Forget Monopoly Feed-In-Tariffs to Start Learning About Competitive Buy-Back Spot Prices

Jose Antonio Vanderhorst-Silverio | Jul 31, 2010

        

This comment completely supersedes the www.greentechmedia.com articleFeed-In Tariffs Can Spur Disruptive Growth: California is studying a new incentive that could grow renewables—and change everything about the state’s energy supply in the process, written by Herman K. Trabish, on July 21, 2010.

The key insight of the news article “Feed-In Tariffs Can Spur Disruptive Growth,” is “Feed-in tariffs can work,” SCE’s Marelli acknowledged, “but they require a lot of work to make sure they remain current with what is going on in the market.” I am happy to tell everyone, that all the conceptual work is already available under the Electricity Without Price Controls Architecture Framework (EWPC-AF). By reading and integrating with the EWPC-AF all 63 comments posted up to July 30, 2010, I have the following synthesis:

 

Through discussions with many important, intelligent and smart persons, in the professionals’ disciplines of electric power, economic, legal, you name it, during the past 15 years, I have designed and tested what has emerged as the EWPC-AF. This is in line with Wisdom2See (W2S) wrote that “I have a saying that when we see social conditions change we must learn to create knew forms of economic positioning or new forms of economic leveraging to address a 21 century problem with energy.”

 

That EWPC Architecture Framework is a simple, emergent, and holistic extension of the theory and practice develop by M.I.T. professor Fred C. Schweppe and his colleagues, among which Michael C. Caramanis, Richard D. Tabors, and Roger E. Bohn, co-authered the 1988 book Spot Pricing of Electricity (SPoE). The aim of that framework is to increase such leverage with the purpose of maximum social welfare.

 

I have a mixed agreement/disagreement with Gertsen (GS). I disagree that “The silicon valley venture capital mentality does not work here,” as the EWPC-AF divides the power industry in two systems that are highly cohesive and lightly coupled among them. The Open market Enterprise system is designed to follow the Technology Adoption Life Cycle, which is inextricably linked to Silicon Valley. The other system (more below) is the regulated T&D Grid. By including an architecture at the energy policy level, the EWPC-AF strongly agree that “In the real world competition among different energy technologies is crucially affected by the regulatory framework … Sometimes … these are more important than the single technological advantages.”

 

As W2S suggest, the EWPC-AF is also designed to consider that “… new competition and innovations is the answer for the free market from an old [in]adequate energy systems models that represented for years an monopoly that did not want true competition.” That can be seen from my … Personal Vision Waiting to Become a Shared Vision About Global Power Industry Leadership, which has an example of the California monopolies behavior.

 

Trying to become a politically possible shared vision, distinct from the status quo that Kevin Christy (KC) expects, my vision seems to be somewhat in agreement with the personal visions of Guillermo Jones (GJ), JoeJoe (JJ) and many others, which are calling for market based prices (GJ), based on avoided costs (JJ). Dying just before the SPoE book was published, Schweppe (and colleagues) wrote that “… the PURPA legislation stated that buy-back rates should be based on avoided costs without clearly defining what avoided costs are. Hourly spot prices provide such a definition.”

 

Under such a definition it isn’t necessary to pick winners and losers (JJ), while increasing transparency, which will enable PV suppliers to “jump into the end-user market… If they put their weight behind end-user focused legislation and regulation we’d all be a hell of a lot better off (JJ) …” in accordance with the EWPC-AF. However, if as Bill Wood (BW) say that “a subsidy program which specifically targets solar” is adopted by the legislation, I suggest that end-customers should receive a proportional increase above the spot price.

 

Skywise (SW) says that “The US seems to be stuck in the centralized power gen mindset. As a result the whole process is overly complicated and overly expensive.” The main objective of centralizing distributed generation is to extend, much, much, beyond the useful life of the already 20 years old obsolete investor Owned Utilities Architecture Framework(IOUs-AF) and their increasingly complex incremental extensions, to keep in operation the business model of winning customer related cases to a regulator. Instead, what we need is to open the power industry to business model innovations by Second Generation Retailers (2GRs) that operate in the Enterprise side.

 

As greenowl (GW) says that “… if we utilize all the different real estate on existing buildings, streamline the paperwork we have a lot of the problem liked,” 2GRs will be able to coordinate (end-user) customers demand side solutions to integrate them to power system planning, operation, and control, making it a lot easier to solve the “Transmission and congestion issues and the biggest problems facing renewables in the coming decade,” that Grandpa (GP) identified.

 

At the same time, GJ argument that “… there is little incentive to invest in transmission lines because investors are uncertain about being able to charge adequate fees to merchant generators and utilities which would seek access to the lines,” disappears by forbidding the T&D Grid compact to operate in the Enterprise side, while they expand the delivery system at minimum costs, based on an obligation to deliver in exchange for reasonable T&D rates.

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