Comments
Wed, 12/02/2009 - 7:18pm
If regulators "would never risk bringing the grid down," they should adopt the system architecting approach. The incremental extensions approach led to large power grid failures in several countries that were followed by the capacity markets and NERC mandatory requirements incremental extensions. The US is one of the countries that have several industries experienced on the development of one of a kind unprecedented systems, where system architecture heuristics (lessons learns) approach predates wholesale organized markets incremental extension of the IOUs-AF.
The EWPC-AF reduction of complexity follows 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."
It follows from those two paragraphs that the huge increase in complexity resulting from the incremental approach being use by regulators is giving rise to stupid behavior. My suggestion is that they should change the approach to the one being use in the development of unprecedented systems, such as eCommerce systems, nuclear power plants, manned space flights. By architecting such unprecedented system, risk management can be well under control.
The statement "As the grid is not longer able to meet the performance requirements of an increasingly share of demand" is confirmed by a DOE report that says "According to the Galvin Electricity Initiative, 'the U.S. electric power system is designed and operated to meet a '3 nines' reliability standard. This means that electric grid power is 99.97% reliable. While this sounds good in theory, in practice it translates to interruptions in the electricity supply that cost American consumers an estimated $150 billion a year." See under the article Just as Pogo, IOUs Found the Enemy, in the link http://www.energyblogs.com/ewpc/index.cfm/2009/1/26/Just-as-Pogo-IOUs-Found-the-Enemy
Quoting the Galvin Electricity Initiative, under that same article, I added "... for every dollar spent on electricity, consumers are spending at least 50 cents on other goods and services to cover the costs of power failures..."
The idea of power capacity and NERC do predate markets. However, Capacity markets and NERC mandatory requirements do not.
Capacity Markets were initiated after markets were introduced in the power industry, as an incremental extension of the IOUs-AF. The conclusion in the last page of the California ISO document "Capacity Markets - General Background Information (published at least on or after December 28 2006)," says "Because many of the Eastern ISOs' capacity market designs have evolved over the past few years, California can learn from these experiences to more efficiently create an enduring resource adequacy framework." Thus, capacity markets do not predate markets. See the link http://www.caiso.com/1b99/1b99a18465360.pdf
To see how NERC mandatory requirements do not predate markets, browse the 1,076 page document Reliability Standards for the Bulk Electric Systems in North America http://www.nerc.com/files/Reliability_Standards_Complete_Set_2009Nov2.pdf
As a quick evidence readers may search "version history" of the standards and come to their own conclusions.
The EWPC-AF reduction of complexity follows 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."
It follows from those two paragraphs that the huge increase in complexity resulting from the incremental approach being use by regulators is giving rise to stupid behavior. My suggestion is that they should change the approach to the one being use in the development of unprecedented systems, such as eCommerce systems, nuclear power plants, manned space flights. By architecting such unprecedented system, risk management can be well under control.
The statement "As the grid is not longer able to meet the performance requirements of an increasingly share of demand" is confirmed by a DOE report that says "According to the Galvin Electricity Initiative, 'the U.S. electric power system is designed and operated to meet a '3 nines' reliability standard. This means that electric grid power is 99.97% reliable. While this sounds good in theory, in practice it translates to interruptions in the electricity supply that cost American consumers an estimated $150 billion a year." See under the article Just as Pogo, IOUs Found the Enemy, in the link http://www.energyblogs.com/ewpc/index.cfm/2009/1/26/Just-as-Pogo-IOUs-Found-the-Enemy
Quoting the Galvin Electricity Initiative, under that same article, I added "... for every dollar spent on electricity, consumers are spending at least 50 cents on other goods and services to cover the costs of power failures..."
The idea of power capacity and NERC do predate markets. However, Capacity markets and NERC mandatory requirements do not.
Capacity Markets were initiated after markets were introduced in the power industry, as an incremental extension of the IOUs-AF. The conclusion in the last page of the California ISO document "Capacity Markets - General Background Information (published at least on or after December 28 2006)," says "Because many of the Eastern ISOs' capacity market designs have evolved over the past few years, California can learn from these experiences to more efficiently create an enduring resource adequacy framework." Thus, capacity markets do not predate markets. See the link http://www.caiso.com/1b99/1b99a18465360.pdf
To see how NERC mandatory requirements do not predate markets, browse the 1,076 page document Reliability Standards for the Bulk Electric Systems in North America http://www.nerc.com/files/Reliability_Standards_Complete_Set_2009Nov2.pdf
As a quick evidence readers may search "version history" of the standards and come to their own conclusions.
Jose Antonio Vanderhorst-Silverio
Thu, 12/03/2009 - 10:40am
<< The idea of power capacity and NERC do predate markets. However, Capacity markets and NERC mandatory requirements do not. >>
NERC has imposed capacity requirements since its inception in 1968. It was one of the reasons it was founded.
<< Capacity Markets were initiated after markets were introduced in the power industry, as an incremental extension of the IOUs-AF. >>
Bull. Capacity trading has been around as long as capacity requirements, which date back to at least the 1960s, maybe earlier.
<< To see how NERC mandatory requirements do not predate markets, browse the 1,076 page document Reliability Standards for the Bulk Electric Systems in North America ... >>
I know the document well since I review it every year along with their annual reliability assessment. If you are going to cite something from a 1000+ page document, please direct us to the page to which you refer.
<< "Because many of the Eastern ISOs' capacity market designs have evolved over the past few years, California can learn from these experiences to more efficiently create an enduring resource adequacy framework." Thus, capacity markets do not predate markets. >>
Because they have 'evolved', they did not exist? Nonsense. Before the ISO/RTO era, capacity trading was bilateral. It still is in the non-RTO regions, in Midwest ISO and SPP. ERCOT doesn't have capacity requirements nor markets anymore. Canada never had capacity requirements.
<< The EWPC-AF reduction of complexity follows 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." >>
Exactly what does Dee Hock, CEO Emeritus of VISA International know about power systems? Nice sentiment, nevertheless irrelevant.
<< It follows from those two paragraphs that the huge increase in complexity resulting from the incremental approach being use by regulators is giving rise to stupid behavior. >>
Rubbish. I see no evidence of "stupid behavior". Taking a headlong dive into this rather than incrementally, THAT would be monumentally stupid.
<< By architecting such unprecedented system, risk management can be well under control. >>
Can I quote this at my next PRMIA chapter meeting??? Control risk management by imposing untested and unproven market schemes.
<< in practice it translates to interruptions in the electricity supply that cost American consumers an estimated $150 billion a year. >>
This is nonsense. Your $150b number is roughly 40% of the entire retail sector!!! Are you citing Galvin Electricity Initiative as authoritative? Why? Where does their number come from? It looks like sales hype to me.
NERC has imposed capacity requirements since its inception in 1968. It was one of the reasons it was founded.
<< Capacity Markets were initiated after markets were introduced in the power industry, as an incremental extension of the IOUs-AF. >>
Bull. Capacity trading has been around as long as capacity requirements, which date back to at least the 1960s, maybe earlier.
<< To see how NERC mandatory requirements do not predate markets, browse the 1,076 page document Reliability Standards for the Bulk Electric Systems in North America ... >>
I know the document well since I review it every year along with their annual reliability assessment. If you are going to cite something from a 1000+ page document, please direct us to the page to which you refer.
<< "Because many of the Eastern ISOs' capacity market designs have evolved over the past few years, California can learn from these experiences to more efficiently create an enduring resource adequacy framework." Thus, capacity markets do not predate markets. >>
Because they have 'evolved', they did not exist? Nonsense. Before the ISO/RTO era, capacity trading was bilateral. It still is in the non-RTO regions, in Midwest ISO and SPP. ERCOT doesn't have capacity requirements nor markets anymore. Canada never had capacity requirements.
<< The EWPC-AF reduction of complexity follows 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." >>
Exactly what does Dee Hock, CEO Emeritus of VISA International know about power systems? Nice sentiment, nevertheless irrelevant.
<< It follows from those two paragraphs that the huge increase in complexity resulting from the incremental approach being use by regulators is giving rise to stupid behavior. >>
Rubbish. I see no evidence of "stupid behavior". Taking a headlong dive into this rather than incrementally, THAT would be monumentally stupid.
<< By architecting such unprecedented system, risk management can be well under control. >>
Can I quote this at my next PRMIA chapter meeting??? Control risk management by imposing untested and unproven market schemes.
<< in practice it translates to interruptions in the electricity supply that cost American consumers an estimated $150 billion a year. >>
This is nonsense. Your $150b number is roughly 40% of the entire retail sector!!! Are you citing Galvin Electricity Initiative as authoritative? Why? Where does their number come from? It looks like sales hype to me.
James Carson
Thu, 12/03/2009 - 1:38pm
A new approach to power energy policy design, based on system's architecting heuristics, has led to an emerging simplified synthesis of the power industry regulatory policy. Instead of undergoing business as usual regulatory proceedings, the approach to the Electricity Without Price Controls Architecture Framework is poised to replace the Investor Owned Utilities Architecture Framework and its incremental extensions that have evolved by analytic patchwork as a extremely complex system.
From its history, I found that in 1997 "NERC formed the Electric Reliability Panel, an independent body, to recommend how NERC should redefine its vision, functions, governance, and membership to ensure that reliability could be maintained in an increasingly competitive marketplace. The panel's report called on NERC to restructure itself into a new organization called the North American Electric Reliability Organization (NAERO) that could function as a self-regulating organization with the authority to set, measure, and enforce reliability planning and operating standards." Before that it could not enforce anything and they were just proposing to start doing it.
"In the absence of legislative authority, nine of the ten Regional Reliability Councils signed an Agreement for Regional Compliance and Enforcement Programs with NERC. The agreements are intended to enforce compliance with NERC reliability rules through contractual means. Although the Agreements are not a substitute for federal legislation, they allow NERC to ensure some measure of compliance with some of the rules."
Capacity trading is NOT capacity markets. They are two different things.
For the quick review of the document Reliability Standards for the Bulk Electric Systems in North America, just do a search of "Version History Version Date Action Change Tracking," and you will get 168 hits. You will see under "Date" that none of those standards predate markets.
Again Capacity trading is not capacity markets. Why would California need to learn them if they were widespread?
The lesson learned given by Dee Hock is highly relevant as system architecting heuristics, like simplify, simplify, simplify; just because it work in the past there's no guarantee that it will work now or in the future; successful architectures are proprietary, but open; do the hard parts first.
Simple and stupid behavior in the power industry is what the DOE Electricity Advisory Committee [EAC], composed primarily of power industry executives, that released a series of reports on the future of the US electric grid" highlighted, when they quoted Galvin Electricity Initiative as authoritative. Fifty cents on every dollar is 33%, so more than 50 cents could be close to 40%.
There is no need to repeat about unprecedented system. The high tech examples are quite clear examples of system architetcting.
From its history, I found that in 1997 "NERC formed the Electric Reliability Panel, an independent body, to recommend how NERC should redefine its vision, functions, governance, and membership to ensure that reliability could be maintained in an increasingly competitive marketplace. The panel's report called on NERC to restructure itself into a new organization called the North American Electric Reliability Organization (NAERO) that could function as a self-regulating organization with the authority to set, measure, and enforce reliability planning and operating standards." Before that it could not enforce anything and they were just proposing to start doing it.
"In the absence of legislative authority, nine of the ten Regional Reliability Councils signed an Agreement for Regional Compliance and Enforcement Programs with NERC. The agreements are intended to enforce compliance with NERC reliability rules through contractual means. Although the Agreements are not a substitute for federal legislation, they allow NERC to ensure some measure of compliance with some of the rules."
Capacity trading is NOT capacity markets. They are two different things.
For the quick review of the document Reliability Standards for the Bulk Electric Systems in North America, just do a search of "Version History Version Date Action Change Tracking," and you will get 168 hits. You will see under "Date" that none of those standards predate markets.
Again Capacity trading is not capacity markets. Why would California need to learn them if they were widespread?
The lesson learned given by Dee Hock is highly relevant as system architecting heuristics, like simplify, simplify, simplify; just because it work in the past there's no guarantee that it will work now or in the future; successful architectures are proprietary, but open; do the hard parts first.
Simple and stupid behavior in the power industry is what the DOE Electricity Advisory Committee [EAC], composed primarily of power industry executives, that released a series of reports on the future of the US electric grid" highlighted, when they quoted Galvin Electricity Initiative as authoritative. Fifty cents on every dollar is 33%, so more than 50 cents could be close to 40%.
There is no need to repeat about unprecedented system. The high tech examples are quite clear examples of system architetcting.
Jose Antonio Vanderhorst-Silverio
Fri, 12/04/2009 - 2:55pm
NERC did not require legislative authority. It had none until after the 2005 EPACT, in fact. FERC had been given the authority to designate an official reliability authority and granted that to NERC in 2007.
Nevertheless, they did have the authority to revoke control area authority in 1999. How do I know that? They threatened a large midwestern utility with just that penalty that year for 'leaning on the ties'. They had had that authority for decades. They also have levied substantial fines for failing to meet reliability standards for decades.
<< Capacity trading is NOT capacity markets. They are two different things. >>
That is absurd. On what planet is trading not markets???
<< Why would California need to learn them if they were widespread? >>
Simple. They want to learn from the eastern experience about what CHANGES they want to make in their capacity markets. Capacity markets in NYISO, ISONE and especially PJM have changed substantially over the past decade.
Please link to any DOE document that shows Galvin as authoritative. Their claims are outlandish.
<< There is no need to repeat about unprecedented system. The high tech examples are quite clear examples of system architetcting. >>
Oh, yes there is. The truth is that most high tech systems fail several times in their early stages, especially those that implement innovative architecture. If your scheme fails, the consequences would be immediately catastrophic. That is why I say that no regulator would prudently follow any path other than incremental.
Nevertheless, they did have the authority to revoke control area authority in 1999. How do I know that? They threatened a large midwestern utility with just that penalty that year for 'leaning on the ties'. They had had that authority for decades. They also have levied substantial fines for failing to meet reliability standards for decades.
<< Capacity trading is NOT capacity markets. They are two different things. >>
That is absurd. On what planet is trading not markets???
<< Why would California need to learn them if they were widespread? >>
Simple. They want to learn from the eastern experience about what CHANGES they want to make in their capacity markets. Capacity markets in NYISO, ISONE and especially PJM have changed substantially over the past decade.
Please link to any DOE document that shows Galvin as authoritative. Their claims are outlandish.
<< There is no need to repeat about unprecedented system. The high tech examples are quite clear examples of system architetcting. >>
Oh, yes there is. The truth is that most high tech systems fail several times in their early stages, especially those that implement innovative architecture. If your scheme fails, the consequences would be immediately catastrophic. That is why I say that no regulator would prudently follow any path other than incremental.
James Carson
Sat, 12/05/2009 - 4:43am
This post has only one objective: to add additional information in order to show that "... 'NERC Mandatory Requirements' are not 'incremental extensions'. They pre-date power markets by decades" is misleading information aimed to confuse readers. Another post will follow later on.
To prove it, I have taken the following evidence from the first section of the NERC Operating Manual of 2008, "A history of NERC," to show that mandatory requirements (to ensure compliance) have their origin in organized wholesale markets. The manual can be downloaded from the link http://www.nerc.com/files/opman_12-13Mar08.pdf
NERC mandatory requirements are the result of an action plan that NERC submitted in 1995 in response to The Federal Energy Regulatory Commission, which issued "its Notice of Proposed Rulemaking (NOPR) on Open Access seeking comments on proposals to encourage a more fully competitive wholesale electric power market. NERC took the lead in addressing the planning and operating reliability aspects of the NOPR and filed a six-point action plan to provide the basis for action by the electric utility industry and FERC." Item 4 on the action plan was "Ensure compliance with NERC rules in a comparable and fair manner."
NERC's history shows that the preceding organization that became NERC "was formed to study and recommend an informal operations organization for the future... It served as an informal, voluntary organization of operating personnel..."
In 1967, the U.S. Federal Power Commission report on the 1965 blackout recommended "A council on power coordination made up of representatives from each of the nation's Regional coordinating organizations to exchange and disseminate information on Regional coordinating practices to all of the Regional organizations, and to review, discuss, and assist in resolving matters affecting interregional coordination."
In 1978, "The Board of Trustees agrees on several additional organizational objectives for NERC, including the need to: define and measure reliability, analyze and testify about legislation affecting reliability, study interregional interconnections, communicate with and educate others about reliability, and collect and publish data on future electricity supply and demand."
In 1979, "NERC assumes responsibility for collecting and analyzing generator availability data...NERC approves expanding its activities to address changes in the industry resulting from the passage of the U.S. National Energy Act of 1978. These activities include the development of planning guides for designing bulk electric systems, invitations to utility trade groups to send observers to NERC Board meetings, and adding staff to support expanded technical activities.
To prove it, I have taken the following evidence from the first section of the NERC Operating Manual of 2008, "A history of NERC," to show that mandatory requirements (to ensure compliance) have their origin in organized wholesale markets. The manual can be downloaded from the link http://www.nerc.com/files/opman_12-13Mar08.pdf
NERC mandatory requirements are the result of an action plan that NERC submitted in 1995 in response to The Federal Energy Regulatory Commission, which issued "its Notice of Proposed Rulemaking (NOPR) on Open Access seeking comments on proposals to encourage a more fully competitive wholesale electric power market. NERC took the lead in addressing the planning and operating reliability aspects of the NOPR and filed a six-point action plan to provide the basis for action by the electric utility industry and FERC." Item 4 on the action plan was "Ensure compliance with NERC rules in a comparable and fair manner."
NERC's history shows that the preceding organization that became NERC "was formed to study and recommend an informal operations organization for the future... It served as an informal, voluntary organization of operating personnel..."
In 1967, the U.S. Federal Power Commission report on the 1965 blackout recommended "A council on power coordination made up of representatives from each of the nation's Regional coordinating organizations to exchange and disseminate information on Regional coordinating practices to all of the Regional organizations, and to review, discuss, and assist in resolving matters affecting interregional coordination."
In 1978, "The Board of Trustees agrees on several additional organizational objectives for NERC, including the need to: define and measure reliability, analyze and testify about legislation affecting reliability, study interregional interconnections, communicate with and educate others about reliability, and collect and publish data on future electricity supply and demand."
In 1979, "NERC assumes responsibility for collecting and analyzing generator availability data...NERC approves expanding its activities to address changes in the industry resulting from the passage of the U.S. National Energy Act of 1978. These activities include the development of planning guides for designing bulk electric systems, invitations to utility trade groups to send observers to NERC Board meetings, and adding staff to support expanded technical activities.
Jose Antonio Vanderhorst-Silverio
Sat, 12/05/2009 - 8:36am
This post has only one objective: to add additional information in order to show that "... 'Capacity markets' are not 'incremental extensions'. They pre-date power markets by decades" is misleading information aimed to confuse readers. Still another post will follow later on.
In vertical integration there was electricity trading within power systems interconnections. According to the 11th edition of the Standard Handbook for Electrical Engineers (1978), "Interconnections also allow companies to exchange power when the time of their peak load differs... This allows each party to install less generating capacity while maintaining adequate system reliability."
The methods to ensure that utilities maintain system adequacy were clearly spelled out in regulatory expansion plan procedures. I know that because I actually led the research and writing of one expansion plan myself when I was Planning Director of the Dominican Power Company and had studied several other plans closely. But, that is not about what we should be discussing in relation to IOUs-AF capacity markets and the EWPC-AF, unless (I repeat) there is an interest to mislead readers.
This is the proper context. In the abstract of the paper "A Market Approach to Long-Term Security of Supply," by Vazquez, C.; Rivier, M.; Perez-Arriaga, Ij., March 2002, a very good introductory example of the capacity markets incremental extensions added to the IOUs-AF is described.
"The problem of ensuring that there is enough generation capacity to meet future demand has been an issue in market design since the beginning of the deregulation process. Although ideally the market itself should be enough to provide adequate investment incentives, there are several factors that prevent this result from being achieved, and some actual markets have already experienced problems related with a lack of generation capacity. A regulatory framework to address this question is presented. The procedure is based on an organized market where reliability contracts (based on financial call options) are auctioned, so both their price and their allocation among the different plants are determined through competitive mechanisms. This results in a stabilization of the income of the generators and provides a clear incentive for new generation investment, with a minimum of regulatory intervention. Additionally, the method represents a market-compatible mechanism to hedge demand from the occurrence of high market prices.
Keywords: Capacity markets, capacity payments, long-term guarantee of supply, generation adequacy, wholesale market design, electricity markets.
In vertical integration there was electricity trading within power systems interconnections. According to the 11th edition of the Standard Handbook for Electrical Engineers (1978), "Interconnections also allow companies to exchange power when the time of their peak load differs... This allows each party to install less generating capacity while maintaining adequate system reliability."
The methods to ensure that utilities maintain system adequacy were clearly spelled out in regulatory expansion plan procedures. I know that because I actually led the research and writing of one expansion plan myself when I was Planning Director of the Dominican Power Company and had studied several other plans closely. But, that is not about what we should be discussing in relation to IOUs-AF capacity markets and the EWPC-AF, unless (I repeat) there is an interest to mislead readers.
This is the proper context. In the abstract of the paper "A Market Approach to Long-Term Security of Supply," by Vazquez, C.; Rivier, M.; Perez-Arriaga, Ij., March 2002, a very good introductory example of the capacity markets incremental extensions added to the IOUs-AF is described.
"The problem of ensuring that there is enough generation capacity to meet future demand has been an issue in market design since the beginning of the deregulation process. Although ideally the market itself should be enough to provide adequate investment incentives, there are several factors that prevent this result from being achieved, and some actual markets have already experienced problems related with a lack of generation capacity. A regulatory framework to address this question is presented. The procedure is based on an organized market where reliability contracts (based on financial call options) are auctioned, so both their price and their allocation among the different plants are determined through competitive mechanisms. This results in a stabilization of the income of the generators and provides a clear incentive for new generation investment, with a minimum of regulatory intervention. Additionally, the method represents a market-compatible mechanism to hedge demand from the occurrence of high market prices.
Keywords: Capacity markets, capacity payments, long-term guarantee of supply, generation adequacy, wholesale market design, electricity markets.
Jose Antonio Vanderhorst-Silverio
Sat, 12/05/2009 - 10:26am
This post has only one objective: to show that the statement "As the grid is not longer able to meet the performance requirements of an increasingly share of demand" is confirmed by a DOE report that says "According to the Galvin Electricity Initiative, 'the U.S. electric power system is designed and operated to meet a '3 nines' reliability standard. This means that electric grid power is 99.97% reliable. While this sounds good in theory, in practice it translates to interruptions in the electricity supply that cost American consumers an estimated $150 billion a year." The last post will follow inmediately.
To confirm that "Simple and stupid behavior in the power industry is what the DOE Electricity Advisory Committee [EAC], composed primarily of power industry executives, that released a series of reports on the future of the US electric grid" highlighted, when they quoted Galvin Electricity Initiative as authoritative," It is possible to navigate to the info requested, from my first response, where I wrote "See under the article Just as Pogo, IOUs Found the Enemy, in the link http://www.energyblogs.com/ewpc/index.cfm/2009/1/2...
However, to reduce navigation, readers can go directly to page 7 of the DOE Electricity Advisory Committee report "Smart Grid: Enabler of the New Energy Economy, December 2008, at the link http://www.oe.energy.gov/DocumentsandMedia/final-smart-grid-report.pdf
To confirm that "Simple and stupid behavior in the power industry is what the DOE Electricity Advisory Committee [EAC], composed primarily of power industry executives, that released a series of reports on the future of the US electric grid" highlighted, when they quoted Galvin Electricity Initiative as authoritative," It is possible to navigate to the info requested, from my first response, where I wrote "See under the article Just as Pogo, IOUs Found the Enemy, in the link http://www.energyblogs.com/ewpc/index.cfm/2009/1/2...
However, to reduce navigation, readers can go directly to page 7 of the DOE Electricity Advisory Committee report "Smart Grid: Enabler of the New Energy Economy, December 2008, at the link http://www.oe.energy.gov/DocumentsandMedia/final-smart-grid-report.pdf
Jose Antonio Vanderhorst-Silverio
Sat, 12/05/2009 - 10:53am
This final post has only one objective: to show how powerful competent system architecting is, especially at the application of the ultraquality imperative to the RPTSS to better respond to the ideal that regulators "would never risk bringing the grid down."
While the IOU-AF Smart Grid incremental extension is a one shot social system quality regulated (by committees!) architecting deal, the EWPC-AF is done in two stages, starting with an intermediate architecture, that has a very familiar "primary regulated power (integrated transmission and distribution) transportation service system (RPTSS) compact with a responsibility to transport electricity of commercial quality (EoCQ) of a given area" architected under the ultraquality imperative.
Eberhart Rechtin and Mark Maier, in their book "The Art of System Architecting," explain that "social system quality... is less a foundation than a case-by-case trade-off; that is, the quality desired depends on the system to be provided. In nuclear power generation, modern manufacturing, and manned space flight, ultraquality is an imperative. But in public health, pollution control, and safety, the level of acceptable quality is only one of many economic, social, political, and technical factors to be accommodated."
In addition to the California deregulation debacle, once again regulators are taking huge risks as explained in the EWPC article "The Deadly Sin of State Regulators on the Smart Grid (please hit the link http://www.energyblogs.com/ewpc/index.cfm/2009/7/5/The-Deadly-Sin-of-State-Regulators-on-the-Smart-Grid )," where I wrote:
Quote begins. The huge Greek Tragedy in the making with the smart grid development is a typical case that has "an unprecedented number of interdependent risks," such as The Egg Basket deadly sin of the flaw of averages, as Sam Savage, Stefan Scholtes, and Daniel Zweidler explain in their article Probability Management, as reprinted by the IEEE Engineering Management Review, Vol. 37, No.2, Second Quarter 2009. The authors write:
Consider putting 10 eggs all in the same basket, versus one by one in separate baskets. If there is 10-percent change of dropping any particular basket, then either strategy results in an average of nine unbroken eggs. However, the first strategy has a 10-percent chance of losing all the eggs, while with the second there is one chance in 10 billion of losing all the eggs.
That is the huge kind of interdependent risks that state regulators are taking on the smart grid projects under the IOUs Architecture Framework (IOUs-AF) with all the eggs on the basket. As the reengineering revolution show that 75 percent of projects were not successful, the Greek Tragedy in the making has spoken. The situation gets even worst at jurisdictions where the artificial profit decoupling incremental extension of the IOUs-AF is also being considered.
Under the EWPC Architecture Framework (EWPC-AF), retail markets business model competition (not all the eggs in one basket), there is such a low expected probability of failure, which enables the development of business model innovations that better understand and satisfy customers' needs. Under the EWPC-AF, natural decoupling is set by natural selection of competitive market survival, as customers are able to choose. Quote ends.
While the IOU-AF Smart Grid incremental extension is a one shot social system quality regulated (by committees!) architecting deal, the EWPC-AF is done in two stages, starting with an intermediate architecture, that has a very familiar "primary regulated power (integrated transmission and distribution) transportation service system (RPTSS) compact with a responsibility to transport electricity of commercial quality (EoCQ) of a given area" architected under the ultraquality imperative.
Eberhart Rechtin and Mark Maier, in their book "The Art of System Architecting," explain that "social system quality... is less a foundation than a case-by-case trade-off; that is, the quality desired depends on the system to be provided. In nuclear power generation, modern manufacturing, and manned space flight, ultraquality is an imperative. But in public health, pollution control, and safety, the level of acceptable quality is only one of many economic, social, political, and technical factors to be accommodated."
In addition to the California deregulation debacle, once again regulators are taking huge risks as explained in the EWPC article "The Deadly Sin of State Regulators on the Smart Grid (please hit the link http://www.energyblogs.com/ewpc/index.cfm/2009/7/5/The-Deadly-Sin-of-State-Regulators-on-the-Smart-Grid )," where I wrote:
Quote begins. The huge Greek Tragedy in the making with the smart grid development is a typical case that has "an unprecedented number of interdependent risks," such as The Egg Basket deadly sin of the flaw of averages, as Sam Savage, Stefan Scholtes, and Daniel Zweidler explain in their article Probability Management, as reprinted by the IEEE Engineering Management Review, Vol. 37, No.2, Second Quarter 2009. The authors write:
Consider putting 10 eggs all in the same basket, versus one by one in separate baskets. If there is 10-percent change of dropping any particular basket, then either strategy results in an average of nine unbroken eggs. However, the first strategy has a 10-percent chance of losing all the eggs, while with the second there is one chance in 10 billion of losing all the eggs.
That is the huge kind of interdependent risks that state regulators are taking on the smart grid projects under the IOUs Architecture Framework (IOUs-AF) with all the eggs on the basket. As the reengineering revolution show that 75 percent of projects were not successful, the Greek Tragedy in the making has spoken. The situation gets even worst at jurisdictions where the artificial profit decoupling incremental extension of the IOUs-AF is also being considered.
Under the EWPC Architecture Framework (EWPC-AF), retail markets business model competition (not all the eggs in one basket), there is such a low expected probability of failure, which enables the development of business model innovations that better understand and satisfy customers' needs. Under the EWPC-AF, natural decoupling is set by natural selection of competitive market survival, as customers are able to choose. Quote ends.
Jose Antonio Vanderhorst-Silverio
Mon, 12/07/2009 - 9:16pm
Jose, I suggest that you read the pdf in the link below. In making the case for making NERC the ERO, it explains how NERC has long established and enforced reliability standards.
http://www.misostates.org/L4%20-%20David%20Cook%20A%20-%20NERC.pdf
I neither "mislead" readers nor posted information that was confusing. I am merely trying to correct your silly pronouncements that others might read and believe to be true.
NERC has been a highly effective industry self-regulatory organization for four decades. It has established and enforced standards much like the NASD sets and enforces standards in securities trading or the NFA sets and enforces standards in futures trading. Many industries have similar powerful and effective self-regulatory organizations.
Your citation of Vasquez et. al has nothing to do with capacity as traded. Capacity or "reliability contracts" are NOWHERE in North America auctioned as financial call options. The approach they mention/recommend in your quote has never been implemented.
I reiterate, the Galvin numbers are ridiculous regardless of who cites them. How can we reduce the cost of electricity disturbances by $49B per year? They cite a cost of $150B cost for disturbances? I reiterate, US energy consumption is roughly 4billion MWHs per year. They are making the absurd claim that the cost of disturbances is roughly the same as the entire wholesale sector? Half the retail value??? THINK about it....
http://www.misostates.org/L4%20-%20David%20Cook%20A%20-%20NERC.pdf
I neither "mislead" readers nor posted information that was confusing. I am merely trying to correct your silly pronouncements that others might read and believe to be true.
NERC has been a highly effective industry self-regulatory organization for four decades. It has established and enforced standards much like the NASD sets and enforces standards in securities trading or the NFA sets and enforces standards in futures trading. Many industries have similar powerful and effective self-regulatory organizations.
Your citation of Vasquez et. al has nothing to do with capacity as traded. Capacity or "reliability contracts" are NOWHERE in North America auctioned as financial call options. The approach they mention/recommend in your quote has never been implemented.
I reiterate, the Galvin numbers are ridiculous regardless of who cites them. How can we reduce the cost of electricity disturbances by $49B per year? They cite a cost of $150B cost for disturbances? I reiterate, US energy consumption is roughly 4billion MWHs per year. They are making the absurd claim that the cost of disturbances is roughly the same as the entire wholesale sector? Half the retail value??? THINK about it....
James Carson
Tue, 12/08/2009 - 5:54am
Thank you Mr. Carson for you effort to be a great sounding board to get the truth out.
First Issue.
When did NERC's role change? http://www.nerc.com/page.php?cid=1%7C7%7C114
The transition from voluntary member organization into the independent authority charged with ensuring legal compliance with mandatory Reliability Standards is being phased in. From its creation in 1968 until approximately July 2006, NERC operated as a voluntary industry organization. In July 2006, FERC certified NERC as the "electric reliability organization" for the U.S., and preparations began in earnest for its new, expanded role. On June 18, 2007, compliance with NERC Reliability Standards will become a legal requirement for bulk power system owners, operators and users.
Second issue.
Thanks for the tip of removing "(based on financial call options)" to make Vasquez et al abstract responsive.
"The problem of ensuring that there is enough generation capacity to meet future demand has been an issue in market design since the beginning of the deregulation process. Although ideally the market itself should be enough to provide adequate investment incentives, there are several factors that prevent this result from being achieved, and some actual markets have already experienced problems related with a lack of generation capacity. A regulatory framework to address this question is presented. The procedure is based on an organized market where reliability contracts are auctioned, so both their price and their allocation among the different plants are determined through competitive mechanisms. This results in a stabilization of the income of the generators and provides a clear incentive for new generation investment, with a minimum of regulatory intervention."
Third issue.
Outage costs, which have been increasing dearly as the U.S. has entered into the digital era, are not included in the statistics you mentioned that stop at the meter.
To see that the claim is real, go to page 7 on the DOE report and look at Table 2-2. Cost of One-Hour Power Service Interruption in Various Industries to get a true feeling. Below the table is the following explanation:
The Galvin Electricity Initiative says that "in an increasingly digital world, even the slightest disturbances in power quality and reliability cause loss of information, processes and productivity. Interruptions and disturbances measuring less than one cycle (less than 1/60th of a second) are enough to crash servers, computers, intensive care and life support machines, automated equipment and other microprocessor-based devices.
First Issue.
When did NERC's role change? http://www.nerc.com/page.php?cid=1%7C7%7C114
The transition from voluntary member organization into the independent authority charged with ensuring legal compliance with mandatory Reliability Standards is being phased in. From its creation in 1968 until approximately July 2006, NERC operated as a voluntary industry organization. In July 2006, FERC certified NERC as the "electric reliability organization" for the U.S., and preparations began in earnest for its new, expanded role. On June 18, 2007, compliance with NERC Reliability Standards will become a legal requirement for bulk power system owners, operators and users.
Second issue.
Thanks for the tip of removing "(based on financial call options)" to make Vasquez et al abstract responsive.
"The problem of ensuring that there is enough generation capacity to meet future demand has been an issue in market design since the beginning of the deregulation process. Although ideally the market itself should be enough to provide adequate investment incentives, there are several factors that prevent this result from being achieved, and some actual markets have already experienced problems related with a lack of generation capacity. A regulatory framework to address this question is presented. The procedure is based on an organized market where reliability contracts are auctioned, so both their price and their allocation among the different plants are determined through competitive mechanisms. This results in a stabilization of the income of the generators and provides a clear incentive for new generation investment, with a minimum of regulatory intervention."
Third issue.
Outage costs, which have been increasing dearly as the U.S. has entered into the digital era, are not included in the statistics you mentioned that stop at the meter.
To see that the claim is real, go to page 7 on the DOE report and look at Table 2-2. Cost of One-Hour Power Service Interruption in Various Industries to get a true feeling. Below the table is the following explanation:
The Galvin Electricity Initiative says that "in an increasingly digital world, even the slightest disturbances in power quality and reliability cause loss of information, processes and productivity. Interruptions and disturbances measuring less than one cycle (less than 1/60th of a second) are enough to crash servers, computers, intensive care and life support machines, automated equipment and other microprocessor-based devices.
Jose Antonio Vanderhorst-Silverio
Tue, 12/08/2009 - 11:41am
Jose, you are laboring under the foolish misconception that 'voluntary' meant 'not effective'. The NFA and NASD are similarly 'voluntary'. The only change in 2007 was legal certification by FERC as an ERO. NERC has long been responsible for reliability in North America.
Here is a quote from the end of a letter sent by ECAR, a subdivision of NERC, sent in 1999 that threatens to revoke the transgressor's (name obliterated) authority to operate as a control area. If they were merely a voluntary organization, how can NERC revoke anything?
<< To address this serious reliability situation, the ECAR Executive Board requests ***** to promptly develop and transmit to the ECAR Executive Board a detailed mitigation plan delineating the actions ***** will take to insure that ***** will not repeat such unreliable operation in the future.
<< If you fail to comply with this request and/or continue to disregard NERC and ECAR operating policies and procedures, ***** authorization to operate as a Control Area will be considered for revocation.
Jose, I have made this point before, before you go spouting nonsense about US power markets, you need to learn how they actually operate first.
Here is a quote from the end of a letter sent by ECAR, a subdivision of NERC, sent in 1999 that threatens to revoke the transgressor's (name obliterated) authority to operate as a control area. If they were merely a voluntary organization, how can NERC revoke anything?
<< To address this serious reliability situation, the ECAR Executive Board requests ***** to promptly develop and transmit to the ECAR Executive Board a detailed mitigation plan delineating the actions ***** will take to insure that ***** will not repeat such unreliable operation in the future.
<< If you fail to comply with this request and/or continue to disregard NERC and ECAR operating policies and procedures, ***** authorization to operate as a Control Area will be considered for revocation.
Jose, I have made this point before, before you go spouting nonsense about US power markets, you need to learn how they actually operate first.
James Carson
Tue, 12/08/2009 - 6:21pm
August 14, 2003 North America experienced its worst blackout ever, as 50 million people lost power in the northeastern and midwestern U.S. and Ontario, Canada.
April 5, 2004 Final report of the U.S.-Canada Power System Outage Task Force on the 2003 blackout concluded the single most important recommendation for preventing future blackouts, and reducing the scope of those that occur, is for the U.S. government to make reliability standards mandatory and enforceable.
See http://www.nerc.com/page.php?cid=1%7C7%7C11
April 5, 2004 Final report of the U.S.-Canada Power System Outage Task Force on the 2003 blackout concluded the single most important recommendation for preventing future blackouts, and reducing the scope of those that occur, is for the U.S. government to make reliability standards mandatory and enforceable.
See http://www.nerc.com/page.php?cid=1%7C7%7C11
Jose Antonio Vanderhorst-Silverio
Wed, 12/09/2009 - 9:10pm
They decided to make them LEGALLY mandatory and enforceable. That is not to say that they were not already mandatory and enforceable before, as my example more than amply illustrated. In 1999, NERC, through its ECAR operating subdivision, threatened the 'death penalty' against a substantial utility for 'leaning on the ties'. This is a distinction without a difference. In fact, they may have made enforcement harder, not easier, since due process rules now apply.
James Carson
Thu, 12/10/2009 - 5:14am
In response to the post "I think the Debate on the IOUs and EWPC Architecture Frameworks is Over (http://www.energyblogs.com/ewpc/index.cfm/2009/12/8/I-think-the-Debate-on-the-IOUs-and-EWPC-Architecture-Frameworks-is-Over ), James wrote at 12/9/09 8:12 PM:
The debate is indeed over. My point that no sane regulator would ever follow Jose Antonio's plan has not been refuted.
# Posted By James Carson |
The debate is indeed over. My point that no sane regulator would ever follow Jose Antonio's plan has not been refuted.
# Posted By James Carson |
Jose Antonio Vanderhorst-Silverio
Thu, 12/10/2009 - 5:17am
I recall that at the end of 2006, Mr. Carson wrote: "My intention is not to convince Professor Banks. My intention is to challenge his assertions with which I disagree. Thousands of people read these forums, and I think it is a bad idea for them to get the impression that Professor Banks reflects the prevailing consensus. Frankly, I expected a more spirited clash. He merely makes pronouncements with little support and fails to respond to my rejoinders."
I guess thanks to Mr. Carson's cooperacion, this time things are much different than with Fred Banks. The debate still has one point to go.
# Posted By Jose Antonio Vanderhorst-Silverio | 12/10/09 4:09 AM
I guess thanks to Mr. Carson's cooperacion, this time things are much different than with Fred Banks. The debate still has one point to go.
# Posted By Jose Antonio Vanderhorst-Silverio | 12/10/09 4:09 AM
Jose Antonio Vanderhorst-Silverio
Thu, 12/10/2009 - 6:00am
Even though Mr. Carson already accepted that there is only remaining point left on the debate, for completeness I repeat that the new NERC's history states "'... concluded the single most important recommendation for preventing future blackouts, and reducing the scope of those that occur, is for the U.S. government to make reliability standards mandatory and enforceable.' Nothing else matters."
Although useless, James may be correct when he says that "My point that no sane regulator would ever follow Jose Antonio's plan has not been refuted." Even after the "April 5, 2004 Final report of the U.S.-Canada Power System Outage Task Force on the 2003 blackout concluded the single most important recommendation for preventing future blackouts, and reducing the scope of those that occur, is for the U.S. government to make reliability standards mandatory and enforceable," the FERC as a sane regulator did nothing. On April Fools 2005, "Voluntary compliance was expected as a matter of good utility practice."
This is what ends the debate for good. The U.S. Congress (and state Congresses as well) is able to act on a restructuring plan as they did on the Task Force's report to create the "electric reliability organization" as an incremental extension of the IOUs-AF empowering FERC to act on the new plan established by EPAct 2005. For evidence, I will copy a few additional rows of NERC's history timeline, that follow the April 5, 2004 row:
Summer 2004 Bilateral Electric Reliability Oversight Group (BEROG) established as a forum for identifying and resolving reliability issues in an international, government-to-government context. BEROG grew out of the U.S.-Canada Power System Outage Task Force.
November 12, 2004 NERC translated its operating policies, planning standards and compliance requirements into an integrated and comprehensive set of 90 measurable standards called "Version 0 Reliability Standards."
February 8, 2005 NERC Board of Trustees adopted the Version 0 standards. Stakeholders overwhelmingly supported the standards.
April 1, 2005 Version 0 Reliability Standards became effective. Voluntary compliance was expected as a matter of good utility practice.
August 8, 2005 U.S. Energy Policy Act of 2005 authorized the creation of a self-regulatory "electric reliability organization" that would span North America, with FERC oversight in the U.S. The legislation stated that compliance with reliability standards would be mandatory and enforceable.
April 4, 2006 NERC filed an application with FERC to become the "electric reliability organization" in the United States.
NERC filed with FERC 102 reliability standards – the 90 Version 0 standards plus 12 additional standards developed in the interim.
NERC filed the same information with the Canadian provincial authorities in Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia, Ontario, Quebec and Saskatchewan, and with the National Energy Board of Canada, for recognition as the "electric reliability organization" in Canada.
Although useless, James may be correct when he says that "My point that no sane regulator would ever follow Jose Antonio's plan has not been refuted." Even after the "April 5, 2004 Final report of the U.S.-Canada Power System Outage Task Force on the 2003 blackout concluded the single most important recommendation for preventing future blackouts, and reducing the scope of those that occur, is for the U.S. government to make reliability standards mandatory and enforceable," the FERC as a sane regulator did nothing. On April Fools 2005, "Voluntary compliance was expected as a matter of good utility practice."
This is what ends the debate for good. The U.S. Congress (and state Congresses as well) is able to act on a restructuring plan as they did on the Task Force's report to create the "electric reliability organization" as an incremental extension of the IOUs-AF empowering FERC to act on the new plan established by EPAct 2005. For evidence, I will copy a few additional rows of NERC's history timeline, that follow the April 5, 2004 row:
Summer 2004 Bilateral Electric Reliability Oversight Group (BEROG) established as a forum for identifying and resolving reliability issues in an international, government-to-government context. BEROG grew out of the U.S.-Canada Power System Outage Task Force.
November 12, 2004 NERC translated its operating policies, planning standards and compliance requirements into an integrated and comprehensive set of 90 measurable standards called "Version 0 Reliability Standards."
February 8, 2005 NERC Board of Trustees adopted the Version 0 standards. Stakeholders overwhelmingly supported the standards.
April 1, 2005 Version 0 Reliability Standards became effective. Voluntary compliance was expected as a matter of good utility practice.
August 8, 2005 U.S. Energy Policy Act of 2005 authorized the creation of a self-regulatory "electric reliability organization" that would span North America, with FERC oversight in the U.S. The legislation stated that compliance with reliability standards would be mandatory and enforceable.
April 4, 2006 NERC filed an application with FERC to become the "electric reliability organization" in the United States.
NERC filed with FERC 102 reliability standards – the 90 Version 0 standards plus 12 additional standards developed in the interim.
NERC filed the same information with the Canadian provincial authorities in Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia, Ontario, Quebec and Saskatchewan, and with the National Energy Board of Canada, for recognition as the "electric reliability organization" in Canada.
Jose Antonio Vanderhorst-Silverio
A new approach to power energy policy design, based on system’s architecting heuristics, has led to an emerging simplified synthesis of the power industry regulatory policy. Instead of undergoing business as usual regulatory proceedings, the approach to the Electricity Without Price Controls Architecture Framework is poised to replace the Investor Owned Utilities Architecture Framework and its incremental extensions that have evolved by analytic patchwork as a extremely complex system.
The Electricity Without Price Controls Architecture Framework
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
EWPC Systems’ Architect
First posted in the GMH Blog, on November 30, 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.
EWPC on Most Viewed on EnergyBlog.com November 30, 2009
· The Sixth Disruptive Technology (4057)
· Nanosolar Breakthrough and the Old Paradigm (3700)
· Response to Professor Banks (3579)
· Can the Power Industry Eliminate its Price Controls to the End Customer? (3165)
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EWPC on Most Commented on EnergyBlog.com November 30, 2009
· Can the Power Industry Eliminate its Price Controls to the End Customer? (66)
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· IMEUC False Facts (41)
· Campaign for Fair Electricity Rates (34)
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The Electricity Without Price Controls (EWPC) Architecture Framework (EWPC-AF) is a basic innovation that greatly simplifies today’s exceeding complex power industry. The EWPC-AF emerged to replace the century old Investor Owned Utilities (IOUs) Architecture Framework (IOUs-AF) and its incremental extensions, such as Open Transmission Access, Capacity Markets, NERC Mandatory Requirements, and now the regulated architecture Smart Grid.
By having demand as an externality, IOUs-AF industry growth is traditionally measured up to the consumer meter. As the grid is not longer able to meet the performance requirements of an increasingly share of demand, industry growth needs to take it into account those contributions.
Growth measures should reflect the new reality of the EWPC-AF. By integrating demand to the power system, large investment in, for example, demand side energy efficiency or distributed generation, or both, the EWPC-AF will help reap important value added coordination savings within the larger industry envelop.
The EWPC-AF is a two tiered architecture that greatly simplifies regulations. The first level is an intermediate architecture aimed for an energy policy act, which separates the whole emergent complex system into two less complex systems. Those systems are highly cohesive with lightly coupled interfaces among them:
1) A primary regulated power (integrated transmission and distribution) transportation service system (RPTSS) compact with a responsibility to transport electricity of commercial quality (EoCQ) of a given area; and
2) A complementary open market business system (OMBS) on the value chain generation, retail, pro-sumer (consumer that may produce).
To enable the purpose of maximum social welfare of the whole, the expansion of the RPTSS is to be done at least costs to transport electricity within the OMBS. The expansion of the OMBS value chain also includes customers’ electricity investments, operating, and maintenance and outage costs.
An important part of the value creation of the EWPC-AF in the OMBS comes from changing the managing by averages in retail markets to managing by “discovering new sources of profitability in a network economy… when the events are interconnected and interdependent (Hax and Wilde, the delta project)” through the development of Business Model Innovations by Second Generation Retailers (2GRs).
The second level architecture is reserved for proprietary architectures for open systems under the leadership of 2GRs. Most value creation will be the result of an architecture competition centered on the Silicon Valley Model, which will lead to the final architecture of the EWPC Smart Grid, which is just one of the disruptive components of the whole.
References:
Strong Evidence of Why Utilities as We Know Them Will Fail
EWPC as a Timely Basic Innovation
Renewable Power and Smart Grid as Parts of a Whole
<1> "As the grid is not longer able to meet the performance requirements of an increasingly share of demand" Bull. The grid is doing just fine despite its limitations. There are no performance issues wrt reliability.
<2> "Capacity Markets, NERC Mandatory Requirements" are not 'incremental extensions'. They pre-date power markets by decades.
<3> As we discussed many months ago, no prudent regulator would implement sweeping power market changes any way but incrementally.