Reference: Playing with Fire – Part II
Thanks Fred for your timely response. I guess you are right that "no tinkering with the demand side can compensate for gaming and lack of investment on the supply side" is highly likely under Model 2 and its piecemeal extensions.
To face gaming and lack of investment under EWPC there is an ultraquality requirement to be performed by a system engineering institution. The commercial activities of generation, and wholesale and retail of electricity to end-customers need to operate under a no-nonsense prudential regulation.
If the expert to the authorities in China is pushing Model 2 and its extensions, I also agree that your "anti-electric deregulation performance" statement is very likely to occur. If vertical integration – Model 1 – becomes the default solution, the little guy is bound to pay more for the investments than he should. The development of the resources of the demand side equity criterion - Market 3 - should lead to the effective development of the Chinese market at the bottom of the pyramid, which is the largest in the world.
Unless Northamerican, Chinesse and European leaders listen very closely to the first and second part of these comments, discussions, debates, and dialogues, they will certainly be playing with fire. My humble recommendation is that they retain a system architect expert on EWPC to help them coordinate a generative dialogue to come up with a new vision and develop a transition to EWPC. An expert on gas without price controls (GWPC) should no be difficult to develop in a parallel generative dialogue.
© 2007, José Antonio Vanderhorst-Silverio, Ph.D.
domingo, enero 07, 2007
A Generative Dialogue Without Illusions Part 11
Reference: Playing with Fire – Part II
Fred,
There is a difference between classroom perfect competition and real life workable competition.
To operate in real life there is a need for a robust power system, where the resources of the demand side and the resources of the supply side are available to manage systemic short run and long run physical risk in time and space.
The T&D grid should be integrated in every geographic - control - area and its operation and control planned and executed by a system engineering institution, with both supply side and demand side resources pre-committed.
There is an urgent need to develop the resources of the demand side. That development requires business model innovations which in turns require competition, as customers need will evolve in significant ways. A regulator is not prepared to do that job, since neat customer classes and rates will be insufficient to get the most value for society out of rationing electricity. The demand side is today highly undeveloped and to develop it true leadership – commercial retailers - will be required, to allow the workable competition that should be emerging in a complete, integral and fully functional Market 3.
Piece meal extensions to the incomplete, fractured and not fully functional Market 2 will maintain valid to your statement that “deregulation has failed, is failing or will fail just about everywhere.”
With T&D grid electric regulated under ultraquality and generation and commercial wholesale and retail deregulated, EWPC should not failed just about anywhere, if the commercial market architecture and design is properly implemented, under competent leadership and management.
Fred,
There is a difference between classroom perfect competition and real life workable competition.
To operate in real life there is a need for a robust power system, where the resources of the demand side and the resources of the supply side are available to manage systemic short run and long run physical risk in time and space.
The T&D grid should be integrated in every geographic - control - area and its operation and control planned and executed by a system engineering institution, with both supply side and demand side resources pre-committed.
There is an urgent need to develop the resources of the demand side. That development requires business model innovations which in turns require competition, as customers need will evolve in significant ways. A regulator is not prepared to do that job, since neat customer classes and rates will be insufficient to get the most value for society out of rationing electricity. The demand side is today highly undeveloped and to develop it true leadership – commercial retailers - will be required, to allow the workable competition that should be emerging in a complete, integral and fully functional Market 3.
Piece meal extensions to the incomplete, fractured and not fully functional Market 2 will maintain valid to your statement that “deregulation has failed, is failing or will fail just about everywhere.”
With T&D grid electric regulated under ultraquality and generation and commercial wholesale and retail deregulated, EWPC should not failed just about anywhere, if the commercial market architecture and design is properly implemented, under competent leadership and management.
A Generative Dialogue Without Illusions Part 10
Reference: Playing with Fire – Part II
Please be advised that today, before Len posted his last comment, I responded to Len's observations, under the article Demand Response Under EWPC Part 2, about his IMEUC proposal with a revised IMEUC retail to customer switchboard approach. The main reason is that his analogy of the gasoline market does not support his IMEUC wholesale to customer proposal, as gasoline stations are simply retailers that operate under competition just as suggested for EWPC.
If you read closely to the above message, Len is making up a distorted view of EWPC. The reason I perceive is that he now sees the LMP concept in the way of his wholesale to customer switchboard. LMP is the signal where supply meets demand at every location. Under Model 2, LMPs could be very high as transmission lines get congested without sufficient demand response close to the location.
Under Model 3, however, ultraquality long run system planning and design will aim to mitigate congestion with a mix of supply side and demand side resources. In general, LMP calculations before considering the demand side will signal the demand response needed. LMPs are part of the better designs possible. It is with the credibility that is inherent in long run ultraquality, not short run LMPs, that base load generators investments get built as they will get many dispatch hours during the lifetime. Technology obsolescence risk, however, should stay with the investors.
Please be advised that today, before Len posted his last comment, I responded to Len's observations, under the article Demand Response Under EWPC Part 2, about his IMEUC proposal with a revised IMEUC retail to customer switchboard approach. The main reason is that his analogy of the gasoline market does not support his IMEUC wholesale to customer proposal, as gasoline stations are simply retailers that operate under competition just as suggested for EWPC.
If you read closely to the above message, Len is making up a distorted view of EWPC. The reason I perceive is that he now sees the LMP concept in the way of his wholesale to customer switchboard. LMP is the signal where supply meets demand at every location. Under Model 2, LMPs could be very high as transmission lines get congested without sufficient demand response close to the location.
Under Model 3, however, ultraquality long run system planning and design will aim to mitigate congestion with a mix of supply side and demand side resources. In general, LMP calculations before considering the demand side will signal the demand response needed. LMPs are part of the better designs possible. It is with the credibility that is inherent in long run ultraquality, not short run LMPs, that base load generators investments get built as they will get many dispatch hours during the lifetime. Technology obsolescence risk, however, should stay with the investors.
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