far Just ONE Objection to EWPC as Winner
As tomorrow's deadline approaches, only Mr. Len Gould has provided a dissent to EWPC as the winning market for the first phase of competition. The second phase is the company vs. company competition after the market is set up and running.
So Far Just ONE Objection to EWPC as Winner
Mr. Chris Neil, Prof. Ferdinand Banks, Mr.
Len Gould, Mr. Edward A Read Jr., Mr. Todd McKissik, Mr. Don Giegler, Mr. Joseph Rosenthal, Mr. Jim Bayer, Mr. Jeff Presley, Mr. Kenneth Kok, Mr. Henry Nelson, Mr. Mark Krebs, and any other ladies and gentlemen helping to find the truth about the EWPC paradigm.
Dear intelligent and important friends,
This is not a process to develop a consensus. On the contrary, so far no one has written her o his approval about EWPC being the winning paradigm. At the moment, only one real objection has been made, the one by Mr. Gould which I acknowledged earlier.
In addition, as advanced in the post Final: IMEUC not a Market Architecture and Design, IMEUC – a physical solution – clearly cannot compete. If you read the post, please consider any allusion that may seem to be a personal attack, as being an attack on the opinion, not to the specific intelligent and important person or persons.
EWPC is not about the best system solution. If we want to promote innovation and economic growth, there should not be such thing, in real life, as a single best solution for the whole market to start with. Instead, we should develop a market environment for the second phase of competition where – the real market - will be enabled, so that each market segment is populated with the best (several competitor that shift market share as time goes by) business model innovations interact in the USA, Europe, etc. and eventually worldwide.
With all due respect for Mr. Presley and Mr. Gould, I will show tomorrow that there is definitely no need at all for simulation, nor implementations to this process. Goliath is dead forever. Nothing will buy time to get him out of the grave.
Some heavy duty friends seem to have opted so far for the silence approach, which I mentioned. Thank you very much, that's fine.
As a lesson learned, however, in this and future debates and dialogues, I suggest that we should take the silence message as being like the “no objections” documents that the multilateral institutions provide. That way, this media will be much more effective.
Any comment or suggestion is invited.
Have a nice rest of the day.
José Antonio
Article An Analysis of the Carbon Emissions Impact of the Senate Energy Bill Viewed 2100 Times 81 Comments so far.
So Far Just ONE Objection to EWPC as Winner
Mr. Chris Neil, Prof. Ferdinand Banks, Mr.
Len Gould, Mr. Edward A Read Jr., Mr. Todd McKissik, Mr. Don Giegler, Mr. Joseph Rosenthal, Mr. Jim Bayer, Mr. Jeff Presley, Mr. Kenneth Kok, Mr. Henry Nelson, Mr. Mark Krebs, and any other ladies and gentlemen helping to find the truth about the EWPC paradigm.
Dear intelligent and important friends,
This is not a process to develop a consensus. On the contrary, so far no one has written her o his approval about EWPC being the winning paradigm. At the moment, only one real objection has been made, the one by Mr. Gould which I acknowledged earlier.
In addition, as advanced in the post Final: IMEUC not a Market Architecture and Design, IMEUC – a physical solution – clearly cannot compete. If you read the post, please consider any allusion that may seem to be a personal attack, as being an attack on the opinion, not to the specific intelligent and important person or persons.
EWPC is not about the best system solution. If we want to promote innovation and economic growth, there should not be such thing, in real life, as a single best solution for the whole market to start with. Instead, we should develop a market environment for the second phase of competition where – the real market - will be enabled, so that each market segment is populated with the best (several competitor that shift market share as time goes by) business model innovations interact in the USA, Europe, etc. and eventually worldwide.
With all due respect for Mr. Presley and Mr. Gould, I will show tomorrow that there is definitely no need at all for simulation, nor implementations to this process. Goliath is dead forever. Nothing will buy time to get him out of the grave.
Some heavy duty friends seem to have opted so far for the silence approach, which I mentioned. Thank you very much, that's fine.
As a lesson learned, however, in this and future debates and dialogues, I suggest that we should take the silence message as being like the “no objections” documents that the multilateral institutions provide. That way, this media will be much more effective.
Any comment or suggestion is invited.
Have a nice rest of the day.
José Antonio
Article An Analysis of the Carbon Emissions Impact of the Senate Energy Bill Viewed 2100 Times 81 Comments so far.
jueves, septiembre 20, 2007
EWPC - Winner 1st Competition Phase
Dear writers and readers,
Please take a look a the last post Solving Smart Grid Cost Recovery, written under the article New Trends Emerging For AMI Cost Recovery, by Will McNamara, Principal Consultant, KEMA, Inc. I dedicate it to Len Gould as a reminder of my appreciation for his stubborn behavior. I think he should try to get a piece of the pie in the new industry organized under EWPC.
After many downloads, debates, reflexive dialogues and generative dialogues, I have two humble question to ask: Is EWPC the winning market of the first and cooperative stage of competition? Are we ready to introduce competition in the power industry with a negotiated transition, of course?
If you think no, to either question, explain very clearly your case to the audience, with facts, and without links. If you think yes, please, by all means say so.
I know that the next thing that should happen is to find out that there is a lot of value destruction made in the industry during the past decade. However, there are much more opportunities to add value, for those who have invested dearly in innovative solutions, but that the "native load" barrier don’t allow it to be implemented.
Silence is the best message.
Thanks to all that helped me get to this point.
Best regards,
José Antonio Vanderhorst-Silverio, PhD
Systemic Consultant: Electricity
Please take a look a the last post Solving Smart Grid Cost Recovery, written under the article New Trends Emerging For AMI Cost Recovery, by Will McNamara, Principal Consultant, KEMA, Inc. I dedicate it to Len Gould as a reminder of my appreciation for his stubborn behavior. I think he should try to get a piece of the pie in the new industry organized under EWPC.
After many downloads, debates, reflexive dialogues and generative dialogues, I have two humble question to ask: Is EWPC the winning market of the first and cooperative stage of competition? Are we ready to introduce competition in the power industry with a negotiated transition, of course?
If you think no, to either question, explain very clearly your case to the audience, with facts, and without links. If you think yes, please, by all means say so.
I know that the next thing that should happen is to find out that there is a lot of value destruction made in the industry during the past decade. However, there are much more opportunities to add value, for those who have invested dearly in innovative solutions, but that the "native load" barrier don’t allow it to be implemented.
Silence is the best message.
Thanks to all that helped me get to this point.
Best regards,
José Antonio Vanderhorst-Silverio, PhD
Systemic Consultant: Electricity
Solving Smart Grid Cost Recovery
To solve the Smart Grid cost recovery dilemma requires a restructuring of the electric industry in such a way that the regulator gets the right signals. A shift from The Anti-System Utility to EWPC solves the problem, as cost recovery of AMI technologies are sent to the market with an international standard interface, that will restrict business model innovations by Second Generation Retailer - 2GR.
Solving Smart Grid Cost Recovery
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 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. Please write to javs@ieee.org to contact the author for any kind of engagement.
Dear Mr. McNamara and Mr. Gould,
Mr. McNamara’s paper is a welcome contribution to understand the reality of the demand side of the power business. Mr. McNamara writes: “The unfortunate result is that state regulators may be reluctant to approve cost recovery or even the implementation of AMI / Smart Grid technologies without specific guarantees that benefits of the technologies will exceed the costs in the long-term.”
The problem is with the business model of vertically integrated utilities (VIUs), because of what Mr. McNamara adds: “Determining the amount of cost that will be received in rates is a challenge for all utilities planning technology upgrades.”
The problem with the business model (winning rate cases to the regulator), to which Mr. Gould adds as being of so little imagination, is the result of the regulated retailers (called by Warren Causey as “the enterprise”) in The Anti-System Utility (hit the link please). To get thing moving fast, efficient and effectively, local (states in the US and countries in the EU) politics distortions must end. To do that A Warning to the US Congress and the European Commission (hit the link also please) is advised.
The regulated retailers operate the value chain in the industry by purchasing power under contract to the generators to serve the end customers. By replacing state and countries regulated retailers with federal competing retailers under EWPC, the problem with the investment in AMI technologies, which would be acquired under competition among retailers, is taken out the scope of the regulators and into the market, while the smart grid technologies rate recovery business cases to the regulator are easier to solve. All that is required to divide the responsibility under EWPC structure is to have a worldwide standard interface between AMI and the grid technologies.
To solve the Smart Grid cost recovery dilemma requires a restructuring of the electric industry in such a way that the regulator gets the right signals. A shift from The Anti-System Utility to EWPC solves the problem as cost recovery of AMI technologies are sent to the market with an international standard interface, that will restrict business model innovations by Second Generation Retailer - 2GR.
Best regards,
José Antonio Vanderhorst-Silverio, PhD
Solving Smart Grid Cost Recovery
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 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. Please write to javs@ieee.org to contact the author for any kind of engagement.
Dear Mr. McNamara and Mr. Gould,
Mr. McNamara’s paper is a welcome contribution to understand the reality of the demand side of the power business. Mr. McNamara writes: “The unfortunate result is that state regulators may be reluctant to approve cost recovery or even the implementation of AMI / Smart Grid technologies without specific guarantees that benefits of the technologies will exceed the costs in the long-term.”
The problem is with the business model of vertically integrated utilities (VIUs), because of what Mr. McNamara adds: “Determining the amount of cost that will be received in rates is a challenge for all utilities planning technology upgrades.”
The problem with the business model (winning rate cases to the regulator), to which Mr. Gould adds as being of so little imagination, is the result of the regulated retailers (called by Warren Causey as “the enterprise”) in The Anti-System Utility (hit the link please). To get thing moving fast, efficient and effectively, local (states in the US and countries in the EU) politics distortions must end. To do that A Warning to the US Congress and the European Commission (hit the link also please) is advised.
The regulated retailers operate the value chain in the industry by purchasing power under contract to the generators to serve the end customers. By replacing state and countries regulated retailers with federal competing retailers under EWPC, the problem with the investment in AMI technologies, which would be acquired under competition among retailers, is taken out the scope of the regulators and into the market, while the smart grid technologies rate recovery business cases to the regulator are easier to solve. All that is required to divide the responsibility under EWPC structure is to have a worldwide standard interface between AMI and the grid technologies.
To solve the Smart Grid cost recovery dilemma requires a restructuring of the electric industry in such a way that the regulator gets the right signals. A shift from The Anti-System Utility to EWPC solves the problem as cost recovery of AMI technologies are sent to the market with an international standard interface, that will restrict business model innovations by Second Generation Retailer - 2GR.
Best regards,
José Antonio Vanderhorst-Silverio, PhD
A Warning to the US Congress and the European Commission
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.
A Warning to the European Union and the US Congress
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 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. Please write to javs@ieee.org to contact the author for any kind of engagement.
Dear Mr. Giegler and Mr. Gould
In the post European Confusion and Tail Chasing, Marty Rosenberg reports that “This week comes work that the European Union wants to break open the energy markets. Again. I thought it was supposed to have happened July 1… The initiative is perplexing, particularly considering the fact that the major governments of Europe cannot keep their hands off the energy business.”
Just like in the US, the European Union wants to break open the electricity market with a faulty market architecture and design that keeps “native load” intact.
We ought to Mr. Giegler hero, Sam Insull, the ingenuity of the creation of the deadlock that the US is facing with the federal and state jurisdictional separation that lead to The Anti-System Utility. This is an excellent example of system thinking in action, as the 1st and 7th Law of the Fifth Discipline apply: “Today’s problems come from yesterday’s “solutions” and “Cause and effect are not closely related in time and space.” FERC and its pair in the EU will play its role with a transformation to EWPC, allowing the development of federal wide competition in the US and Europe by 2GRs initially, with worldwide competition later on.
EWPC applies the 8th Law of the Fifth Discipline: “Small changes can produce big results – but the areas of highest leverage are often the less obvious. Two example of high leverage are the change in structure from VIU to EWPC, and the introduction of competitive retailers.
EWPC takes into account the possibility of a transition, in accordance with the 6th Law of the Fifth Discipline: “Faster is slower.”
As state regulated retailers, aka “the enterprise” by Warren Causey, are transformed into federal competitive retailers, the negative political influence will be strongly mitigated. The open market activities in the value chain will change the need of financial capital to production capital, as predictability is reinserted into the industry.
The most important element to enable the open market and the key to predictability is a transportation grid with ultraquality. The motto “reliability first, economy second” is what should drive the industry from now on. As the deadlock is eliminated, new investments, innovations, and jobs with a lot of future, will be created. Financing base load power plants will be easy, under a predictable environment.
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.
A Warning to the European Union and the US Congress
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 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. Please write to javs@ieee.org to contact the author for any kind of engagement.
Dear Mr. Giegler and Mr. Gould
In the post European Confusion and Tail Chasing, Marty Rosenberg reports that “This week comes work that the European Union wants to break open the energy markets. Again. I thought it was supposed to have happened July 1… The initiative is perplexing, particularly considering the fact that the major governments of Europe cannot keep their hands off the energy business.”
Just like in the US, the European Union wants to break open the electricity market with a faulty market architecture and design that keeps “native load” intact.
We ought to Mr. Giegler hero, Sam Insull, the ingenuity of the creation of the deadlock that the US is facing with the federal and state jurisdictional separation that lead to The Anti-System Utility. This is an excellent example of system thinking in action, as the 1st and 7th Law of the Fifth Discipline apply: “Today’s problems come from yesterday’s “solutions” and “Cause and effect are not closely related in time and space.” FERC and its pair in the EU will play its role with a transformation to EWPC, allowing the development of federal wide competition in the US and Europe by 2GRs initially, with worldwide competition later on.
EWPC applies the 8th Law of the Fifth Discipline: “Small changes can produce big results – but the areas of highest leverage are often the less obvious. Two example of high leverage are the change in structure from VIU to EWPC, and the introduction of competitive retailers.
EWPC takes into account the possibility of a transition, in accordance with the 6th Law of the Fifth Discipline: “Faster is slower.”
As state regulated retailers, aka “the enterprise” by Warren Causey, are transformed into federal competitive retailers, the negative political influence will be strongly mitigated. The open market activities in the value chain will change the need of financial capital to production capital, as predictability is reinserted into the industry.
The most important element to enable the open market and the key to predictability is a transportation grid with ultraquality. The motto “reliability first, economy second” is what should drive the industry from now on. As the deadlock is eliminated, new investments, innovations, and jobs with a lot of future, will be created. Financing base load power plants will be easy, under a predictable environment.
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.
miércoles, septiembre 19, 2007
The Anti-System Utility
Vertically integrated utilities don't operate as a system because of a monopoly mindset of incumbents investor owned utilities and political interference. To operate as a system a paradigm shift to EWPC is required to offer customers competitive services and to neutralize political interference.
The Anti-System Utility
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 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. Please write to javs@ieee.org to contact the author for any kind of engagement.
This introduction, and the next to last paragraph, are taken from the article link Divine Dispensation of Electric Markets is Gone:
When an organization operates as a system, the value of the whole is greater than sum of the value of its parts.
Reading carefully the article by Warren Causey, I come to the following conclusion:
The sum of the potential value of the grid plus the sum of the potential value of the enterprise is greater than the potential value of the utility, meaning that the utility instead of being organized as a system, it can be though as an anti-system.
What is the problem? Incumbent’s monopoly mindsets and political interference.
The monopoly utility operates a cash cow and so the priority is the enterprise, not the grid, nor customer service. In addition, the utility is also a political target. So grid’s investments are postponed, over and over.
What’s the solution? To restructure by a paradigm shift from VIUs to EWPC.
In order to make the industry robust, competitive and fully functional, EWPC separates the utility grid from the enterprise, with the former integrated to transmission and the latter open to competition. When that is done, the new utility becomes the transportation grid and several 2GRs (see link Second Generation Retailer - 2GR) take over a segment of the market by adding to their part of the enterprise the non-trivial functions of competition and integration of demand to the industry. Incumbents IOUs should decide whether they select one and only one of three activities (no Chinese walls allowed) of the restructured industry: generation, transportation, and retail.
As the grid is integrated with transmission, the resulting transportation utility budget is applied entirely to the modernization of the greater grid in a given area. As the regulated enterprise is transformed into several competing enterprises (aka Second Generation Retailers), the political target disappears, and investments, innovations, and jobs with a lot future are created.
The Anti-System Utility
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 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. Please write to javs@ieee.org to contact the author for any kind of engagement.
This introduction, and the next to last paragraph, are taken from the article link Divine Dispensation of Electric Markets is Gone:
Looking what is happening from the EWPC paradigm shift, IOUs tried to stop progress by keeping the grid and the enterprise together (Congress should delete it from the new Energy Bill), as Warren Causey calls the two elements of the VIU in the article of the link All the issues in the same room.
Most, if not all, of the issues identified by Mr. Causey, a very objective observer of recent industry activity, are the results of maintaining the native load requirement that IOUs have imposed on the electric industry, which keep the utility grid and the enterprise under the control of VIUs. Mr. Causey calls for integrating the grid and the enterprise, which means that IOUs have not been able to integrate both dissimilar functions, so it is easier to go forward with EWPC.
When an organization operates as a system, the value of the whole is greater than sum of the value of its parts.
Reading carefully the article by Warren Causey, I come to the following conclusion:
The sum of the potential value of the grid plus the sum of the potential value of the enterprise is greater than the potential value of the utility, meaning that the utility instead of being organized as a system, it can be though as an anti-system.
What is the problem? Incumbent’s monopoly mindsets and political interference.
The monopoly utility operates a cash cow and so the priority is the enterprise, not the grid, nor customer service. In addition, the utility is also a political target. So grid’s investments are postponed, over and over.
What’s the solution? To restructure by a paradigm shift from VIUs to EWPC.
In order to make the industry robust, competitive and fully functional, EWPC separates the utility grid from the enterprise, with the former integrated to transmission and the latter open to competition. When that is done, the new utility becomes the transportation grid and several 2GRs (see link Second Generation Retailer - 2GR) take over a segment of the market by adding to their part of the enterprise the non-trivial functions of competition and integration of demand to the industry. Incumbents IOUs should decide whether they select one and only one of three activities (no Chinese walls allowed) of the restructured industry: generation, transportation, and retail.
As the grid is integrated with transmission, the resulting transportation utility budget is applied entirely to the modernization of the greater grid in a given area. As the regulated enterprise is transformed into several competing enterprises (aka Second Generation Retailers), the political target disappears, and investments, innovations, and jobs with a lot future are created.
Divine Dispensation of Electric Markets is Gone
As a result of David killing Goliath, US Congress has the great opportunity to introduce EWPC to the USA. In addition, the state of Ohio has the first opportunity to reap the benefits of retail competition, by developing 2GRs and integrating active demand to power system planning, operation and control. The Dominican Republic has one of the best positions to implement EWPC, but needs to place the Very Short Electricity Law in the waste basket.
Divine Dispensation of Electric Markets is Gone
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 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. Please write to javs@ieee.org to contact the author for any kind of engagement.
Dear Mr. Giegler,
Thank you very much for your recollection of the process, which I respect, and for giving (I think) EWPC and my humbled opinions the benefit of the doubt for the first time.
I have placed my last recollection in the link The BIG California LIE, to which I added as the leader paragraph: “The BIG LIE is that retail competition is impossible in electric markets. The implementation of a competitive retail market was the center of the debate in California. Instead of cooperating to implement it, the three big California utilities, that didn't care about the end-customers, acted very irresponsibly. EWPC is the paradigm shift to show that retail competition is not only possible, but absolutely necessary to turn the electricity industry into a vibrant value added business for all stakeholders.”
Although you are not interested on going to the starting point, as I explained above, state government and the CPUC were restructuring precisely because by entering long term contracts with generators, customers rates were very high in California in the first place. I am sure that customers are still paying those long term scams in the rates. To make a fair comparison, that is the point to start to do downloads, debates, and reflexive, and generative dialogues, which I considered have already been done.
Maybe state government and CUPC didn't know that they were going in the correct direction, but it seems that the guardian of the non-trivial VIUs didn't know either. What a shame! Instead of a win-win balanced approach that weighted well the truth and the service, IOUs went just for (what’s in it for me) the power and the money.
That is precisely why I responded to Joseph with the “Law of the Situation: the railroads did not understand,” (see my post of 9.11.07 above) that applies to VIUs, from which I extract, “Some people [IOUs for example] still believe there’s a divine dispensation that their markets are theirs - and no one else’s - now and forevermore. It is an old dream that dies hard, yet no businessman in a free society can control a market when the customers decide to go somewhere else [under EWPC for example]. All the king’s horses and all the king’s man are helpless in the face of a better product. Our commercial history is filled with examples of companies that failed to change in a changing world, and became tombstones in the corporate graveyard.”
When energy costs were low, the business model of winning rate cases to the regulator didn’t bother the customers. But since the oil embargo in the 70s, customers are ever more interested in competitive prices, as free society recognized that IOUs cannot control anymore the electricity markets. I have followed Donella Meadows advise (see link Let's Get Out of Back Rooms to a Generative Dialogue) to end the divine dispensation to the IOUs. But after many things have occurred during more than 30 years, with the obsolete VIUs controlled market, customers like those of the state of Ohio want and effective and efficient re-regulation process.
Whether the judicial investigations, which I suggested, are executed or not, taking of course your recollections into account, I am very sure that Goliath is already dead. I am also sure that after reading this complete message, taking into account the whole EWPC context, you, Len, Joseph, Jeff, Fred, and anybody else, will agree that David killed Goliath, once again, even though, anyone is free to remain skeptic, which I definitely respect too.
So let me comeback to today’s reality. Looking what is happening from the EWPC paradigm shift, IOUs tried to stop progress by keeping the grid and the enterprise together (Congress should delete it from the new Energy Bill), as Warren Causey calls the two elements of the VIU in the article of the link All the issues in the same room.
Most, if not all, of the issues identified by Mr. Causey, a very objective observer of recent industry activity, are the results of maintaining the native load requirement that IOUs have imposed on the electric industry, which keep the utility grid and the enterprise under the control of VIUs. Mr. Causey calls for integrating the grid and the enterprise, which means that IOUs have not been able to integrate both dissimilar functions, so it is easier to go forward with EWPC.
In order to make the industry robust, competitive and fully functional, EWPC separates the utility grid from the enterprise, with the former integrated to transmission and the latter open to competition. When that is done, the new utility becomes the transportation grid and several 2GRs (see link Second Generation Retailer - 2GR) take over a segment of the market by adding to their part of the enterprise the non-trivial functions of competition and integration of demand to the industry. Incumbents should decide whether they select one and only one of three activities (no Chinese walls allowed) of the restructured industry: generation, transportation, and retail.
I hope you agree now that the divine dispensation that IOUs markets are theirs - and no one else’s - now and forevermore is gone.
Best regards,
José Antonio
Divine Dispensation of Electric Markets is Gone
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 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. Please write to javs@ieee.org to contact the author for any kind of engagement.
Dear Mr. Giegler,
Thank you very much for your recollection of the process, which I respect, and for giving (I think) EWPC and my humbled opinions the benefit of the doubt for the first time.
I have placed my last recollection in the link The BIG California LIE, to which I added as the leader paragraph: “The BIG LIE is that retail competition is impossible in electric markets. The implementation of a competitive retail market was the center of the debate in California. Instead of cooperating to implement it, the three big California utilities, that didn't care about the end-customers, acted very irresponsibly. EWPC is the paradigm shift to show that retail competition is not only possible, but absolutely necessary to turn the electricity industry into a vibrant value added business for all stakeholders.”
Although you are not interested on going to the starting point, as I explained above, state government and the CPUC were restructuring precisely because by entering long term contracts with generators, customers rates were very high in California in the first place. I am sure that customers are still paying those long term scams in the rates. To make a fair comparison, that is the point to start to do downloads, debates, and reflexive, and generative dialogues, which I considered have already been done.
Maybe state government and CUPC didn't know that they were going in the correct direction, but it seems that the guardian of the non-trivial VIUs didn't know either. What a shame! Instead of a win-win balanced approach that weighted well the truth and the service, IOUs went just for (what’s in it for me) the power and the money.
That is precisely why I responded to Joseph with the “Law of the Situation: the railroads did not understand,” (see my post of 9.11.07 above) that applies to VIUs, from which I extract, “Some people [IOUs for example] still believe there’s a divine dispensation that their markets are theirs - and no one else’s - now and forevermore. It is an old dream that dies hard, yet no businessman in a free society can control a market when the customers decide to go somewhere else [under EWPC for example]. All the king’s horses and all the king’s man are helpless in the face of a better product. Our commercial history is filled with examples of companies that failed to change in a changing world, and became tombstones in the corporate graveyard.”
When energy costs were low, the business model of winning rate cases to the regulator didn’t bother the customers. But since the oil embargo in the 70s, customers are ever more interested in competitive prices, as free society recognized that IOUs cannot control anymore the electricity markets. I have followed Donella Meadows advise (see link Let's Get Out of Back Rooms to a Generative Dialogue) to end the divine dispensation to the IOUs. But after many things have occurred during more than 30 years, with the obsolete VIUs controlled market, customers like those of the state of Ohio want and effective and efficient re-regulation process.
Whether the judicial investigations, which I suggested, are executed or not, taking of course your recollections into account, I am very sure that Goliath is already dead. I am also sure that after reading this complete message, taking into account the whole EWPC context, you, Len, Joseph, Jeff, Fred, and anybody else, will agree that David killed Goliath, once again, even though, anyone is free to remain skeptic, which I definitely respect too.
So let me comeback to today’s reality. Looking what is happening from the EWPC paradigm shift, IOUs tried to stop progress by keeping the grid and the enterprise together (Congress should delete it from the new Energy Bill), as Warren Causey calls the two elements of the VIU in the article of the link All the issues in the same room.
Most, if not all, of the issues identified by Mr. Causey, a very objective observer of recent industry activity, are the results of maintaining the native load requirement that IOUs have imposed on the electric industry, which keep the utility grid and the enterprise under the control of VIUs. Mr. Causey calls for integrating the grid and the enterprise, which means that IOUs have not been able to integrate both dissimilar functions, so it is easier to go forward with EWPC.
In order to make the industry robust, competitive and fully functional, EWPC separates the utility grid from the enterprise, with the former integrated to transmission and the latter open to competition. When that is done, the new utility becomes the transportation grid and several 2GRs (see link Second Generation Retailer - 2GR) take over a segment of the market by adding to their part of the enterprise the non-trivial functions of competition and integration of demand to the industry. Incumbents should decide whether they select one and only one of three activities (no Chinese walls allowed) of the restructured industry: generation, transportation, and retail.
I hope you agree now that the divine dispensation that IOUs markets are theirs - and no one else’s - now and forevermore is gone.
Best regards,
José Antonio
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