Reference: Playing with Fire - The 10 Tcf/year Supply Gap -- Part I
To all readers that want to learn about the third way of deregulation
To complement the posts EWPC: People Coordinating and Cooperating with Electrons and EWPC: People Coordinating and Cooperating with Electrons Part 2, in chapter one of their book, Rechtin and Maeir define ultraquality “as a level of quality so demanding that it is impractical to measure defects, much less certify a system prior to use.” On a note to the definition they say ultraquality “was discussed extensively by Juran…”
They add that “Demonstrating this limit state in high quality is not a simple extension of existing quality measures… because system complexity has outpaced instrument accuracy.”
Systemic thinking, scenarios, system dynamics, mental models are tools to help us approach system complexity. An explanation based on simple cause and effect, mechanistic thinking, is generally insufficient to explain system complexity. Those tools should be used fully, since “[a]n independent investigation is needed of all the issues raised by the blackout and other reliability problems to ascertain that all necessary remedial actions have been taken, as PEST suggest and the GMH extends.”
lunes, enero 01, 2007
domingo, diciembre 31, 2006
EWPC: People Coordinating and Cooperating with Electrons Part 2
Reference: Playing with Fire - The 10 Tcf/year Supply Gap -- Part I
To all readers that want to learn about the third way of deregulation
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.” [I published this insight on march this year at the Academy of Science of the Dominican Republic.]
In the first case, the experts are the engineers. For the center stage, controlled market, system engineer institution to assures that electrons and people have the same purpose, as I mentioned on 12.30.06, ultraquality is an imperative to manage short run and long run systemic risk, with both supply side and demand side resources.
In the second case, according to Rechtin and Maier, the accommodation is done by the architect with “a professional response to the public needs and perceptions.” It is such unjustified perceptions that fueled the decade long debate. Bill Hogan mistake was that he didn’t understand what Fred Schweppe meant by the fourth criterion: “consider the engineering requirements for controlling, operating and planning an electric power system,” which can only be met by ultraquality. As time has advanced and new digital technology market share becomes larger, electricity demand for quality is only increasing. A professional response is needed, however, for the remaining, non real-time, free market activities of retail and generation. EWPC for the customers is such a response.
PEST engineers are correct when they say that “'Deregulation and the concomitant restructuring of the electric power industry in the United States have resulted in a decline in the reliability of North American bulk power systems and constitute the ultimate root cause of the California meltdown, Enron's depredations, and the 14 August 2003 blackout.”
In al three cases mentioned by PEST, the root cause is the lack of ultraquality. First the lack of ultraquality “stressed the system.” Had the past decade been used to developed elasticity in the resources of the demand side true, none of the three cases had resulted. The decline in reliability when the system is stressed led to price spikes. Instead of changing from stage 1, to stage 2, to stage 3, California just needed to rotate blackouts and compensate the customers’ interruptions.
While PEST can be tagged as pinning for the good old days, by no means are they silly. Engineering manpower and institutional memory has suffered a lot in the power industry worldwide under deregulation. There is a need to allow for the emergence of the good new days, and EWPC is a strong candidate to increase the revised criteria: 1) Freedom of choice; 2) Economic efficiency; 3) Equity; and 4) Ultraquality. Only through new knowledge and innovations will societies satisfy emergent needs.
© 2006. José Antonio Vanderhorst-Silverio, PhD.
To all readers that want to learn about the third way of deregulation
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.” [I published this insight on march this year at the Academy of Science of the Dominican Republic.]
In the first case, the experts are the engineers. For the center stage, controlled market, system engineer institution to assures that electrons and people have the same purpose, as I mentioned on 12.30.06, ultraquality is an imperative to manage short run and long run systemic risk, with both supply side and demand side resources.
In the second case, according to Rechtin and Maier, the accommodation is done by the architect with “a professional response to the public needs and perceptions.” It is such unjustified perceptions that fueled the decade long debate. Bill Hogan mistake was that he didn’t understand what Fred Schweppe meant by the fourth criterion: “consider the engineering requirements for controlling, operating and planning an electric power system,” which can only be met by ultraquality. As time has advanced and new digital technology market share becomes larger, electricity demand for quality is only increasing. A professional response is needed, however, for the remaining, non real-time, free market activities of retail and generation. EWPC for the customers is such a response.
PEST engineers are correct when they say that “'Deregulation and the concomitant restructuring of the electric power industry in the United States have resulted in a decline in the reliability of North American bulk power systems and constitute the ultimate root cause of the California meltdown, Enron's depredations, and the 14 August 2003 blackout.”
In al three cases mentioned by PEST, the root cause is the lack of ultraquality. First the lack of ultraquality “stressed the system.” Had the past decade been used to developed elasticity in the resources of the demand side true, none of the three cases had resulted. The decline in reliability when the system is stressed led to price spikes. Instead of changing from stage 1, to stage 2, to stage 3, California just needed to rotate blackouts and compensate the customers’ interruptions.
While PEST can be tagged as pinning for the good old days, by no means are they silly. Engineering manpower and institutional memory has suffered a lot in the power industry worldwide under deregulation. There is a need to allow for the emergence of the good new days, and EWPC is a strong candidate to increase the revised criteria: 1) Freedom of choice; 2) Economic efficiency; 3) Equity; and 4) Ultraquality. Only through new knowledge and innovations will societies satisfy emergent needs.
© 2006. José Antonio Vanderhorst-Silverio, PhD.
EWPC: People Coordinating and Cooperating with Electrons
Reference: Playing with Fire - The 10 Tcf/year Supply Gap -- Part I
To all readers that want to learn about the third way of deregulation
Jack Casazza, Frank Delea and George Loehr, of “Power Engineers Supporting Truth (PEST),” have written the article “Electrons Versus People: Which group is smarter?”, for the January-February 2007 issue, of the IEEE Power & Energy Magazine, “In my View” column.
While I strongly recommend reading and “listening openly” to what the authors say, I only quote incompletely the beginning and last paragraphs. The authors start by saying that: “Deregulation and the concomitant restructuring of the electric power industry in the United States have resulted in a decline in the reliability of North American bulk power systems and constitute the ultimate root cause of the California meltdown, Enron's depredations, and the 14 August 2003 blackout.”
As part of the decade old debate, done with faulty deregulation and restructuring, the authors conclude that “An independent investigation is needed of all the issues raised by the blackout and other reliability problems to ascertain that all necessary remedial actions have been taken.”
As can be seen in the book “Powerful Times: Rising to the Challenge of our Uncertain World,” written by Eamonn Kelly, CEO of Global Business Network, a renown futures network and scenario strategy consultant, there is a need to consider an emergent paradigm and creative destruction of the power industry.
The independent investigation should consider fully both the institutional memory and the sound research done by Fred C. Schweppe and colleagues, from 1978-1988, not in a debate, but in a generative dialogue, to resolve most of the flaws identified by Casazza, Delea and Loehr, and also to break the barriers to the emergent innovations flowing into the industry.
In one promising third way of deregulation mixed market architecture and design, centered on Electricity Without Price Controls (EWPC), NERC reliability activities are merged into the system engineer institution, which is in charge of managing short run and long run systemic risk, with both supply side and demand side resources. That center stage controlled market institution assures that electrons and people have the same purpose. Transportation (T&D) of electricity is an integrated monopoly responding to the system engineer institution and under a traditional regulator.
The free market, non real-time activities, restricted to the supply side resources (central watts and vars generation and storage, FACTS, etc.) and demand side resources (AMI, CIS, energy efficiency, demand response, distributed watts and vars generation and storage, etc.), also respond to the system engineer institution on matters of control, operations and planning, and to a prudential regulator on conduct of business, such as competition, market power, consumer protection, asset quality, etc.
As the readers of the comments under this article may recall, at the center of the suggested generative dialogue we have pending the following statement:
© 2006. José Antonio Vanderhorst-Silverio, PhD.
To all readers that want to learn about the third way of deregulation
Jack Casazza, Frank Delea and George Loehr, of “Power Engineers Supporting Truth (PEST),” have written the article “Electrons Versus People: Which group is smarter?”, for the January-February 2007 issue, of the IEEE Power & Energy Magazine, “In my View” column.
While I strongly recommend reading and “listening openly” to what the authors say, I only quote incompletely the beginning and last paragraphs. The authors start by saying that: “Deregulation and the concomitant restructuring of the electric power industry in the United States have resulted in a decline in the reliability of North American bulk power systems and constitute the ultimate root cause of the California meltdown, Enron's depredations, and the 14 August 2003 blackout.”
As part of the decade old debate, done with faulty deregulation and restructuring, the authors conclude that “An independent investigation is needed of all the issues raised by the blackout and other reliability problems to ascertain that all necessary remedial actions have been taken.”
As can be seen in the book “Powerful Times: Rising to the Challenge of our Uncertain World,” written by Eamonn Kelly, CEO of Global Business Network, a renown futures network and scenario strategy consultant, there is a need to consider an emergent paradigm and creative destruction of the power industry.
The independent investigation should consider fully both the institutional memory and the sound research done by Fred C. Schweppe and colleagues, from 1978-1988, not in a debate, but in a generative dialogue, to resolve most of the flaws identified by Casazza, Delea and Loehr, and also to break the barriers to the emergent innovations flowing into the industry.
In one promising third way of deregulation mixed market architecture and design, centered on Electricity Without Price Controls (EWPC), NERC reliability activities are merged into the system engineer institution, which is in charge of managing short run and long run systemic risk, with both supply side and demand side resources. That center stage controlled market institution assures that electrons and people have the same purpose. Transportation (T&D) of electricity is an integrated monopoly responding to the system engineer institution and under a traditional regulator.
The free market, non real-time activities, restricted to the supply side resources (central watts and vars generation and storage, FACTS, etc.) and demand side resources (AMI, CIS, energy efficiency, demand response, distributed watts and vars generation and storage, etc.), also respond to the system engineer institution on matters of control, operations and planning, and to a prudential regulator on conduct of business, such as competition, market power, consumer protection, asset quality, etc.
As the readers of the comments under this article may recall, at the center of the suggested generative dialogue we have pending the following statement:
IRRESPECTIVE OF LOCATION, THE BEST INVESTMENT STRATEGY FOR AN ELECTRIC POWER SYSTEM WITH THE APPROPIATE MARKET RCHITECTURE AND DESIGN IS A MIX OF INVESTMENTS ON THE DEVELOPMENT OF THE RESOURCES OF THE DEMAND SIDE AND INVESTMENTS ON THE DEVELOPMENT OF THE RESOURCES OF THE SUPPLY SIDE THAT REDUCES SHORT RUN AND LONG RUN SYSTEMIC RISK WHILE SOCIETY RECEIVES THE MAXIMUM VALUE FROM ELECTRICITY.
© 2006. José Antonio Vanderhorst-Silverio, PhD.
viernes, diciembre 29, 2006
A Generative Dialogue Without Illusions Part 6
Jim,
I perceive that you don’t really want, or are not prepared, or your terms of reference bind you somehow, to engage in a generative dialogue. I sense you want to debate. If that is the case, we will get into a stalemate very fast. I don’t have the time that Fred has to debate. While you are a practical analyst and I just try to be without illusions. That is why I am saving my posts as:
A Generative Dialogue Without Illusions Part 5
A Generative Dialogue Without Illusions Part 4
A Generative Dialogue Without Illusions Part 3
A Generative Dialogue Without Illusions Part 2
A Generative Dialogue Without Illusions Part 1
Given the above, I won’t engage to your complete response. So, I will write just a few paragraphs.
You said earlier “I see the flaws, and the benefits, of the current architecture in the US more clearly than just about anyone. However, your phrase 'without selfish components' makes me squirm.” I know that there is no such thing as the current architecture, but for simplicity I called it Space B. Space B is centered on open transmission access architecture. Essentially the whole point is that to make it stable you need to have more supply side reserves as in Space A o move to Space C by investing in demand response. In both cases you are investing in physical risk management.
On 12.17.06 above, I said the following: “Ferdinand, please take the whole sentence and the context in consideration… You seem to be right under a mechanistic thinking mental model that doesn’t consider the environment. However, under a systemic thinking mental model, the interdependencies are very important…” Your opinions are very similar to that of Fred. They are great tools for debates that get stuck.
If you read the whole comments, and not part by part as independent elements you will see the answers to your questions, if you are on the positive generative dialogue. If you have done that, even with my difficulties with the language, you will know that there was no a need to elucidate, as the idea of “system destruction” is developed in that paragraph of “selfish components” and reinforced in the next 2 paragraphs.
Please advise if you “want to learn about the third way of deregulation,” as I suggested on 12.27.06. If so, please read about what I believe was Bill Hogan’s great mistake, that changed the industry and led to the decade old debate.
With a lot of respect,
José Antonio
I perceive that you don’t really want, or are not prepared, or your terms of reference bind you somehow, to engage in a generative dialogue. I sense you want to debate. If that is the case, we will get into a stalemate very fast. I don’t have the time that Fred has to debate. While you are a practical analyst and I just try to be without illusions. That is why I am saving my posts as:
A Generative Dialogue Without Illusions Part 5
A Generative Dialogue Without Illusions Part 4
A Generative Dialogue Without Illusions Part 3
A Generative Dialogue Without Illusions Part 2
A Generative Dialogue Without Illusions Part 1
Given the above, I won’t engage to your complete response. So, I will write just a few paragraphs.
You said earlier “I see the flaws, and the benefits, of the current architecture in the US more clearly than just about anyone. However, your phrase 'without selfish components' makes me squirm.” I know that there is no such thing as the current architecture, but for simplicity I called it Space B. Space B is centered on open transmission access architecture. Essentially the whole point is that to make it stable you need to have more supply side reserves as in Space A o move to Space C by investing in demand response. In both cases you are investing in physical risk management.
On 12.17.06 above, I said the following: “Ferdinand, please take the whole sentence and the context in consideration… You seem to be right under a mechanistic thinking mental model that doesn’t consider the environment. However, under a systemic thinking mental model, the interdependencies are very important…” Your opinions are very similar to that of Fred. They are great tools for debates that get stuck.
If you read the whole comments, and not part by part as independent elements you will see the answers to your questions, if you are on the positive generative dialogue. If you have done that, even with my difficulties with the language, you will know that there was no a need to elucidate, as the idea of “system destruction” is developed in that paragraph of “selfish components” and reinforced in the next 2 paragraphs.
Please advise if you “want to learn about the third way of deregulation,” as I suggested on 12.27.06. If so, please read about what I believe was Bill Hogan’s great mistake, that changed the industry and led to the decade old debate.
With a lot of respect,
José Antonio
A Generative Dialogue Without Illusions Part 5
Jim, Len, and other readers,
A few more lines added for Jim after lunch. I will wait on Len promised article.
There is a difference between "selfish components" and "selfish components that destroy the system." Another name for demand response is price demand elasticity. California deregulation was an incomplete market without enough demand elasticity that had a "native" selfish component that destroyed the system. Your example of Enron is perfect, but the insight seems to be that of a contradictory scenario.
Acording to Eamon Kelly in his book “Powerful Times: Rising to the Challenge of our Uncertain World,” page 35, Winston Churchill said: “A lie gets halfway around the world before the truth has a chance to get its coat on.” On page 36, Kelly says that “Conspiracy theories can, ironically, provide an ordered framework with which to understand chaotic events.” I will make an exception to my opinion that “debates are over.” So, under the principle that I am not my opinion, let’s try to find an alternative explanation scenario.
Picture yourself in the year 2000, and as a practical analyst that knew about the protection inherent in utility regulation and also knew what had happen in the US midwest in the summers of 1998 and 1999. You also knew what I said above on 12.21.06 that starts as “The debate in California has changed remarkably over the past year or two. Discussion now focuses not on whether retail competition or direct access is possible, but on how to make it happen. The three California investor-owned utilities affected by the commission's decision convened an industry working group, called the Western Power Exchange (Wepex) to address the issues related to implementing the new competitive retail market.” Please answer, to the best of your knowledge, if there might be some ground for a complot theory on which Enron was a just a casualty.
I agree that under Space B there are winners and losers. Read Donella Meadows article to see that big industry is supposed to receive the benefit of Space B. Systems like PJM, the role model of SMD, is stable by having excessive reserves. My son tells me that his residential rates in Pittsburgh were very high. Coal stations have low variable costs, but people health costs in their neighborhoods are much higher than without. No to mention, Andy's expected carbon tax that Congress seems to be working on.
Retail competition under Space B is pretty meager. Not so in Space D, where business design innovations, on the development of the resources of the demand side, will result in creative destruction of the power industry.
That’s it for now.
Happy New Year,
José Antonio
A few more lines added for Jim after lunch. I will wait on Len promised article.
There is a difference between "selfish components" and "selfish components that destroy the system." Another name for demand response is price demand elasticity. California deregulation was an incomplete market without enough demand elasticity that had a "native" selfish component that destroyed the system. Your example of Enron is perfect, but the insight seems to be that of a contradictory scenario.
Acording to Eamon Kelly in his book “Powerful Times: Rising to the Challenge of our Uncertain World,” page 35, Winston Churchill said: “A lie gets halfway around the world before the truth has a chance to get its coat on.” On page 36, Kelly says that “Conspiracy theories can, ironically, provide an ordered framework with which to understand chaotic events.” I will make an exception to my opinion that “debates are over.” So, under the principle that I am not my opinion, let’s try to find an alternative explanation scenario.
Picture yourself in the year 2000, and as a practical analyst that knew about the protection inherent in utility regulation and also knew what had happen in the US midwest in the summers of 1998 and 1999. You also knew what I said above on 12.21.06 that starts as “The debate in California has changed remarkably over the past year or two. Discussion now focuses not on whether retail competition or direct access is possible, but on how to make it happen. The three California investor-owned utilities affected by the commission's decision convened an industry working group, called the Western Power Exchange (Wepex) to address the issues related to implementing the new competitive retail market.” Please answer, to the best of your knowledge, if there might be some ground for a complot theory on which Enron was a just a casualty.
I agree that under Space B there are winners and losers. Read Donella Meadows article to see that big industry is supposed to receive the benefit of Space B. Systems like PJM, the role model of SMD, is stable by having excessive reserves. My son tells me that his residential rates in Pittsburgh were very high. Coal stations have low variable costs, but people health costs in their neighborhoods are much higher than without. No to mention, Andy's expected carbon tax that Congress seems to be working on.
Retail competition under Space B is pretty meager. Not so in Space D, where business design innovations, on the development of the resources of the demand side, will result in creative destruction of the power industry.
That’s it for now.
Happy New Year,
José Antonio
A Generative Dialogue Without Illusions Part 4
Reference: Playing with Fire - The 10 Tcf/year Supply Gap -- Part I
Thanks James for your comments.
Go back to part 2 of my comments. Spaces A, C and D are stable architecture. Space B is unstable: as price increase, system reliability decrease. That is a counterintuitive systemic behavior. Trying to make stable there is a movement from Space B to Space C, which is at the core of the afterthought in the 2005 Energy Bill, which resulted in Bruneto & Wimberly’s article.
Bruneto & Wimberly explain that to get to Space C, the process of evaluating and implementing DR is less complex, than the “current” - Space B - architecture in the US. However, under the EWPC environment, the process of evaluating and implementing DR is not only less complex than in Space C, but also more efficient in the long run as we get to the End-State - Space D - of the electricity industry. The benefits are shared among two major stakeholders, the consumer and the competitive retailer under EWPC, instead of three major stakeholders – customer, monopoly distributor, and regulator, under a fully regulated environment.
LMP theory and practice comes from Fred C. Schweppe as the leader of the spot pricing of electricity research at MIT. LMP without DR leads to an incomplete – Space B - market. When you say “[T]hen, the household could respond to that price signal,” you are, like it or not, using Fred Schweppe’s – Space C - theory. As you can see a practical analyst has mental models - theories in use – to suggest decisions. Some of those theories - beliefs -are flawed when policies interact with each other in dynamic systemic ways on complex systems, as the counterintuitive behavior of Space B referred above.
I agree that under the flawed “current” market design and architecture it is politically impossible to implement a market structure without maximum prices. That happened because Schweppe insights were not taken into consideration. Space C was “bypassed” (Schweppe recommended A to C to D) and innovation was foreclosed, as the three California utilities preserve their “native” loads and delay innovation one decade, keeping alive a totally unnecessary debate.
Search for Hogan in the following articles, read the complete comments (not only samples), and their links, and get back to me with your conclusions.
What a surprise: Prices move both ways
The Gap Between Demand Response Potential and Demand Response Reality
Post hoc ergo propter hoc: The fallacy of blaming deregulation for rising electricity prices
Regards,
José Antonio
Thanks James for your comments.
Go back to part 2 of my comments. Spaces A, C and D are stable architecture. Space B is unstable: as price increase, system reliability decrease. That is a counterintuitive systemic behavior. Trying to make stable there is a movement from Space B to Space C, which is at the core of the afterthought in the 2005 Energy Bill, which resulted in Bruneto & Wimberly’s article.
Bruneto & Wimberly explain that to get to Space C, the process of evaluating and implementing DR is less complex, than the “current” - Space B - architecture in the US. However, under the EWPC environment, the process of evaluating and implementing DR is not only less complex than in Space C, but also more efficient in the long run as we get to the End-State - Space D - of the electricity industry. The benefits are shared among two major stakeholders, the consumer and the competitive retailer under EWPC, instead of three major stakeholders – customer, monopoly distributor, and regulator, under a fully regulated environment.
LMP theory and practice comes from Fred C. Schweppe as the leader of the spot pricing of electricity research at MIT. LMP without DR leads to an incomplete – Space B - market. When you say “[T]hen, the household could respond to that price signal,” you are, like it or not, using Fred Schweppe’s – Space C - theory. As you can see a practical analyst has mental models - theories in use – to suggest decisions. Some of those theories - beliefs -are flawed when policies interact with each other in dynamic systemic ways on complex systems, as the counterintuitive behavior of Space B referred above.
I agree that under the flawed “current” market design and architecture it is politically impossible to implement a market structure without maximum prices. That happened because Schweppe insights were not taken into consideration. Space C was “bypassed” (Schweppe recommended A to C to D) and innovation was foreclosed, as the three California utilities preserve their “native” loads and delay innovation one decade, keeping alive a totally unnecessary debate.
Search for Hogan in the following articles, read the complete comments (not only samples), and their links, and get back to me with your conclusions.
What a surprise: Prices move both ways
The Gap Between Demand Response Potential and Demand Response Reality
Post hoc ergo propter hoc: The fallacy of blaming deregulation for rising electricity prices
Regards,
José Antonio
jueves, diciembre 28, 2006
A Generative Dialogue Without Illusions Part 3
Part 3 of 3.
Among the thing that I have done is recognize that Space C is no longer advisable and that all of the retail activities, including CIS, AMI, etc. should belong to a competitive entity. This is what I said then:
What should have emerged in the 90s is still waiting to emerge, except that now the 2005 Energy Bill favors Demand Response. Most of the damage done seems that it cannot be undone. Experts, like Jack Casazza, claim that the agreements of the “weird sort” (Fred’s term) are like scramble eggs, which can be unscrambled. However, new developments as those reported by David Cay Johnston that says “A federal appeals court yesterday called into question the government’s efforts to change the power industry into a more competitive business, ruling that national energy officials abdicated their responsibility to ensure fair electricity markets,” may help unscrambled them.
You are really a late comer. In the past year I have written comments at length in support of EWPC in EnergyPulse. I suggest that you take your time and read as much as you can to get up to speed.
Don’t forget the most important rule of the generative dialogue: you are not your opinion. This of course applies to me and everybody else too.
Regards,
José Antonio
© 2006. José Antonio Vanderhorst-Silverio, PhD
As you will see, moving from the regulated Space A to the regulated Space C involves a very large undertaking, while moving from Space C to Space to D no such a large one. The regulated (Space C: see page 11 of Spot Pricing of Electricity) “energy marketplace involves the utility and its customers operating as partners… Utility implementation concerns include real-time calculation/prediction of hourly spot prices, metering-communication-billing, and system control center operation using the new control signal called price… customers who choose to exploit the energy marketplace potentials must implement the appropriate response systems (today demand response), which could range from simple manual response to sophisticated digital controls.”
Among the thing that I have done is recognize that Space C is no longer advisable and that all of the retail activities, including CIS, AMI, etc. should belong to a competitive entity. This is what I said then:
My hypothesis is that time and reality are given us the opportunity to bypass Space C and go directly to Space D. It does not make any sense today to develop a Regulated Spot Price Based Energy Marketplace. It does not make any sense either to stay at Space A. Maybe my contribution, if there is one, is recognizing that a very simple restructuring, which keeps the wires utility out of the competitive business, creates an opportunity for retail marketers to develop the Deregulated Spot Price Based Energy Marketplace. That I suggest is the required change in firm organization that goes satisfies the control scheme, on the need to develop the corresponding innovative business models.By the way, on 1.7.06, Fred said: “Sorry José, but you'll have to take this discussion up with somebody else.” I am glad that you would like to take it from the faulty end of the deregulation spectrum.
What should have emerged in the 90s is still waiting to emerge, except that now the 2005 Energy Bill favors Demand Response. Most of the damage done seems that it cannot be undone. Experts, like Jack Casazza, claim that the agreements of the “weird sort” (Fred’s term) are like scramble eggs, which can be unscrambled. However, new developments as those reported by David Cay Johnston that says “A federal appeals court yesterday called into question the government’s efforts to change the power industry into a more competitive business, ruling that national energy officials abdicated their responsibility to ensure fair electricity markets,” may help unscrambled them.
You are really a late comer. In the past year I have written comments at length in support of EWPC in EnergyPulse. I suggest that you take your time and read as much as you can to get up to speed.
Don’t forget the most important rule of the generative dialogue: you are not your opinion. This of course applies to me and everybody else too.
Regards,
José Antonio
© 2006. José Antonio Vanderhorst-Silverio, PhD
A Generative Dialogue Without Illusions Part 2
Part 2 of 3.
On systemic risk see my answer to Fred about his expertise on risk management and his lack of knowledge hidden under engineering knowledge. I think that what I have done so far is: “cracking through the egg shell (title of a chapter of solving tough problems)” of the power industry. That is the missing side of your “world … the bone and gristle world of decisions.”
Andy started his article with the following sentence: “This is the first of a four part series of articles on the natural gas and electricity price and supply risks facing the U.S. economy. The first article provides an overview and summary.” If we apply the expected long run natural gas price and supply risks to the electricity industry, there is a big difference between the decade old debate and a generative dialogue to “reassess the likely long-term prospects for price and supply in the U.S. market,” as Andy puts it.
At the center of the decade old deregulation debate, the research and practice suggested by Fred C. Schweppe and his colleagues in the 1988 book Spot Pricing of Electricity was in general bypassed. That is exactly what PA Consulting Viepoint on Energy is saying now.
My article An Alternative Business Case for Demand Response, a rebuttal to The Business Case for Demand Response, by Thomas Brunetto, Managing Director and Jamie Wimberly, CEO, both of Distributed Energy Financial Group, was the first stake on the “ground” that led to the emerging EWPC model. As you can see from what I said to be the “Key issue” in my post you refer to, it is Mr. Wimberly who acknowledges an emergent revolution away from the continuity scenario, which the Deloitte Research Energy Study identified in the 2005-2010.
Schweppe’s insights were to be applied first to a transformation of the vertically integrated utility by developing a spot price energy marketplace. As can be seen from my comments of 12.27.05 to Mr. Martin-Giraldo under A Few More Unfriendly Comments on Electric Deregulation, written by Fred, all deregulation experiments were based on jumping to the wrong conclusions. This is part of what I posted at that time:
Quote completed on next paragraph…
On systemic risk see my answer to Fred about his expertise on risk management and his lack of knowledge hidden under engineering knowledge. I think that what I have done so far is: “cracking through the egg shell (title of a chapter of solving tough problems)” of the power industry. That is the missing side of your “world … the bone and gristle world of decisions.”
Andy started his article with the following sentence: “This is the first of a four part series of articles on the natural gas and electricity price and supply risks facing the U.S. economy. The first article provides an overview and summary.” If we apply the expected long run natural gas price and supply risks to the electricity industry, there is a big difference between the decade old debate and a generative dialogue to “reassess the likely long-term prospects for price and supply in the U.S. market,” as Andy puts it.
At the center of the decade old deregulation debate, the research and practice suggested by Fred C. Schweppe and his colleagues in the 1988 book Spot Pricing of Electricity was in general bypassed. That is exactly what PA Consulting Viepoint on Energy is saying now.
My article An Alternative Business Case for Demand Response, a rebuttal to The Business Case for Demand Response, by Thomas Brunetto, Managing Director and Jamie Wimberly, CEO, both of Distributed Energy Financial Group, was the first stake on the “ground” that led to the emerging EWPC model. As you can see from what I said to be the “Key issue” in my post you refer to, it is Mr. Wimberly who acknowledges an emergent revolution away from the continuity scenario, which the Deloitte Research Energy Study identified in the 2005-2010.
Schweppe’s insights were to be applied first to a transformation of the vertically integrated utility by developing a spot price energy marketplace. As can be seen from my comments of 12.27.05 to Mr. Martin-Giraldo under A Few More Unfriendly Comments on Electric Deregulation, written by Fred, all deregulation experiments were based on jumping to the wrong conclusions. This is part of what I posted at that time:
I believe there has been a big misunderstanding of Fred C. Schweppe proposal. Trying to clarify his proposal, lets consider four general structures for the electric business: A) a traditional vertical integrated utility; B) a faulty deregulation or re-regulation that keeps a largely irresponsive and obsolete utility business model; C) Fred C. Schweppe “Regulated Spot Price Based Energy Marketplace” with homeostatic utility controls, where the utility is the only middleman; and D) a true deregulated electricity market, with retailers innovative business models, without price controls, a new value chain (generator, retailer & customer), while re-regulating the wires monopoly.
Quote completed on next paragraph…
A Generative Dialogue Without Illusions Part 1
Thanks James for accepting the challenge of the generative dialogue. My world is that of an interdependent (systemic) consultant on electricity centered now on market design and architecture. I have “listen” closely to what you wrote and will also "listen" to any new perspective you may bring.
Part 1 of 3.
As I suggested under the article The Power Will Be There But Will It Get to Market?, please accept that the word debate has the meaning found in the suggested reading: generative dialogue paper by Adam Kahane, entitled "Changing the World by Changing How We Talk and Listen." Diagram "Four Ways of Talking and Listening," presented by Kahane in a 2003 conference.
I hope you understand now that under the generative dialogue debates based on the deregulation performance so far are completely misleading. A large part of the overcapacity is due to lack of knowledge of the utility industry by vested interests. In my opinion, debates on the decade old deregulation are over. Let’s do a generative dialogue on deregulation to create a new market architecture and design for the electricity system, without selfish components that destroy the system as W. Edward Deming would have said.
Under the article Condemned to the Fourth Quartile?, I wrote the following:
Part 1 of 3.
As I suggested under the article The Power Will Be There But Will It Get to Market?, please accept that the word debate has the meaning found in the suggested reading: generative dialogue paper by Adam Kahane, entitled "Changing the World by Changing How We Talk and Listen." Diagram "Four Ways of Talking and Listening," presented by Kahane in a 2003 conference.
I hope you understand now that under the generative dialogue debates based on the deregulation performance so far are completely misleading. A large part of the overcapacity is due to lack of knowledge of the utility industry by vested interests. In my opinion, debates on the decade old deregulation are over. Let’s do a generative dialogue on deregulation to create a new market architecture and design for the electricity system, without selfish components that destroy the system as W. Edward Deming would have said.
Under the article Condemned to the Fourth Quartile?, I wrote the following:
I found in the website an interesting paragraph in the introduction of the report "Viewpoint on Energy: shortages, surplus, and the search for value” of PA Consulting,” prepared by Todd Filsinger, Member del PA Management Group, to the article prepared by Edward Kee (also a member) entitled “Reaping the benefits of electricity industry reform: defining and limiting the use of price controls,” that says:
Deregulated wholesale electricity markets have come under attack for their perceived deficiencies. Edward argues that the competitive benefits of wholesale competition have never been realized because of the deleterious impact of retail market regulation and political interventions, which decouple the ultimate consumer from real-time market pricing, thwarting economically rational decisions on power consumption. He concludes that only when the retail customer is allowed to decide when and how much to consume based on the actual cost of providing that service, will the many promised benefits of competitive energy markets be realized.I believe that the paragraph can be taken as a useful contribution to the generative dialogue I proposed earlier in the post Let's Get Out of Back Rooms to a Generative Dialogue. A generative dialogue cannot be done by looking the issues in isolation topic by topic, but as a system, cutting across topics. Please follow the links on the post.
I work under the Koestenbaum strategy that says “reality means having no illusions.” I have “convinced” Fred many times. So, only once I see results, I will change my opinion when I see the consensus. In general, to fill in the content you will need to read a lot of my comments dispersed on EnergyPulse to make sense of EWPC and the rephrased argument. I know that I should start to write my book to make it easy for readers to make sense to EWPC.
miércoles, diciembre 27, 2006
Playing With Fire and Collapse Part 22
Reference: Playing with Fire - The 10 Tcf/year Supply Gap -- Part I
Part 2 of 2.
On 12.20.06, Fred wanted to restart the debate, but was unsuccessful. Len suddenly decided to take command and defend his baby project IMEUC as an emerging deregulation project, saying to Fred “I would like to submit that on de-regulation I believe you are wrong (and therefore naturally and to my regret, myself for a failing grade).”
On 12.21.06 I defused Prof. Banks argument about “NO TINKERING ON THE DEMAND SIDE CAN OFFSET THE GAMING AND LACK OF INVESTMENT ON THE SUPPLY SIDE!” He said nothing, which to the untrained eye means he accepted the arguments. However, being a great downloader he repeated it later on in response to James.
On 12.24.06 Mr. Carson came to respond Banks on the “NO TINKERING…” argument that he didn’t defend.
Trying to reframe the debate, on 12.25.06, I rephrased Fred’s “NO TINKERING…”argument in a generative dialogue sense. But, on 12.26.06, Mr. Carson’s did not “listen” as his aim was to keep debating.
Before completing my 12.26.06 response to Len, which starts with “Generative dialogue synthesis,” I said “I have ‘listened’ carefully to Len’s opinions and perceive that his interests, by going farther than necessary, go well beyond Phase One. Other parties representative of the larger whole – high social complexity - with different interests – regulators, generation of differing kinds, wholesale, retail, transmission, distribution, fuel supply, manufacturers of systems and equipments, etc. - are invited to participate in the generative dialogue.”
On 12.26.06 Len asked for a time out of “perhaps a couple of weeks…”
I hope to have taken away some of the interference that seems to exist on the generative dialogue.
Regards,
José Antonio Vanderhorst-Silverio, PhD
Part 2 of 2.
On 12.20.06, Fred wanted to restart the debate, but was unsuccessful. Len suddenly decided to take command and defend his baby project IMEUC as an emerging deregulation project, saying to Fred “I would like to submit that on de-regulation I believe you are wrong (and therefore naturally and to my regret, myself for a failing grade).”
On 12.21.06 I defused Prof. Banks argument about “NO TINKERING ON THE DEMAND SIDE CAN OFFSET THE GAMING AND LACK OF INVESTMENT ON THE SUPPLY SIDE!” He said nothing, which to the untrained eye means he accepted the arguments. However, being a great downloader he repeated it later on in response to James.
On 12.24.06 Mr. Carson came to respond Banks on the “NO TINKERING…” argument that he didn’t defend.
Trying to reframe the debate, on 12.25.06, I rephrased Fred’s “NO TINKERING…”argument in a generative dialogue sense. But, on 12.26.06, Mr. Carson’s did not “listen” as his aim was to keep debating.
Before completing my 12.26.06 response to Len, which starts with “Generative dialogue synthesis,” I said “I have ‘listened’ carefully to Len’s opinions and perceive that his interests, by going farther than necessary, go well beyond Phase One. Other parties representative of the larger whole – high social complexity - with different interests – regulators, generation of differing kinds, wholesale, retail, transmission, distribution, fuel supply, manufacturers of systems and equipments, etc. - are invited to participate in the generative dialogue.”
On 12.26.06 Len asked for a time out of “perhaps a couple of weeks…”
I hope to have taken away some of the interference that seems to exist on the generative dialogue.
Regards,
José Antonio Vanderhorst-Silverio, PhD
Playing With Fire and Collapse Part 21
Reference: Playing with Fire - The 10 Tcf/year Supply Gap -- Part I
To all readers that want to learn about the third way of deregulation
Part 1 of 2.
I am against debates on deregulation, because there is nothing we can do about the decade old debate. That is why I proposed instead to work on a generative dialogue, because we can learn about the emerging future, by considering, for example, EWPC as a candidate for such third way. Deregulation is a very complex and tough problem situation.
Adam Kahane says on page 68 of his book “solving tough problems,” that “[M]ost conventional approaches to solving problems emphasize talking, especially the authoritarian, boss or expert, way of talking: telling…” just like James Carson and Prof. Banks.
Kahane continuous saying: “In a debate, each party prepares their position and speech in advance and then delivers it to a panel, which chooses the most convincing speech. The same process is used in courtrooms and boardrooms and in parliament (except the legislators have usually made up their minds before they hear the speeches).” Fred and James seem to be excellent legislators.
Kahane concludes that “This approach works for deciding between already created alternatives, but it doesn’t create anything new… The additional element that is required to create something new, and that is ignored in most conventional approaches, is listening… [on page 70] the next step, listening openly, is even harder.”
Given that in this medium it is not possible to impose a solution by force, debates can only get stuck. With very high probability, that will be the result of Carson vs. Banks.
We need at least two people to start a debate, specially a heated debate. According to the Webster’s American Dictionary, debate means “discussion, especially of a public question in an assembly, involving opposing viewpoints.” Before Mr. Carson’s first comment, I believe that I was conducting a generative dialogue with Len (but not with Prof. Banks), since on 12.25.06 Len said “…I might add that it seems that the greatest benefit of "generative dialogue"…”
So, I will try to summarize some of the signals that have resulted so far from the electricity industry generative dialogue.
I recall that 12.19.06 was a very important synchronicity day for the generative dialogue on deregulation. While I was recalling that “it is time innovate…,” Len said he was “actually one of the strongest supporters of a pure market electricity strategy such as EWPC.” As I explained that EWPC is not a pure market electricity strategy, I found an important and strong signal: “Jamie Wimberly’s article The Future Utility Customer Service Model closure, in which he endorses systemic approach and the revolution away from the continuity scenario.” That is the key issue here!
To all readers that want to learn about the third way of deregulation
Part 1 of 2.
I am against debates on deregulation, because there is nothing we can do about the decade old debate. That is why I proposed instead to work on a generative dialogue, because we can learn about the emerging future, by considering, for example, EWPC as a candidate for such third way. Deregulation is a very complex and tough problem situation.
Adam Kahane says on page 68 of his book “solving tough problems,” that “[M]ost conventional approaches to solving problems emphasize talking, especially the authoritarian, boss or expert, way of talking: telling…” just like James Carson and Prof. Banks.
Kahane continuous saying: “In a debate, each party prepares their position and speech in advance and then delivers it to a panel, which chooses the most convincing speech. The same process is used in courtrooms and boardrooms and in parliament (except the legislators have usually made up their minds before they hear the speeches).” Fred and James seem to be excellent legislators.
Kahane concludes that “This approach works for deciding between already created alternatives, but it doesn’t create anything new… The additional element that is required to create something new, and that is ignored in most conventional approaches, is listening… [on page 70] the next step, listening openly, is even harder.”
Given that in this medium it is not possible to impose a solution by force, debates can only get stuck. With very high probability, that will be the result of Carson vs. Banks.
We need at least two people to start a debate, specially a heated debate. According to the Webster’s American Dictionary, debate means “discussion, especially of a public question in an assembly, involving opposing viewpoints.” Before Mr. Carson’s first comment, I believe that I was conducting a generative dialogue with Len (but not with Prof. Banks), since on 12.25.06 Len said “…I might add that it seems that the greatest benefit of "generative dialogue"…”
So, I will try to summarize some of the signals that have resulted so far from the electricity industry generative dialogue.
I recall that 12.19.06 was a very important synchronicity day for the generative dialogue on deregulation. While I was recalling that “it is time innovate…,” Len said he was “actually one of the strongest supporters of a pure market electricity strategy such as EWPC.” As I explained that EWPC is not a pure market electricity strategy, I found an important and strong signal: “Jamie Wimberly’s article The Future Utility Customer Service Model closure, in which he endorses systemic approach and the revolution away from the continuity scenario.” That is the key issue here!
martes, diciembre 26, 2006
Playing With Fire and Collapse Part 20
Reference: Playing with Fire - The 10 Tcf/year Supply Gap -- Part I
Generative dialogue synthesis:
Competition is divided in two phases: One) market vs market and Two) company vs company.
In Phase One all interested parties cooperate in the generative dialogue to select the emergent winning market. Phase Two is not part of the generative dialogue.
EWPC – an integral reform paradigm - is an open and robust emergent market architecture and design that divides the vertically integrated utility at modular interfaces. 1) Long run and short run system planning, operation and control natural monopoly functions are also kept integrated. 2) The T&D wires natural transport monopoly is kept integrated. 3) Supply - generation - natural competitive functions compete with each other 4) Demand - retail - natural competitive functions compete with each other. 5) Supply and demand – Megawatt/vars vs Negawatt/vars - compete with each other in time and space. Module 1 commitments on planning, operation and control are to be executed by the other modules.
Based on mechanistic thinking, IMEUC is one close and fractured strategy, like any other experienced deregulation efforts, that suggests retaining one of the key elements of retail business model innovations – the metering function – as a monopoly. The intermediary Market Manager is designed to contract base load units based on long run forecasting under uncertainty, arising from improper market signals.
IMEUC as a switchboard intermediary is just one of the many potential business models. It is only through execution – high dynamic complexity – of the development of the resources on the demand side that the potential will be realized. Other potential business model innovations won’t be able to be developed if IMEUC is unfairly and prematurely selected, by giving it market power over other intermediaries. It is no correct to assume how customers will behave – and evolve - beforehand. Instead, there is a need for a customer orientation.
While incremental costs might become negligible, sunk costs might be comparatively prohibitive for all customers. As a “right” solution, IMEUC becomes a strong barrier to emergent – high generative complexity - creative destruction. The best way to find out what the real overhead costs will be is in Phase Two with the right strategy and flawless execution under competition.
Module 1 is to take decisions for the health of the whole system as they unfold. The forward looking statement suggested to Prof. Banks and Mr. Carson on the generative dialogue goes in that direction. The Market Manager does not have such integral perspective.
I want to keep my opinions on Phase One. I am open to review the general open market design and architecture, if there are unfair elements associated with it. I have “listen” carefully to Len’s opinions and perceive that his interests, by going farther than necessary, go well beyond Phase One. Other parties representative of the larger whole – high social complexity - with different interests – regulators, generation of differing kinds, wholesale, retail, transmission, distribution, fuel supply, manufacturers of systems and equipments, etc. - are invited to participate in the generative dialogue.
© 2006. José Antonio Vanderhorst-Silverio, PhD.
Generative dialogue synthesis:
Competition is divided in two phases: One) market vs market and Two) company vs company.
In Phase One all interested parties cooperate in the generative dialogue to select the emergent winning market. Phase Two is not part of the generative dialogue.
EWPC – an integral reform paradigm - is an open and robust emergent market architecture and design that divides the vertically integrated utility at modular interfaces. 1) Long run and short run system planning, operation and control natural monopoly functions are also kept integrated. 2) The T&D wires natural transport monopoly is kept integrated. 3) Supply - generation - natural competitive functions compete with each other 4) Demand - retail - natural competitive functions compete with each other. 5) Supply and demand – Megawatt/vars vs Negawatt/vars - compete with each other in time and space. Module 1 commitments on planning, operation and control are to be executed by the other modules.
Based on mechanistic thinking, IMEUC is one close and fractured strategy, like any other experienced deregulation efforts, that suggests retaining one of the key elements of retail business model innovations – the metering function – as a monopoly. The intermediary Market Manager is designed to contract base load units based on long run forecasting under uncertainty, arising from improper market signals.
IMEUC as a switchboard intermediary is just one of the many potential business models. It is only through execution – high dynamic complexity – of the development of the resources on the demand side that the potential will be realized. Other potential business model innovations won’t be able to be developed if IMEUC is unfairly and prematurely selected, by giving it market power over other intermediaries. It is no correct to assume how customers will behave – and evolve - beforehand. Instead, there is a need for a customer orientation.
While incremental costs might become negligible, sunk costs might be comparatively prohibitive for all customers. As a “right” solution, IMEUC becomes a strong barrier to emergent – high generative complexity - creative destruction. The best way to find out what the real overhead costs will be is in Phase Two with the right strategy and flawless execution under competition.
Module 1 is to take decisions for the health of the whole system as they unfold. The forward looking statement suggested to Prof. Banks and Mr. Carson on the generative dialogue goes in that direction. The Market Manager does not have such integral perspective.
I want to keep my opinions on Phase One. I am open to review the general open market design and architecture, if there are unfair elements associated with it. I have “listen” carefully to Len’s opinions and perceive that his interests, by going farther than necessary, go well beyond Phase One. Other parties representative of the larger whole – high social complexity - with different interests – regulators, generation of differing kinds, wholesale, retail, transmission, distribution, fuel supply, manufacturers of systems and equipments, etc. - are invited to participate in the generative dialogue.
© 2006. José Antonio Vanderhorst-Silverio, PhD.
lunes, diciembre 25, 2006
Playing With Fire and Collapse Part 19
Reference: Playing with Fire - The 10 Tcf/year Supply Gap -- Part I
Merry Christmas to everyone!
Thanks Len for considering the generative dialogue. In a generative dialogue what is important is "listening" in sychronicity with other interest parties to the larger whole that is emerging. For example, a common understanding of what EWPC means as a third way not considered in the decade old debate.
I presume that large customers could be allowed to go directly to generators for their deals in the wholesale market. Then, what you are suggesting is a monopoly retailer innovation under a Market Manager. I suggest to have retail competition, so that other potential innovations are also allowed to emerge. Go to any marketing book and you will find why intermediaries are needed.
What you are proposing is to impose on everyone the Swithboard Profit Model “innovation,” which Adrian Slywosky describes on page 59 of his book “The Profit Zone.”
Merry Christmas to everyone!
Thanks Len for considering the generative dialogue. In a generative dialogue what is important is "listening" in sychronicity with other interest parties to the larger whole that is emerging. For example, a common understanding of what EWPC means as a third way not considered in the decade old debate.
I presume that large customers could be allowed to go directly to generators for their deals in the wholesale market. Then, what you are suggesting is a monopoly retailer innovation under a Market Manager. I suggest to have retail competition, so that other potential innovations are also allowed to emerge. Go to any marketing book and you will find why intermediaries are needed.
What you are proposing is to impose on everyone the Swithboard Profit Model “innovation,” which Adrian Slywosky describes on page 59 of his book “The Profit Zone.”
Some markets are characterized by multiple sellers communicating with multiple buyers, with high costs incurred by both. In many case, there is an opportunity to create a high-value intermediary that concentrates these multiple communicating pathways through one point, one channel, by creating a switchboard. The switchboard reduces the cost to both buyers and sellers. A powerful component of the switchboard model is that it builds on itself; the more buyers and sellers that join, the more valuable it becomes.Such middleman model is perfectly allowed under the EWPC market architecture and design. That is why I said earlier "good luck!" Please say so if there are other things that still bother you.
Playing With Fire and Collapse Part 18
Reference: Playing with Fire - The 10 Tcf/year Supply Gap -- Part I
Mr. Carson initiated what seems to be a heated debate with Prof. Banks. In my most recent comment you may see that a debate centers on the typical downloading and reloading. However, if they decide to learn from the emerging future, by following my suggestion to Let's Get Out of Back Rooms to a Generative Dialogue all of us might be served better.
In that respect, I also suggest to change the debate based on the past
to an emergent generative dialogue on
The suggested forward looking statement itself is open to be clarified and refined.
Mr. Carson initiated what seems to be a heated debate with Prof. Banks. In my most recent comment you may see that a debate centers on the typical downloading and reloading. However, if they decide to learn from the emerging future, by following my suggestion to Let's Get Out of Back Rooms to a Generative Dialogue all of us might be served better.
In that respect, I also suggest to change the debate based on the past
NO TINKERING ON THE DEMAND SIDE CAN OFFSET THE GAMING AND LACK OF INVESTMENT ON THE SUPPLY SIDE!
to an emergent generative dialogue on
IRRESPECTIVE OF LOCATION, THE BEST INVESTMENT STRATEGY FOR AN ELECTRIC POWER SYSTEM WITH THE APPROPIATE MARKET ARCHITECTURE AND DESIGN IS A MIX OF INVESTMENTS ON THE DEVELOPMENT OF THE RESOURCES OF THE DEMAND SIDE AND INVESTMENTS ON THE DEVELOPMENT OF THE RESOURCES OF THE SUPPLY SIDE THAT REDUCES SHORT RUN AND LONG RUN SYSTEMIC RISK WHILE SOCIETY RECEIVES THE MAXIMUM VALUE FROM ELECTRICITY.
The suggested forward looking statement itself is open to be clarified and refined.
domingo, diciembre 24, 2006
Playing With Fire and Collapse Part 17
Reference: Playing With Fire and Collapse Part 16
While debating, people operate downloading and reloading rehearsed messages. They know what is true and they don’t need to “listen” to what the other writes. Some as Prof. Banks have the courage to write that “I know too much about it, and where this subject is concerned my memory is very good.”
Under a generative dialogue, the aim is different as “listening” is very important. The object is to tackle complex problems to learn from an emergent future. It is not possible to come up yet with a right solution.
On 5.12.06 – under Post hoc ergo propter hoc: The fallacy of blaming deregulation for rising electricity prices we had this interchange of opinions:
See Avoiding the Boom and Bust Cycle in Electricity Trading and Let's Get Out of Back Rooms to a Generative Dialogue for an explanation of how under EWPC the mitigation of fuel price avoids unacceptable price spikes.
Jose Antonio today: the complex situation is similar to the one facing the gas industry that Andy has brilliantly explained. This explains why "recommendations don't quite go far enough." The complexity has three dimensions according to Adam Kahane (taken from Senge and other):
High dynamic complexity: forecasting tools should be replaced by system dynamics and scenario tools deployed by competent professionals. Fuel prices should be mitigated to produce electricity prices.
High generative complexity: an emergent market design and architecture model – a third way – is available and was not included in the decade long debate. Schweppes’s theory and practice was unable to emerge. EWPC is one candidate market design and architecture open to many competing solutions that extend Schweppes’s concepts.
High social complexity: there is a need for a customer orientation to be able to develop the resources of the demand side by market segments. As customers needs evolve, such development will empower customers only by interacting with them. Retailers’ accounts are assets that prudential regulation supervises and that customers and generators will trust if the system is designed properly.
Jose Antonio Vanderhorst-Silverio, PhD is an Interdependent [Systemic] Consultant on Electricity, whose “[R]esearch and practice areas, and interests include: [electricity without price controls], systems architecture, systems thinking, electricity retail marketing under a customer orientation, electric market rules, information systems requirements and design, contract assistance.”
While debating, people operate downloading and reloading rehearsed messages. They know what is true and they don’t need to “listen” to what the other writes. Some as Prof. Banks have the courage to write that “I know too much about it, and where this subject is concerned my memory is very good.”
Under a generative dialogue, the aim is different as “listening” is very important. The object is to tackle complex problems to learn from an emergent future. It is not possible to come up yet with a right solution.
On 5.12.06 – under Post hoc ergo propter hoc: The fallacy of blaming deregulation for rising electricity prices we had this interchange of opinions:
Len: I'm still waiting for anyone to acknowledge Independent Market for Every Utility Customer - Preliminary Business Case or Independent Market for Every Utility Customer Part 2 - Market Operation
José Antonio: “In other comments I have expressed that retailers’ business model innovations should be centered on AMI, CIS and demand response integration. That leads to the market winning approach, which is the first phase of competition: market vs. market, where collaboration is the critical strategy according to Geoffrey Moore in the book “Living on the fault line” … Len articles are part of the second phase of competition: company vs. company. That is a zero sum game, and so competition is the core strategy. That is why I don’t want to take sides yet. Sorry Len, I think your approach is one of several available to retailers. Good luck!”
See Avoiding the Boom and Bust Cycle in Electricity Trading and Let's Get Out of Back Rooms to a Generative Dialogue for an explanation of how under EWPC the mitigation of fuel price avoids unacceptable price spikes.
Jose Antonio today: the complex situation is similar to the one facing the gas industry that Andy has brilliantly explained. This explains why "recommendations don't quite go far enough." The complexity has three dimensions according to Adam Kahane (taken from Senge and other):
High dynamic complexity: forecasting tools should be replaced by system dynamics and scenario tools deployed by competent professionals. Fuel prices should be mitigated to produce electricity prices.
High generative complexity: an emergent market design and architecture model – a third way – is available and was not included in the decade long debate. Schweppes’s theory and practice was unable to emerge. EWPC is one candidate market design and architecture open to many competing solutions that extend Schweppes’s concepts.
High social complexity: there is a need for a customer orientation to be able to develop the resources of the demand side by market segments. As customers needs evolve, such development will empower customers only by interacting with them. Retailers’ accounts are assets that prudential regulation supervises and that customers and generators will trust if the system is designed properly.
Jose Antonio Vanderhorst-Silverio, PhD is an Interdependent [Systemic] Consultant on Electricity, whose “[R]esearch and practice areas, and interests include: [electricity without price controls], systems architecture, systems thinking, electricity retail marketing under a customer orientation, electric market rules, information systems requirements and design, contract assistance.”
sábado, diciembre 23, 2006
Feliz Navidad
Referencia: Columna, Sin temor ni favor. Por Luis H. Arthur S. / El Caribe. Sábado 23 de diciembre del 2006 actualizado el viernes 22 de diciembre del 2006 a las 11:15 PM
¿En qué consiste abrir nuestra mente? Significa, en última instancia, abrir nuestro corazón. Pero aquí también hay quienes descartan esta alternativa porque piensan que utilizar el corazón es sinónimo de pensamiento confuso y debilidad personal de quien toma decisiones con “eficiencia”. Sin embargo, las culturas más antiguas y los pueblos del mundo a lo largo de su historia han conectado sus decisiones a este aspecto subjetivo. El más antiguo símbolo de la mente entre los chinos es una representación del corazón.
Adam Kahane
Estimados Amigos del GMH y del Exatec Ampliado,
Agradezco y secundo cordialmente el mensaje en la nota Feliz Navidad y en especial todos los deseos que Luís envió a los piconautas.
Escribe Peter Senge en el prefacio del libro "solving tough problems," de Adam Kahane, que "La política y los políticos de hoy personifican virtualmente lo opuesto del símbolo del cual emergió su vocación - la polis griega - donde los ciudadanos venían a hablar juntos sobre los asuntos del día." La vocación de los dominicanos necesita regresar a la forma original y para ello es que sugiero consideren las bondades del diálogo generativo.
Empecé al leer el libro de Kahane y entiendo claramente que el debate sobre la solución eléctrica solamente puede producir un tranque o una solución de fuerza. Una parte de la solución de fuerza ya decidida es reducir las pérdidas de las distribuidoras con el imperio de la ley, posponiendo la reducción de las pérdidas de los clientes para más adelante. Otra parte - la renegociación de los contratos - parece estar trancada todavía. Aún otra parte es seguir regresando hacia la ley orgánica de la vieja CDE, imponiendo de nuevo también por la fuerza muchas de las prerrogativas que la LGE le quitó a la CDE, al tiempo que se abre la puerta para convertirla en un comprador único.
Kahane ofrece una tercera alternativa que no se ha explorada y que evita quedarse empantanado en el debate. Esa alternativa nos permitirá crear una nueva realidad emergente. Entiendo muy bien que no hay una sola solución emergente a este problema, a pesar de que impulso una que, hasta prueba en contrario, entiendo funciona bien. Lo que sí sé es que ni la solución CDEEE ni la Capitalización funcionan.
Hasta que no superemos la mentalidad del debate, nuestras necesidades y penurias continuarán. Necesitamos adoptar “una forma abierta de hablar, escuchar y crear nuevas realidades” - ese el subtítulo del libro de Adam Kahane.
Aunque la gente ve muy mal que les digan lo que tienen que hacer espero no tomen a mal mi regalo de Navidad. El regalo es que reitero mi sugerencia de que invitemos a Adam Kahane al país y lo escuchemos abiertamente con la mente, el corazón y nuestra voluntad para conocer su enfoque de como resolver "vaínas jodidas" (traducción de tough problems). Sugiero que si se decide trear a Kahane al país, aseguremos que venga sin términos de referencia que lo aten.
Un fuerte abrazo navideño a todos,
José Antonio
viernes, diciembre 22, 2006
Playing With Fire and Collapse Part 16
Reference: Playing With Fire and Collapse Part 15
Part 2 of 2.
Len - 1.12.06 – On Independent Market for Every Utility Customer Part 2 - Market Operation
As the result of efficiency on every stage of the supply chain, any competent electric power system planner would see a repetition of the fault found in the deregulation experiments of the last decade: the system is also fractured. Hence IMEUC does not lead to the maximum value expected by society as is EWPC where the system architecture is modularized at the proper interfaces on the value chain. For example, retail marketing is an essential service for the development of the resources of the demand side that is disintegrated in the IMEUC. A fault on market architecture is evident on IMEUC that becomes a barrier to emerging retail marketing business model innovations under competition.
It was to the innovation concept that Mr. Wimberly responded to my conclusion that “instead of Utilities Enterprise Solutions, a Retailers Enterprise Solutions arrives, which will make much more business for IT suppliers than expected under the Continuity Scenario. The main reason is that current business models are at the end of there useful life, while new technology is available to be transformed into competing innovative business models, leading to true deregulation of electric markets.”
While under EWPC obsolescence risk of customer interfaces are taken by retail marketers, under IMEUC monopoly regime the bets of the Market Manager on the customer interface (including metering) are transferred to the rate payers. As customers needs evolve, retail competition should be centered on business model innovations for the different market segments. One size fit all system is also big bet.
In addition, under IMEUC the Market Manager remains as an intermediary for base load generation based on very risky forecasting. Forecasting great weaknesses that leads to playing with fire have already been delved at length earlier on under this article. The resulting market design is no robust enough, leading to either excessive costs of over-capacity or under-capacity by missing proper whole system long run risk management. A market design error has been made, as an improper market signal may lead to large levies imposed on customers when there is a large forecasting error.
Part 2 of 2.
Len - 1.12.06 – On Independent Market for Every Utility Customer Part 2 - Market Operation
The Market Manager uses a public tender process to add to this baseload contract supply as load increases within their market territory. Ideally they never get themselves into a position of having to pay for more production than customers purchase, but in the event that happens they are still responsible for paying the contract, so must try to re-sell the excess into other neighboring markets. Failing that, the Market Manager must add a levy onto all market transactions to collect the amount necessary to cover the shortfall amount owed the provider above the amount collected by sales…Vanderhorst-Silverio: After reading the article suggested and its follow up, I find that after looking closely IMEUC does not corresponds to the new integral reform paradigm. IMEUC is based on mechanistic thinking about fundamental electricity economics, as can be found under the heading “Metrics” a statement that says: “[E]very consumer of utilities will benefit from a system such as this in three ways: first…every entity at every stage in the supply chain will be constrained to making their own good investment and operating decisions or be out-competed by a more efficient operator.”
As the result of efficiency on every stage of the supply chain, any competent electric power system planner would see a repetition of the fault found in the deregulation experiments of the last decade: the system is also fractured. Hence IMEUC does not lead to the maximum value expected by society as is EWPC where the system architecture is modularized at the proper interfaces on the value chain. For example, retail marketing is an essential service for the development of the resources of the demand side that is disintegrated in the IMEUC. A fault on market architecture is evident on IMEUC that becomes a barrier to emerging retail marketing business model innovations under competition.
It was to the innovation concept that Mr. Wimberly responded to my conclusion that “instead of Utilities Enterprise Solutions, a Retailers Enterprise Solutions arrives, which will make much more business for IT suppliers than expected under the Continuity Scenario. The main reason is that current business models are at the end of there useful life, while new technology is available to be transformed into competing innovative business models, leading to true deregulation of electric markets.”
While under EWPC obsolescence risk of customer interfaces are taken by retail marketers, under IMEUC monopoly regime the bets of the Market Manager on the customer interface (including metering) are transferred to the rate payers. As customers needs evolve, retail competition should be centered on business model innovations for the different market segments. One size fit all system is also big bet.
In addition, under IMEUC the Market Manager remains as an intermediary for base load generation based on very risky forecasting. Forecasting great weaknesses that leads to playing with fire have already been delved at length earlier on under this article. The resulting market design is no robust enough, leading to either excessive costs of over-capacity or under-capacity by missing proper whole system long run risk management. A market design error has been made, as an improper market signal may lead to large levies imposed on customers when there is a large forecasting error.
Playing With Fire and Collapse Part 15
Reference: Playing With Fire and Collapse Part 14
In addition to the comments under this article, please find further comments on a generative dialogue about Independent Market for Every Utility Customer (IMEUC) and Electricity Without Price Controls (EWPC).
Part 1 of 2.
Jose Antonio – 11.21.06 – on AMI Services Solutions for Alberta's Deregulated Market:
Len – 11.22.06 – on AMI Services Solutions for Alberta's Deregulated Market:
Len - 1.12.06 – On Independent Market for Every Utility Customer Part 2 - Market Operation
Continued on next post…
In addition to the comments under this article, please find further comments on a generative dialogue about Independent Market for Every Utility Customer (IMEUC) and Electricity Without Price Controls (EWPC).
Part 1 of 2.
Jose Antonio – 11.21.06 – on AMI Services Solutions for Alberta's Deregulated Market:
Deregulation on a piecemeal basis leads to the outcome you are pointing out. Transmission and distribution is fractured; the customer interface is fractured; the value chain is fractured. I suggest that ADOE (and other energy departments) retain a consultant for advice on electricity without price control (EWPC).
The result should be a robust market, where retailers business design innovation (with AMI) should develop the resources on the demand side (with water and gas as well). Reintegration of T&D should assure short run (price elasticity demand response) and long run (boom-bust mitigation) risk managements, with a different standard market structure and design. In simple terms, the result should be the End-State of the Electricity Industry.
The benefits of AMI in the new integral-reform-paradigm will be larger than in the fractured-high/volatility-paradigm, as growth and development towards the new economy will result from real creative destruction.
Energy departments worldwide should look closely to the article issues in the making. As electricity deregulation is a very complex subject matter, debate will prove insufficient. There is a need for a generative dialogue that will help see the presence of the emergent solution. I strongly believe EWPC is the way out of those issues.
Len – 11.22.06 – on AMI Services Solutions for Alberta's Deregulated Market:
Agree with Jose generally, though I think your recommendations don't quite go far enough. Given the meter communications infrastructure you propose, your final "Benefits" graph misses entirely the largest potential benefit by far, that of providing genuine real-time pricing and intelligent interaction with the markets from every customer's meter. It would provide a large block of added benefits at only a very low incremental cost.
Len - 1.12.06 – On Independent Market for Every Utility Customer Part 2 - Market Operation
The most basic operation of the market is to:
· Resell to customers the electricity or natural gas produced by large baseload suppliers under very long-term fixed price contracts negotiated by the Market Manager entity based on their projections of future demand.
· Provide means for merchant generators of all sizes to contract with customer load in excess of this baseload to provide additional power in excess of the baseload.
Continued on next post…
jueves, diciembre 21, 2006
Síntesis: Jugando con Fuego y con el Colapso Parte 2 Grupo 0
Referencia: Síntesis: Jugando con Fuego y con el Colapso
Feliz Navidad a todos los Amigos del GMH y demás lectores,
Ayer, el Editorial El Día: El País Eléctrico trajo un mensaje que refleja el poco avance en la solución de la crisis del sector eléctrico en la opinión pública, pero esperando una solución para el próximo año. La opinión pública merece conocer el progreso acontecido en esta Bitácora Digital y en esta segunda parte aparece cada vez más clara y contundente la tercera vía que nos sacará del debate hacia el diálogo generativo. Seguimos jugando con fuego y las cosas están muy calientes en esta entrega de la primera hasta la última nota.
Por la íntima relación con el proceso de colapso que vivimos en la economía dominicana, sigo concentrando mi atención en un artículo muy oportuno e interesante, que aparenta ser excesivamente leído (7,458 veces en menos de 6 días), sobre los riesgos de precio y suministro en la crisis emergente de gas natural. Aunque insisto en poner cuidadosa atención al artículo Playing with Fire – The 10 Tcf/year Supply Gap -- Part I, de Andrew Weissman, Editor-in-Chief & Publisher, EnergyBusinessWatch.com, y muy especialmente a los 44 comentarios colocados ya al respecto, esta es una breve e incompleta síntesis de la segunda parte a este momento del dialogo generativo que he impulsado:
Playing With Fire and Collapse Part 6
En respuesta a la propuesta de Arvid Hallén de realizar una expansión a base de energía nuclear para resolver la crisis del gas natural, le expliqué la existencia de la tercera vía emergente diferente aquí de los modelos de CDEEE y de Capitalización. Le hice una pregunta para confirmar su modelo mental.
Playing With Fire and Collapse Part 7
Defendí las grandes oportunidades del desarrollo de los recursos del lado de la demanda basándome en informaciones del Electric Power Research Institute (EPRI).
Playing With Fire and Collapse Part 8
Len sugiere aprovechar las economías de alcance de otros servicios públicos para expandir la ESCP. Digo que sería los servicios públicos sin control de precios – SPSCP. El agua aquí y en otras partes es un serio problema emergente que el GMH tiene en su mira. Explico que la ESCP no es una solución pura de mercado como sugiere Len: T&D y la operación del sistema seguirán siendo monopolios y deberán satisfacer el cuarto criterio de Schweppe.
Playing With Fire and Collapse Part 9
Identifico que el modelo mental de Arvid es de la industrial verticalmente integrada. Explico que esa industria - como la CDEEE - es cada vez más ineficiente, pero que la liberación defectuosa de los mercados – como la capitalización - es mucho más ineficiente para la mayoría de los clientes. Adelanto serios problemas en la liberación anunciada de los mercados de Europa en el 2007.
Playing With Fire and Collapse Part 10
Respondo a comentarios calientes del Prof. Banks, quien dice saber demasiado y tener buena memoria. Lo cito y le doy la oportunidad para reconocer el aporte de Schweppe.
Playing With Fire and Collapse Part 11
Respondo otra solicitud de Arvid y lo oriento sobre como poner al día con la tercera vía.
Playing With Fire and Collapse Part 12
Respondo otros comentarios calientes del Prof. Banks quien insiste en una opinión fija. Le cito de nuevo sus propias expresiones y le explico como los ingenieros de la industria eléctrica administran el riesgo – uno de sus fuertes a nivel externo a la industria – y muestro como la respuesta de la demanda es la clave para hacerlo en el modelo emergente de la industria eléctrica. Agrego los comentarios muy favorables de Jamie Wimberly el CEO de Distributed Energy Financial Group al esfuerzo que he venido realizando sobre la solución emergente.
Playing With Fire and Collapse Part 13
Len reitera que tenemos diferencias sobre la solución emergente; el cree que no se necesitan detallistas. Le explico las razones institucionales que entiendo justifican a los detallistas.
Playing With Fire and Collapse Part 14
Ultima, pero la más caliente de todas. Una corte de Estados Unidos abre la puerta para la invalidez de los contratos de la industria eléctrica y el posible pago de grandes multas. Esta noticia debe ser la clave para una reforma con visión de futuro de la industria eléctrica. Hagamos que exista un país eléctrico y esa sea su marca-país.
Playing With Fire and Collapse Part 14
Reference: Playing With Fire and Collapse Part 13
Historical news on deregulation scams: "Court Says U.S. Oversight of Power Industry Was Lax," by DAVID CAY JOHNSTON, The New York Times, December 20, 2006.
"A federal appeals court yesterday called into question the government’s efforts to change the power industry into a more competitive business, ruling that national energy officials abdicated their responsibility to ensure fair electricity markets."
Historical news on deregulation scams: "Court Says U.S. Oversight of Power Industry Was Lax," by DAVID CAY JOHNSTON, The New York Times, December 20, 2006.
"A federal appeals court yesterday called into question the government’s efforts to change the power industry into a more competitive business, ruling that national energy officials abdicated their responsibility to ensure fair electricity markets."
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