The Obsolete Generation Economies of Scale Argument

The Pitfalls of and Opportunities in Electric Power Deregulation is an article written by Harry Valentine, Commentator/Energy Researcher, which opens up the deregulation box. The following comment is written from the EWPC architecture framework (EWPC-AF) perspective.

The Obsolete Generation Economies of Scale Argument

By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
EWPC Systems’ Architect

First posted in the GMH Blog, on June 8th, 2009.

Copyright © 2009 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.

Wishful thinking of an old world that doesn’t care about environmental risks abounds. However, energy poverty is a highly likely scenario of clean energy to be expected in North America. Even in China and India, people need to be prepared for such a culture changing scenario.

Whether considering or not the above statement, Harry’s emerging scenario will be only possible under the EWPC-AF, as explained in the article Innovation Needs to Belong to the Small. To ease the large value destruction in the making, the government needs to make a revolutionary move in the power industry to enable business model innovations to develop the resources of the demand side in order to increase significantly the efficiency of the power industry.

What Harry should be telling readers is that large generating stations are being protected from competition from disruptive technologies, by successive incremental extensions of the investor owned utilities (IOUs) architecture framework (IOUs-AF). In that process, a huge and highly complex legacy stock is now blowing a bubble with taxpayers’ funds, which will explode as the smart grid “innovations” regulated bets, including those that actually make it through, fail at early obsolescence, as it historically happened with 75% of all projects during the reengineering revolution. That is the Greek Tragedy that is explained in the discussion to the article Competitive Markets for COMPETE Coalition Potential Losers.

Two years ago I wrote the GMH post Lowest Cost Electricity Generation is Just Intuitive, but I will add more. Missing from the generation economy of scale thinking is the fact that most of the value being added in the power industry has been found close to customer premises, as explained in the EWPC article Just as Pogo, IOUs Found the Enemy. As the IOUs-AF developed resources of the supply side saturated long ago, they left the resources of the demand side highly undeveloped. The new economies of scale and scope are to be found in the development of the resources of the demand side and its integration to power system planning, operation and controls. See also the EWPC article Demand Integration is NOT the Province of Politics.