Innovation and Risk Taking in the Power Industry

Open Transmission Access was a great mistake made at the outset of restructuring to preserve utilities rights. To introduce innovation, risk taking and create value for the customers, transmission must be integrated with distribution to enable a future smart grid transportation utility, while the existing utility retail enterprise is open to retail competition at the federal and global levels.

By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity

Copyright © 2008 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. This article is an unedited, an uncorrected, draft material of The EWPC Textbook. Please write to javs@ieee.org to contact the author for any kind of engagement.

Kevin and Bob,

Kevin’s article is a welcome contribution on the future of the electricity industry. Bob comment reflects the difficulties of utility monopolies to innovate and for regulators unable to take on technology risks. My comment will show a necessary shift on the utility of the future to become just a transportation utility. As can be seen, I am taking the opportunity to integrate a few of EWPC articles to show how to create value by introducing innovations and risk taking to the electricity industry after making a necessary paradigm shift.

In order to create value in the electricity industry, it is first necessary to restructure the industry with a high leverage intervention (please see Creative Destruction of the Old Electric Paradigm). Today’s utilities join together the grid and the enterprise under Open Transmission Access, which has resulted in a low leverage intervention of the old vertically integrated utility (VIU) paradigm that involved the industry in a looming systemic crisis. Please read The Anti-System Utility to get a feel of the value destruction under today’s utilities and The End of Electric Monopoly Retail to understand a reality that is long overdue.

Further value destruction comes from the separation of transmission and distribution (please read The Natural Monopoly Transportation System). When demand is inactive, distribution is also inactive, and the interface between transmission and distribution can be assumed to be simple and dependent. When demand is active, in time and space, distribution is very active, and the interface between transmission and distribution becomes highly interdependent and complex, under power system planning, operation and control. Transmission and distribution integration is a must to reap the value creation of the smart grid transportation (T&D) utility.

EWPC is a high leverage proposition that opens the industry to value creation at the customer interface with the development of business model innovations. EWPC restructuring separates the old utility grid (please see Disintegrating the Grid and Retail Worlds) and reintegrates to transmission and distribution to become the new utility smart grid transportation utility, opening all state utility enterprises to federal and global competition by Second Generation Retailers. Please read The Sixth Disruptive Technology which is the business model innovation of 2GRs. See also K2007 Retailers’ Enterprise Solutions to learn about an alternative to the electric industry intelligent enterprise.

Regards,

José Antonio

Reference and context: Creating Value is the Key for the Utility of the Future, by Kevin Walsh, Industry Principal, Utilities, SAP Americas, Inc.