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.
martes, septiembre 25, 2007
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.
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