Financing and Developing Uncertain Generation

Another partial response to respond to Adrian Lloyd in this upgrade to Nov. 15, 2007, most viewed article. EWPC is the answer to the difficult question on how to finance and develop uncertain generation projects for all stakeholders to win. The underlying problem is found on the successive extensions of the inefficient price controls of the vertically integrated utilities paradigm that leads to simple and stupid behavior.

Financing and Developing Uncertain Generation

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 the article Optimize Transmission Assets for New Wind Farms but Who Pays?, Mr. HIMADRI BANERJI brings a difficult question on how to finance and develop wind [changed to Uncertain Generation without any loss of generality] projects. The problem, however, comes from the lesson that Dee Hock, CEO Emeritus VISA International, gave us: “Simple, clear purpose and principles give rise to complex and intelligent behavior. Complex rules and regulations give rise to simple and stupid behavior.”

The problem Mr. Banerji is bringing has its origin in the vertically integrated utilities (VIUs) paradigm, whose incremental extensions give rise to very complex rules and regulations that result in simple and stupid behavior. It is well known that price controls are inefficient and lack transparency. Lack of transparency is one side of a coin, the other side being corruption. So the question “Who pays?” is always answered by those that control the political process, as debates get locked, and to get them unlocked the hierarchical force of the authorities is employed. Please read Slicing the Last of the Regulated Monopolies.

Electricity Without Price Controls is a market architecture and design paradigm shift away from the VIUs paradigm based on “simple, clear purpose and principles,” as can be seen in the article Synthesis Proposal Agreement of EWPC. Under EWPC, both questions – who should pay and how to develop an optimal transportation (T&D) grid, as many RR projects are to be connected to distribution lines, are answered without getting into debates.

Financing and Developing Uncertain Generation . . . continued . . .

Optimal transportation should be the result of expansion planning where all potential RR projects (see also Integrating Uncertain Generation to the Grid ) are taken into consideration at the same time for a give planning horizon. Such expansion planning is to be done in the environment suggested in the article Free Market and Central Planning, Under R1E2.

With a transportation utility that is financed by tolls the problem of “Who Pays?” is solved. A simple explanation of how to optimize the transportation system is given in the context of the article Demand Integration Under EWPC, as follows:

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.

For more details please read other articles in the Energy Central Network EWPC Blog.