Power Markets Essential Requirements - II

Mission accomplished!!! This are comments received and responded under the article Power Markets Essential Requirements. Readers will find that the two assertions questioned, are certainly true:  IMEUC has NO Ultraquality, and NO Demand Integration to power system planning, operation and control. Ultraquality is a system characteristic.The incentive system is spelled out clearly. While IMEUC is technology dependent, EWPC is technology neutral. A standard meter is needed for 2GR to develop their business model innovations. Nothing else is needed to reconfirm the winner in the market vs. market competition, this time based on the essential requirements: retail competition with active demand and ultraquality transportation.

Len Gould 3.6.08	Jose Antonio: "Since IMEUC has NO Retail Competition nor Ultraquality, and thus NO Demand Integration to power system planning, operation and control, it is just an incomplete and unfeasible proposition."Two FALSE assertions in one sentence (you're improving). 1) IMEUC makes no statement about ultraquality relative T&D, and I can see no reason why it should or why EWPC does. What is the benefit? That decision belongs with each individual ultimate client of a particular regional T&D system. What may make sense regarding T&D reliability in New York city may not make sense in rural Pakistan. Designs which make sense for an Apollo moon rocket may not make sense for a low-volume-production agricultural tractor. Quality has to fit the market with consideration of all factors. 2) IMEUC depends HEAVILY on demand integration to manage quality of service to customers, that is the core of its entire design. Smart grid technology is integrated with a careful market design to allow realtime price to optionally substitute for your absolutely gold-plated T&D system when and if it provides much lower cost. The balance is continually adjusted by market forces. Several others not worth covering. Finally, how about giving us the details of what the market structure is which the EWPC 2GR retailers operate in? What specifically sets up their incentive to invest in demand management systems when the benefits largely accrue to their competitors? SPECIFICS please or nothing.
Len Gould 3.6.08	Also what are the EXACT contract terms between your 2GR retailers and the customers? If a 2GR invests in smart-grid technology for a homeowner under eg. a five-year supply contract, then the homeowner sells out and moves away, what happens? Is the new buyer bound to the contract or does it remain a liability of the one who moved? Many more undetailed and critical issues.In general, EWPC can't work.
Len Gould 3.6.08	And I assure you, despite what Maierand Rechtin may say in their book "The Art of Systems Architecting", you'll never likely find a repair shop for agricultural machinery with pristine white-painted floors etc. Reality just doesn't work that way. "Ultraquality" is an interesting word.
Len Gould 3.6.08	(meant to say "the same pristine work environment as the Rolls-Royce maintenance shop", reference "repair shop for agricultural machinery".)
Todd McKissick 3.6.08	I have two questions with each directed toward each plan promoter.Retail competition. How exactly is that defined? I'm assuming it is the local distributor marketing their wares (electrical service) to their customers while trying to lure customers away from their competing companies. If this is true, the monopoly territories are gone and they are not selling based on quantity but rather quality of service. If Retail competition is trying to outsell the overall volume of their competition, then there is no incentive to conserve or break up monopolist territories. Both really make the case for separating the quantity (generators) from the quality (distributors). Active Demand. Is Active Demand meant to only include some non-customer entity actually controlling DR equipment or does it also refer to a scenerio where a public price fluctuates relative to everyone's collective costs and demand simply responds without any hard feedback?
Jose Antonio Vanderhorst-Silverio 3.6.08	Todd,Retail competition replaces the monopoly retailer. Since distribution gets integrated with transmission, there is no longer an incumbent retailer that owns the wires and serves as a barrier to progress. Different from the state monopoly retailer, the competitive retailer should operate under a federal jurisdiction generating great incentives to develop business model innovations for market a related segments. Active demand just means having means to offer demand reduction, generation and storage beyond the meter in sufficient quantities as to be important to power system planning, operation and control. Large demand side energy efficiency projects should be coordinated with transportation and generation expansion plans.
Jose Antonio Vanderhorst-Silverio 3.6.08	Dear Todd and Len,Let's keep on the essential requirements, which is all that is needed for the debate and dialogue of the market vs. market competition. It is very important to agree that vertical integration is not in the market vs. market competition as it doesn’t have the capacity to respond cost effectively to Active Demand and Demand Integration. FERC and NERC are having a tough time on the requirements that are overextending the capability of the vertical integration paradigm. Vertical integration has an ultraquality requirement and answers with a NO in each of the three other questions. As such, EWPC is the largest shift away from vertical integration that keeps an ultraquality requirement. As will be seen, IMEUC does not have the essential ultraquality requirement. The ultraquality requirement satisfies the essential criterion disclosed by Fred Schweppe el al in the book “Spot Pricing of Electricity.” The criterion is "Utility Control, Operation and Planning: Consider the engineering requirements for controlling, operating and planning an electric power system." In fact, ultraquality is a true and non-trivial requirement absolutely necessary that involves the concepts of system adequacy (long run – power system expansion planning - systemic risk of system failure) and system security (short run – power systems operations planning - systemic risk of system failure) that I understand goes well beyond our debate and dialogue, but that I have delved in the past in many earlier posts. As the world has changed and Active Demand is waiting for the market barriers to be taken down, both system adequacy and system security will include Demand Integration to power system planning, operation, and control, activities that will be performed by 2GRs. System security plans, developed with security constraint unit commitment simulations at wholesale considering generation resources, need to be extended to consider also demand resources to perform Demand Integration. IMEUC intends to use prices to balance supply and demand, but prices are non-trivial also. Jay Forrester, the Father of System Dynamics explains that “… supply and demand are not balanced by prices alone, as is commonly done in economic models. Inventories, backlogs, and delivery delays are the primary short-term balancing forces. Prices then change as a result of over or under supply of product” From the system security plans, power system operators select from the all the generating units (inventory from generators) available the generating stock that is operate synchronized to the grid and under EWPC power system operators need also select from all the demand stock available to respond (inventory from 2GRs) the corresponding demand response stock to operate the power system at ultraquality (being able to manage effectively at all times, with the needed redundancy, potential backlogs and delivery delays).
Len Gould 3.6.08	Jose Amtonio: "Jay Forrester, the Father of System Dynamics" is long since obsoleted by modern electronics. A distribution region which can, conservatively, vary it's peak demand down by 20% or more in a period of minutes based on reactions to grid dynamics, incented by realtime prices, completely invaidates your hypothesis. Such dramatic reactions would never be common, but they would be available under IMEUC to deal with emergencies such as unplanned generation or grid outages. Given the near future connection of large numbers of PHEV battery chargers, eventually becoming grid-wise, eg. able to feed power back if the price gets high enough, that number is if anything, conservative. Such a system, implemented properly, eliminates your argument on "Inventories, backlogs, and delivery delays".BTW, how are 2G Retailers incented to invest in such systems under EWPC when the benefits accrue to their competition who does not so invest? And my otrher questions? (Again)
Jose Antonio Vanderhorst-Silverio 3.7.08	Todd and Len:Once again, even oil markets don't "use prices to balance supply and demand, but prices are non-trivial also." Those markets operate according stocks and flows, which makes Jay Forrester as important as ever. I am glad that Len pointed out that IMEUC is also technology dependent and based on a market prediction. That makes it a very risky proposition. PHEV depend on batteries that have a lot of difficulties associated with them, including economic (i.e. competition with other technologies), environmental issues, etc. EWPC is very robust, because it is generation and storage technology neutral, from the supply side and the demand side. Markets should be allowed to determine what technologies will have the best chances, as it is impossible to predict the best technologies. Under EWPC 2GRs make money on energy flows in both directions, but most of the money will come from information intensive technology investments at the federal market level. That money will come from increase the efficiency of customers’ investments and energy purchases and the coordination savings resulting lower wholesale market prices. Instead of an obsolete, monopoly, and fixed business model, in which energy sales are linked to profits, 2GRs will develop business model innovations while integrating demand to power system planning, operation and control. The competition that doesn't invest in business model development, will take big risks in the retail and wholesale markets. At retail, customers will select the best business deals offered, which will be the result of business model innovations on every market segment. At wholesale, lack of business savvy will result in mistakes in customers aggregation parameters transaction costs risks. During the transition, in which some customers might be still under price controls (served by those that don’t invest!), unlike customers without price controls, they should subject to direct control (interruptions!!!). No cross subsidies should be allowed between all customers on price controls and all those without price controls, including the potential cross subsidies related to interruptions of customers on price controls. This means that the idea of a monopoly service of metering infrastructure should not be allowed. Competitive 2GRs will need to install a standard hardware metering system, differentiating them with software and firmware downloads.
Jose Antonio Vanderhorst-Silverio 3.7.08	Mission accomplished!!!"...it is wise to concentrate just on the essentials items." They are the generic market model paradigm: retail competition with active demand and ultraquality transportation. That is the essence."
Len Gould 3.7.08	Jose Antonio: "I am glad that Len pointed out that IMEUC is also technology dependent and based on a market prediction. That makes it a very risky proposition." -- ?? Not as risky as doing nothing, which is EWPC. Perhaps very robust because absolutely nothing changes?Still waiting for answers to the problems of EWPC, as posed above. IMEUC is far more market-based than is EWPC. EWPC "apparently" turns the entire market over to a few priveleged 2GR retailers, and restricts all others from direct access to the actual suppliers. (How, by regulation perhaps? What do large industrials think of that? Another question which won't get answered.) IMEUC simply PROVIDES A MARKET, a free amd open marketplace where all ideas and developments can compete fairly at all levels. IF 2GR retailers are a good idea (??) then they will predominate under IMEUC. IF they can sell electricity to customers cheaper than the generating companies can, then they have the floor.
Len Gould 3.7.08	Jose Antonio: "Competitive 2GRs will need to install a standard hardware metering system, differentiating them with software and firmware downloads."Thats IMEUC! Congratulations, you've seen the light!
Len Gould 3.7.08	Now don't go claiming that you invented THAT one!!!
Jose Antonio Vanderhorst-Silverio 3.7.08	Large industrials can still participate on the wholesale market.Thank you for the correction. I didn’t invent that one. It is not one standard metering system; it is just one standard meter with only one hardware spec and many 2GRs that purchased them in the open market from multiple sources. Eventually it should get mass produced for the whole world at very low cost, so that customers at the Bottom of the Pyramid get electricity and credit for their response. IMEUC is one metering system for only one monopoly market manager. Every 2GR will have their own private metering system as they develop their business model innovations, which will differentiate them with the software and firmware downloads. "Given the near future connection of large numbers of PHEV battery chargers, eventually becoming grid-wise, eg. able to feed power back if the price gets high enough, that number is if anything, conservative..." is something that may just not occur. IMEUC is technology dependent. EWPC is dependent on what 2GRs do to implement their business model innovations, with whichever generating or storage technologies in the market.