Instead of trying to integrate the grid and the retail sides of the utilities, CIOs should take the results of an essential system analysis that supports the EWPC market architecture and design breakthrough paradigm shift of the power industry.
Disintegrating the Grid and Retail Worlds
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.
W. Marie Zanavich, Vice President Information Technology / CIO, Retired, has produced a very interesting piece of work to support the integration of the grid and retail sides of the utilities, based on the cumulative learning of the past 30 years in standards and process disciplines of the IT business. She concludes that “the ‘enterprise direction’ [of the CIO] should be the only one supported.”
An alternative view of the article supports the need to restructure the power industry under the EWPC market architecture and design paradigm, as can be seen in Disruptive Technologies Convergence. With EWPC most of the technology integration present challenges identified in the article disappear. By performing an essential systems analysis, to find out the real information system requirements of the power industry, I came up with the Synthesis Proposal Agreement of EWPC.
The biggest technology (compatibility and integration) issue originates in an intuitive and mistaken restructuring that separates transmission from distribution and that keeps distribution together with the retail operation in the utilities. Restructuring is in essence an information technology event, in which there are great efficiency opportunities on the customer side of the business, arising from the great reduction in transaction costs with the introduction of innovative business models to take the power industry out of the NO PROFIT ZONE, as explained in Let EWPC Come to Fruition.
In addition, serious difficulties on the integration of the grid with retail were explained in the article The Anti-System Utility. The problem is that the distribution side of the grid has been used to keep the retail side of the enterprise as a monopoly or as a powerful incumbent retailer. Those powerful retailers obstructs competition, as is the recent case of Ohio’s plan for re-regulation, as explained in the A New Mistaken Experiment and that are to be resolved with “Let the Market Decide” in Ohio.
Unlike the grid and retail side of the utility under transmission access, the integrated transmission and distribution grid, which is kept together under EWPC, has the same transportation function and the same culture under the same roof. That is why I also wrote the EWPC article Solving Smart Grid Cost Recovery to solve the difficulty that regulators have to approve AMI investment. I said above that most of the problems disappear, thinking of the great information technology challenges of implementing the smart grid.
Retail competition at the federal or global level, under prudential regulations, with Second Generation Retailer - 2GR developing business model innovations, will result in Retailers Enterprise Solutions as explained in Positive Returns under EWPC. AMI investments then will no longer be bets of regulators, but risks taken by 2GRs under competition.
Reference and context: Technology Integration Presents Challenges
lunes, noviembre 12, 2007
The EWPC Textbook
A textbook on electricity without price controls (EWPC) has been in the making for quite some time. The textbook will answer the paradox, “How much system reliability can you afford?” by integrating preceding work, which will include a whole chapter in physical and financial risk management.
The EWPC Textbook
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.
Thank you Fred Banks, Len, Michael, Fred Plett, Jim, Steve, Peter, Joseph, and many other important and intelligent persons, like yourselves, that have questioned or helped the EWPC market architecture and design breakthrough paradigm concepts, under this article or in other physical or electronic venues.
I am happy to tell all of you, and the general public, that I have decided to write the textbook “EWPC Theory and Practice,” since I have now come full circle with the key insight of William C. Hayes Editorial, in the Electrical World magazine of April 1st, 1978, “How much system reliability can you afford?,” which signalled very clearly the need for a paradigm shift of the power industry.
This morning, after almost 30 years of keen observations and hard work in the power industry, I woke up with a strong message that is going to be the center of the EWPC book, which fully answers that engineering, economic, social, and financial paradox, that “brought the utility industry to a cross roads,” as Mr. Hayes wrote.
Most of the concepts of the textbook are already in the GMH Blog and in www.EnergyPulse.net, while the most recent are in www.energyblogs.com, needing a strong editorial and design effort to transform it into a coherent textbook.
From what I gather from Fred insistence, on the need of a textbook that covers electric derivatives, there is a need for a textbook (not necessarily financial) to cover both the physical and financial risk management aspects of EWPC. One whole chapter of the textbook will be dedicated to it. Since my Ph.D. training is in Information Theory, where random variables and random processes are everyday work, I will take that challenge very seriously.
Readers are advised to read very carefully the recent rebuttals posted, before making any conclusions.
Best regards,
José Antonio
The EWPC Textbook
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.
Thank you Fred Banks, Len, Michael, Fred Plett, Jim, Steve, Peter, Joseph, and many other important and intelligent persons, like yourselves, that have questioned or helped the EWPC market architecture and design breakthrough paradigm concepts, under this article or in other physical or electronic venues.
I am happy to tell all of you, and the general public, that I have decided to write the textbook “EWPC Theory and Practice,” since I have now come full circle with the key insight of William C. Hayes Editorial, in the Electrical World magazine of April 1st, 1978, “How much system reliability can you afford?,” which signalled very clearly the need for a paradigm shift of the power industry.
This morning, after almost 30 years of keen observations and hard work in the power industry, I woke up with a strong message that is going to be the center of the EWPC book, which fully answers that engineering, economic, social, and financial paradox, that “brought the utility industry to a cross roads,” as Mr. Hayes wrote.
Most of the concepts of the textbook are already in the GMH Blog and in www.EnergyPulse.net, while the most recent are in www.energyblogs.com, needing a strong editorial and design effort to transform it into a coherent textbook.
From what I gather from Fred insistence, on the need of a textbook that covers electric derivatives, there is a need for a textbook (not necessarily financial) to cover both the physical and financial risk management aspects of EWPC. One whole chapter of the textbook will be dedicated to it. Since my Ph.D. training is in Information Theory, where random variables and random processes are everyday work, I will take that challenge very seriously.
Readers are advised to read very carefully the recent rebuttals posted, before making any conclusions.
Best regards,
José Antonio
sábado, noviembre 10, 2007
Friendly Comments on Deregulation Update
This is an update of Some Friendly Comments on True Electric Deregulation Part 4, posted on Tuesday, December 27, 2005, on the BMH blog. The update is in square "[" "]" brackets, some of which may be missing in order no to make it more complex by unnecessary repeating.
Thank you very much Mr. Martín-Giraldo for your timely comments.
I agree completely that Fred C. Schweppe supported regulation, but a very distinct kind of regulation, which I believe is completely unnecessary today. Experience with faulty [today E1R2] deregulation, experience with regulation, the development of new technologies, and additional insights into electric business, suggest serious consideration to the development of a "true" deregulated [now re-regulated] electric marketplace. The comments that follow are in addition to my earlier [which I believe is the seminal EWPC] article on An Alternative Business Case for Demand Response, as well as my comments dispersed on EnergyPulse.
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 [again changed to re-regulated under prudential regulations] deregulated electricity market, with retailers innovative business models, without price controls, a new value chain (generator, retailer & customer), while re-regulating the wires monopoly.
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."
That explains why on page 123, Schweppe, et al, conclude "that there are many similarities between the regulated energy market place… and the deregulated system." That also explains very clearly the shortcomings ( i.e. price spikes) of, Space B, faulty deregulation.
In addition, on page xvii of Spot Pricing of Electricity, Fred C. Schweppe (et al) understood that "there is a need for fundamental changes in the way society views electric energy... In general terms: …the spot price based energy marketplace involves a variety of utility-customer transactions… These transactions may include customers selling to, as well as buying from, the utility." Read "fundamental changes" not cosmetic changes in the utilities business models.
On page xviii, they add "A spot price based energy marketplace has many benefits for both the electric utility and its customers. These benefits include improvements in operating efficiency, reductions in needed capital investments, and customer options on the type of (reliability) of electricity to be bought. A spot price based energy marketplace is a win-win situation for both the regulated utility and its customers. The customer's lifestyles improve because the customers are receiving more service from the use of electric energy per dollar spent. The utility has a more controllable, less uncertain world in which to operate." That is exactly the opposite of what has been happening, by leaving the customer out in the re-regulation efforts. Demand response will change that.
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 [again re-regulated] Spot Price Based Energy Marketplace. That I suggest is the required change in firm organization that [delete goes] satisfies the control scheme, on the need to develop the corresponding innovative business models.
I add my response to your well documented comments with the dedication of the book "Spot Pricing of Electricity," that says: "Fred created spot pricing and proved, again, that "The forecast is always wrong!" (Unnumbered page, placed on what should be page v).
Schweppe was a feedback genious, which understood (see page 7) that "In the energy marketplace, there is a closed-loop feedback between the utility and its customers. The whole electric power system (generation, transmission, distribution, and customers) is controlled and operated in an integrated fashion, without removing the customers' freedom of choice. This is made possible by the diversity in costumer's characteristics, desires and needs… The benefits of well-designed, real time, utility customer feedback are clear, or will be after reading this book." My hypothesis of "true" [EWPC re-regulation] deregulation is centered on those perceptions of the customers, which introduce [as a key issue for full retail and wholesale competition to develop] the need for retail marketing and retail competition, which, unfortunately, is the "true" deregulation that the late Fred C. Schweepe had no time to [consider, nor]see.
Now I like to respond some of your comments:
· To me is important to remark that the origins of restructuring are not in the thought of Schweppe, although many people could think so nowadays.
My response:
I believe that sufficient time has past to assign the proper credits, which I am trying to integrate in a true deregulation of electricity. However, I firmly believe that the theory and practice of restructuring of electricity originated with Fred C. Schweppe leadership. The book "Spot Pricing of Electricity" is the place to respond to Charles Maurice de Tayllerand-Périgord, argument: "When something become dark to you, go to the origins."
I believe that Schweppe proposed a "real" restructuring, when he said "New directions for the utility industry are being sought by many interested parties in the government, the private sector, and the universities. One such direction has been widespread interest in utility-customer cooperation through innovative rates characterized by broader options and better use of information on utility costs and customer needs. The goal of this book is to provide a theoretically sound, yet practical foundation for the implementation of utility-customer transactions based on today's needs. Our goal is to meet four criteria:
1. "Freedom of Choice: provide customers with options on the cost and reliability of supply and how they choose to use electric energy."
2. Economic Efficiency: Motivate customers to adjust their own electric energy usage patterns to match utility marginal costs.
3. Equity: Reduce customer cross-subsidies…
4. Utility Control, Operation and planning: Consider the engineering requirements for controlling, operating and planning an electric power system."
Commenting the criteria in reverse order:
Item 4: is what Mr. Jack Casazza, yourself, myself, and others have been asking all along, which were forgotten in the "deregulation" frenzy. [This is what I have reduced to the simple, but not simplistic, R1E2 policy.]
Item 3: had a note [on my book]: "there are other definitions of equity." I characterize a supply security (or quality) cross-subsidy, just to cross-subsidize, for example, the computer manufacturer, as Thomas Tanton has rightly pointed out. Average rates to customer classes forbid that.
Item 2: motivation underscores the need for retail marketing, which utility minded people find unnecessary. I have to admit that Mr. Schweppe didn't got that far [ and should have].
Item 1: This is the key element on the differentiation of customers. Technology for a complete market is already here. In the End-State (which is within the next five years) [WOW! 5 years – interesting opinion] price controls become completely unnecessary, given my article and the comments have made in the EnergyPulse discussions.
Your comment:
Why?. Please pay attention to the first sentence between parenthesis: "Which we do advocate". Schweppe advocated regulation. By extension, this means there is not necessarily a relationship between "deregulation" and "demand response", thus "demand response" could take place in a restructured or non-restructured environment.
My response:
While the words seem correct, the intent is not. As was seeing from my first response, Fred C. Schweppe advocated a much more different regulation than the re-regulation that California experimented. In fact, Schwepe had suggested very big restructuring effort, with the following 4 above goals. Had they follow Fred C. Schweppe spot pricing "regulation" model; the experiment would have been completely successful. That is why you need to add the sentence "The reader might be surprised to learn that the trip from regulation to deregulation need not be very long…"
Your comment:
In my opinion it is more easy "demand response", (or load management, demand side management, market transformation or whatever name adopted along last 30 years you want to call it), takes place in a regulated environment and carried out by a vertical integrated utility under the once very popular IRP (Integrated Resource Planning.)
My response:
I suggest you to read my response to Bob Lieberman in what I believe is The Birth of the Global Electric Retailer.
Best regards,
José Antonio Vanderhorst-Silverio, PhD
On 12/27/05, Power Encounter <powerencounter@gmail.com> wrote:
Dear Mr. Vanderhorst-Silverio,
I have the following comments to do:
1. Fred Schewppe supported regulation. In Chapter 5. "A Possible Future: Deregulation", page 111 of the book "Spot Pricing of Electricity" by Fred C. Schweppe, Michael C. Caramanis, Richard D. Tabors and Roger E. Bohn (Kluwer Academic Publishers. 1988 ISBN 0-89838-260-2), we can read: "This chapter shows how the establishment of a spot price based energy marketplace in a regulated environment (which we do advocate) can evolve towards or into a deregulated system. The reader may be surprised to learn that the trip from regulation to deregulation need not be very long (although it may be bumpy)." To me is important to remark that the origins of restructuring are not in the thought of Schweppe, although many people could think so nowadays. Why?. Please pay attention to the first sentence between parenthesis: "Which we do advocate". Schweppe advocated regulation. By extension, this means there is not necessarily a relationship between "deregulation" and "demand response", thus "demand response" could take place in a restructured or non-restructured environment. In my opinion it is more easy "demand response", (or load management, demand side management, market transformation or whatever name adopted along last 30 years you want to call it), takes place in a regulated environment and carried out by a vertical integrated utility under the once very popular IRP (Integrated Resource Planning.).
2. Since its inception, the control scheme of a power system is hierarchical. Id est: a vertical one. This vertical control scheme observes a time scale which comply with the power system states: electromagnetic, transient, and steady states, and short term and long term planning. And this vertical scheme control obeys the organization of a vertical integrated utility as well. With restructuring and unbundling the utility lost verticality and become horizontal. To enlarge my view in this point it could be interesting for instance you pay a view to the Economics book "Markets and Hierarchies: Analysis and Antitrust Implications", by Oliver E. Williamson, Free Press. 1983 ISBN: 0-02934-780-7). There has been a change in the firm organisation, but there has NOT been the corresponding change in the control scheme. Now, the point here is whether the classical control scheme affords horizontal utilities. The facts seem to tell no. Then, how to add to the present vertical control scheme a new full horizontal one such the required by "demand response" without provoking clashing?. Neither the multi-agent systems technology is still ready, nor the Agent-based Computational Economics has been developed. See http://www.econ.iastate.edu/tesfatsi/aelect.htm .
3. In present times I remember a quote of Charles Maurice de Tayllerand-Périgord, that argued French politician who once said: "When something become dark to you, go to the origins".
Posted in Energy Pulse.
Sincerely yours
J Martín-Giraldo
On 12/24/05, José Antonio Vanderhorst-Silverio, PhD wrote:
Estimado Dr. Martín-Giráldo,
Perdone mi insistencia sobre mi propuesta de un Mercado eléctrico liberalizado verdadero, con el cual su contribución espero. Cambio al inglés ahora.
Professor Ferdinand E. Banks wrote a timely article in EnergyPulse entitled A Few More Unfriendly Comments on Electric Deregulation, to which I made an initial comment and posed some questions regarding my hipothesis of a true electric deregulation. Prof. Banks has said, among other things that: "Almost as important, I think that the arguments of Jack Casazza, and the people at the Carnegie Mellon Electricity Industry Center are unbeatable. They also have all the evidence on their side, which helps. (And here I can suggest examining the blog of Jesus M. Martin-Giraldo.) I certainly respect the knowledge and interest of Vanderhorst-Silverio in this matter, and I hope that his ideas receive a wide circulation, but in terms of the economic theory that I study and teach, I would really be surprised if I were able to endorse those suggesting that there is an acceptable deregulation agenda out there somewhere if only we take the time to find it. "
Thanking Prof. Banks for his suggestion that my ideas receive a wide circulation, I responded in part as follows:
"Recently, I have sent an email to Mr. Casazza, and have gone to Jesus M. Martin-Giraldo, Power Encounters blog, where I posted comments in Spanish about 1) a misunderstanding of Fred C Schweppe's Homeostatic Utility Control in the literature review he posted; 2) my blog in which I have posted well over 900 notes, most of them in Spanish, related to what I believe is my meaningful aim of true deregulation (which started on 1995); and 3) CME Industry Center (CMEIC) admission of incomplete (=faulty) deregulation and lack of physical demand side risk management, and referring him to the link of my comments under the article " Strategic Perspectives on Utility Enterprise Solutions," by Warren Causey on EnergyPulse."
"I have received no reply from them yet. I agree that under the old paradigm, CMEIC and Mr. Casazza are unbeatable, because they are based on "facts" of the faulty deregulation. However, I humbly think that under COE [Customer Oriented Electricity was what I now call EWPC] hypothesis many of the arguments just don't hold. However, I received a kind reply from Dr. Alfred E. Kahn, but I am not allowed to forward it yet (the email has some legalese at the bottom)."
"I will send all of them, including the CMEIC the link of this article to see if they may have answers to the questions I asked you. "
Deseándole una feliz Navidad y esperando sus comentarios, bien sea en su bitácora digital, en EnergyPulse o por esta misma vía.
Muy cordialmente,
José Antonio Vanderhorst-Silverio, PhD
Interdependent Consultant on Electricity
BS ´68, MS ´71 & PhD ´72, all from Cornell University
Valued IEEE Member for 35 Years
javs@ieee.org
Research and practice areas, and interests: systems architecture, systems thinking, retail marketing, customer orientation, information systems requirements and design, market rules, contract assistance.
Thank you very much Mr. Martín-Giraldo for your timely comments.
I agree completely that Fred C. Schweppe supported regulation, but a very distinct kind of regulation, which I believe is completely unnecessary today. Experience with faulty [today E1R2] deregulation, experience with regulation, the development of new technologies, and additional insights into electric business, suggest serious consideration to the development of a "true" deregulated [now re-regulated] electric marketplace. The comments that follow are in addition to my earlier [which I believe is the seminal EWPC] article on An Alternative Business Case for Demand Response, as well as my comments dispersed on EnergyPulse.
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 [again changed to re-regulated under prudential regulations] deregulated electricity market, with retailers innovative business models, without price controls, a new value chain (generator, retailer & customer), while re-regulating the wires monopoly.
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."
That explains why on page 123, Schweppe, et al, conclude "that there are many similarities between the regulated energy market place… and the deregulated system." That also explains very clearly the shortcomings ( i.e. price spikes) of, Space B, faulty deregulation.
In addition, on page xvii of Spot Pricing of Electricity, Fred C. Schweppe (et al) understood that "there is a need for fundamental changes in the way society views electric energy... In general terms: …the spot price based energy marketplace involves a variety of utility-customer transactions… These transactions may include customers selling to, as well as buying from, the utility." Read "fundamental changes" not cosmetic changes in the utilities business models.
On page xviii, they add "A spot price based energy marketplace has many benefits for both the electric utility and its customers. These benefits include improvements in operating efficiency, reductions in needed capital investments, and customer options on the type of (reliability) of electricity to be bought. A spot price based energy marketplace is a win-win situation for both the regulated utility and its customers. The customer's lifestyles improve because the customers are receiving more service from the use of electric energy per dollar spent. The utility has a more controllable, less uncertain world in which to operate." That is exactly the opposite of what has been happening, by leaving the customer out in the re-regulation efforts. Demand response will change that.
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 [again re-regulated] Spot Price Based Energy Marketplace. That I suggest is the required change in firm organization that [delete goes] satisfies the control scheme, on the need to develop the corresponding innovative business models.
I add my response to your well documented comments with the dedication of the book "Spot Pricing of Electricity," that says: "Fred created spot pricing and proved, again, that "The forecast is always wrong!" (Unnumbered page, placed on what should be page v).
Schweppe was a feedback genious, which understood (see page 7) that "In the energy marketplace, there is a closed-loop feedback between the utility and its customers. The whole electric power system (generation, transmission, distribution, and customers) is controlled and operated in an integrated fashion, without removing the customers' freedom of choice. This is made possible by the diversity in costumer's characteristics, desires and needs… The benefits of well-designed, real time, utility customer feedback are clear, or will be after reading this book." My hypothesis of "true" [EWPC re-regulation] deregulation is centered on those perceptions of the customers, which introduce [as a key issue for full retail and wholesale competition to develop] the need for retail marketing and retail competition, which, unfortunately, is the "true" deregulation that the late Fred C. Schweepe had no time to [consider, nor]see.
Now I like to respond some of your comments:
· To me is important to remark that the origins of restructuring are not in the thought of Schweppe, although many people could think so nowadays.
My response:
I believe that sufficient time has past to assign the proper credits, which I am trying to integrate in a true deregulation of electricity. However, I firmly believe that the theory and practice of restructuring of electricity originated with Fred C. Schweppe leadership. The book "Spot Pricing of Electricity" is the place to respond to Charles Maurice de Tayllerand-Périgord, argument: "When something become dark to you, go to the origins."
I believe that Schweppe proposed a "real" restructuring, when he said "New directions for the utility industry are being sought by many interested parties in the government, the private sector, and the universities. One such direction has been widespread interest in utility-customer cooperation through innovative rates characterized by broader options and better use of information on utility costs and customer needs. The goal of this book is to provide a theoretically sound, yet practical foundation for the implementation of utility-customer transactions based on today's needs. Our goal is to meet four criteria:
1. "Freedom of Choice: provide customers with options on the cost and reliability of supply and how they choose to use electric energy."
2. Economic Efficiency: Motivate customers to adjust their own electric energy usage patterns to match utility marginal costs.
3. Equity: Reduce customer cross-subsidies…
4. Utility Control, Operation and planning: Consider the engineering requirements for controlling, operating and planning an electric power system."
Commenting the criteria in reverse order:
Item 4: is what Mr. Jack Casazza, yourself, myself, and others have been asking all along, which were forgotten in the "deregulation" frenzy. [This is what I have reduced to the simple, but not simplistic, R1E2 policy.]
Item 3: had a note [on my book]: "there are other definitions of equity." I characterize a supply security (or quality) cross-subsidy, just to cross-subsidize, for example, the computer manufacturer, as Thomas Tanton has rightly pointed out. Average rates to customer classes forbid that.
Item 2: motivation underscores the need for retail marketing, which utility minded people find unnecessary. I have to admit that Mr. Schweppe didn't got that far [ and should have].
Item 1: This is the key element on the differentiation of customers. Technology for a complete market is already here. In the End-State (which is within the next five years) [WOW! 5 years – interesting opinion] price controls become completely unnecessary, given my article and the comments have made in the EnergyPulse discussions.
Your comment:
Why?. Please pay attention to the first sentence between parenthesis: "Which we do advocate". Schweppe advocated regulation. By extension, this means there is not necessarily a relationship between "deregulation" and "demand response", thus "demand response" could take place in a restructured or non-restructured environment.
My response:
While the words seem correct, the intent is not. As was seeing from my first response, Fred C. Schweppe advocated a much more different regulation than the re-regulation that California experimented. In fact, Schwepe had suggested very big restructuring effort, with the following 4 above goals. Had they follow Fred C. Schweppe spot pricing "regulation" model; the experiment would have been completely successful. That is why you need to add the sentence "The reader might be surprised to learn that the trip from regulation to deregulation need not be very long…"
Your comment:
In my opinion it is more easy "demand response", (or load management, demand side management, market transformation or whatever name adopted along last 30 years you want to call it), takes place in a regulated environment and carried out by a vertical integrated utility under the once very popular IRP (Integrated Resource Planning.)
My response:
I suggest you to read my response to Bob Lieberman in what I believe is The Birth of the Global Electric Retailer.
Best regards,
José Antonio Vanderhorst-Silverio, PhD
On 12/27/05, Power Encounter <powerencounter@gmail.com> wrote:
Dear Mr. Vanderhorst-Silverio,
I have the following comments to do:
1. Fred Schewppe supported regulation. In Chapter 5. "A Possible Future: Deregulation", page 111 of the book "Spot Pricing of Electricity" by Fred C. Schweppe, Michael C. Caramanis, Richard D. Tabors and Roger E. Bohn (Kluwer Academic Publishers. 1988 ISBN 0-89838-260-2), we can read: "This chapter shows how the establishment of a spot price based energy marketplace in a regulated environment (which we do advocate) can evolve towards or into a deregulated system. The reader may be surprised to learn that the trip from regulation to deregulation need not be very long (although it may be bumpy)." To me is important to remark that the origins of restructuring are not in the thought of Schweppe, although many people could think so nowadays. Why?. Please pay attention to the first sentence between parenthesis: "Which we do advocate". Schweppe advocated regulation. By extension, this means there is not necessarily a relationship between "deregulation" and "demand response", thus "demand response" could take place in a restructured or non-restructured environment. In my opinion it is more easy "demand response", (or load management, demand side management, market transformation or whatever name adopted along last 30 years you want to call it), takes place in a regulated environment and carried out by a vertical integrated utility under the once very popular IRP (Integrated Resource Planning.).
2. Since its inception, the control scheme of a power system is hierarchical. Id est: a vertical one. This vertical control scheme observes a time scale which comply with the power system states: electromagnetic, transient, and steady states, and short term and long term planning. And this vertical scheme control obeys the organization of a vertical integrated utility as well. With restructuring and unbundling the utility lost verticality and become horizontal. To enlarge my view in this point it could be interesting for instance you pay a view to the Economics book "Markets and Hierarchies: Analysis and Antitrust Implications", by Oliver E. Williamson, Free Press. 1983 ISBN: 0-02934-780-7). There has been a change in the firm organisation, but there has NOT been the corresponding change in the control scheme. Now, the point here is whether the classical control scheme affords horizontal utilities. The facts seem to tell no. Then, how to add to the present vertical control scheme a new full horizontal one such the required by "demand response" without provoking clashing?. Neither the multi-agent systems technology is still ready, nor the Agent-based Computational Economics has been developed. See http://www.econ.iastate.edu/tesfatsi/aelect.htm .
3. In present times I remember a quote of Charles Maurice de Tayllerand-Périgord, that argued French politician who once said: "When something become dark to you, go to the origins".
Posted in Energy Pulse.
Sincerely yours
J Martín-Giraldo
On 12/24/05, José Antonio Vanderhorst-Silverio, PhD wrote:
Estimado Dr. Martín-Giráldo,
Perdone mi insistencia sobre mi propuesta de un Mercado eléctrico liberalizado verdadero, con el cual su contribución espero. Cambio al inglés ahora.
Professor Ferdinand E. Banks wrote a timely article in EnergyPulse entitled A Few More Unfriendly Comments on Electric Deregulation, to which I made an initial comment and posed some questions regarding my hipothesis of a true electric deregulation. Prof. Banks has said, among other things that: "Almost as important, I think that the arguments of Jack Casazza, and the people at the Carnegie Mellon Electricity Industry Center are unbeatable. They also have all the evidence on their side, which helps. (And here I can suggest examining the blog of Jesus M. Martin-Giraldo.) I certainly respect the knowledge and interest of Vanderhorst-Silverio in this matter, and I hope that his ideas receive a wide circulation, but in terms of the economic theory that I study and teach, I would really be surprised if I were able to endorse those suggesting that there is an acceptable deregulation agenda out there somewhere if only we take the time to find it. "
Thanking Prof. Banks for his suggestion that my ideas receive a wide circulation, I responded in part as follows:
"Recently, I have sent an email to Mr. Casazza, and have gone to Jesus M. Martin-Giraldo, Power Encounters blog, where I posted comments in Spanish about 1) a misunderstanding of Fred C Schweppe's Homeostatic Utility Control in the literature review he posted; 2) my blog in which I have posted well over 900 notes, most of them in Spanish, related to what I believe is my meaningful aim of true deregulation (which started on 1995); and 3) CME Industry Center (CMEIC) admission of incomplete (=faulty) deregulation and lack of physical demand side risk management, and referring him to the link of my comments under the article " Strategic Perspectives on Utility Enterprise Solutions," by Warren Causey on EnergyPulse."
"I have received no reply from them yet. I agree that under the old paradigm, CMEIC and Mr. Casazza are unbeatable, because they are based on "facts" of the faulty deregulation. However, I humbly think that under COE [Customer Oriented Electricity was what I now call EWPC] hypothesis many of the arguments just don't hold. However, I received a kind reply from Dr. Alfred E. Kahn, but I am not allowed to forward it yet (the email has some legalese at the bottom)."
"I will send all of them, including the CMEIC the link of this article to see if they may have answers to the questions I asked you. "
Deseándole una feliz Navidad y esperando sus comentarios, bien sea en su bitácora digital, en EnergyPulse o por esta misma vía.
Muy cordialmente,
José Antonio Vanderhorst-Silverio, PhD
Interdependent Consultant on Electricity
BS ´68, MS ´71 & PhD ´72, all from Cornell University
Valued IEEE Member for 35 Years
javs@ieee.org
Research and practice areas, and interests: systems architecture, systems thinking, retail marketing, customer orientation, information systems requirements and design, market rules, contract assistance.
viernes, noviembre 09, 2007
“Let the Market Decide” in Ohio
By endorsing the EWPC market architecture and design breakthrough paradigm shift, the EEI will tell Ohio’s policymakers that energy efficiency is the cheapest, quickest, and cleanest resource for meeting their ever-increasing [end-use] demand for energy.
“Let the Market Decide” in Ohio
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.
Dear Mr. Rosenstock,
I am glad that the Edison Electric Institute (EEI) is suggesting to “Let the market decide,” with respect to the worldwide movement to ban the (light) bulbs. The reason for that move, however, has its origin in the obsolescence of the power industry market structure and design, which operates in general perverse incentives on energy efficiency. For example, to the complain of Joseph Somsel, on 11.6.07, “Instead I have to pay for … ‘efficiency’ that people have not decided to buy themselves,” I responded in the electricity without price controls (EWPC) article Let EWPC Come to Fruition, that:
With respect with our strong recommendation of letting the market decide, in the EWPC article the Divine Dispensation of Electric Markets is Gone, I wrote:
Right after reading your article, I went to the EEI website and found, in “events and meeting” of the home page, a link with the promotion of the Energy Efficiency Global Forum & Exposition (EE Global), to be celebrated next week, with the auspices of EEI.
“Let the Market Decide” in Ohio . . . continued
I browsed the EE Global website and found that “What makes EE Global stand out from other international conferences,” is that “[t]his conference is being held in Washington, D.C. to demonstrate to policymakers that energy efficiency is the cheapest, quickest, and cleanest resource for meeting the world’s ever-increasing demand for energy. Today’s achievements in energy efficiency as well as developing plans and commitments for a sustainable energy future will be highlighted.”
“To demonstrate to policymakers that energy efficiency is the cheapest, quickest, and cleanest resource for meeting the world’s ever-increasing demand for energy” is a tall order, exactly what the late Donella Meadows suggested (hit again the link to “Let’s Get…” above) in 2001, and that have inspired (together with other insights) the breakthrough paradigm shift to EWPC market architecture and design. EWPC turns around 180 degrees the industry away from the perverse incentives against energy efficiency, by completely letting the market decide effectively. While browsing the program, I found missing the need for such paradigm shift.
In conclusion, I respectfully suggest that the EEI consider very seriously letting come to fruition (please see details above in the corresponding link) the breakthrough paradigm shift to EWPC, as it is in the best interest all the EEI membership and all other stakeholders. The best opportunity available right now for the EEI is precisely in Ohio, as explained in the EWPC article A New Mistaken Experiment, where I wrote among other things:
Best regards,
José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
“Let the Market Decide” in Ohio
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.
Dear Mr. Rosenstock,
I am glad that the Edison Electric Institute (EEI) is suggesting to “Let the market decide,” with respect to the worldwide movement to ban the (light) bulbs. The reason for that move, however, has its origin in the obsolescence of the power industry market structure and design, which operates in general perverse incentives on energy efficiency. For example, to the complain of Joseph Somsel, on 11.6.07, “Instead I have to pay for … ‘efficiency’ that people have not decided to buy themselves,” I responded in the electricity without price controls (EWPC) article Let EWPC Come to Fruition, that:
I agree that by decoupling artificially sales and profits by ‘costly incremental shifts away from the VIUs [vertically integrated utilities] paradigm’ makes customers pay for “‘efficiency’ that people have not decided to buy themselves,” as I explained when I wrote The Sixth Disruptive Technology.
With respect with our strong recommendation of letting the market decide, in the EWPC article the Divine Dispensation of Electric Markets is Gone, I wrote:
When energy costs were low, the business model of [ÍOUs] winning rate cases to the regulator didn’t bother the customers. But since the oil embargo in the 70s, customers are ever more interested in competitive prices, as free society recognized that IOUs cannot control anymore the electricity markets. I have followed Donella Meadows advise (see the Let's Get Out of Back Rooms to a Generative Dialogue link please) to end the divine dispensation to the IOUs. But after many things have occurred during more than 30 years, with the obsolete VIUs controlled market, customers like those of the state of Ohio want and effective and efficient re-regulation process.
Right after reading your article, I went to the EEI website and found, in “events and meeting” of the home page, a link with the promotion of the Energy Efficiency Global Forum & Exposition (EE Global), to be celebrated next week, with the auspices of EEI.
“Let the Market Decide” in Ohio . . . continued
I browsed the EE Global website and found that “What makes EE Global stand out from other international conferences,” is that “[t]his conference is being held in Washington, D.C. to demonstrate to policymakers that energy efficiency is the cheapest, quickest, and cleanest resource for meeting the world’s ever-increasing demand for energy. Today’s achievements in energy efficiency as well as developing plans and commitments for a sustainable energy future will be highlighted.”
“To demonstrate to policymakers that energy efficiency is the cheapest, quickest, and cleanest resource for meeting the world’s ever-increasing demand for energy” is a tall order, exactly what the late Donella Meadows suggested (hit again the link to “Let’s Get…” above) in 2001, and that have inspired (together with other insights) the breakthrough paradigm shift to EWPC market architecture and design. EWPC turns around 180 degrees the industry away from the perverse incentives against energy efficiency, by completely letting the market decide effectively. While browsing the program, I found missing the need for such paradigm shift.
In conclusion, I respectfully suggest that the EEI consider very seriously letting come to fruition (please see details above in the corresponding link) the breakthrough paradigm shift to EWPC, as it is in the best interest all the EEI membership and all other stakeholders. The best opportunity available right now for the EEI is precisely in Ohio, as explained in the EWPC article A New Mistaken Experiment, where I wrote among other things:
The public needs to be aware that the approved Ohio’s Senate Bill has a big flaw: for competition to exist, utilities as we know them would disappear. For retail competition to exist there is a need to do without incumbent retailers, as the utilities need to be transformed into integrated (transmission and distribution) transportation utilities.
The central issue, however, is that the transportation utility is not a subject of congressional debate, but the subject of engineering planning, operation and control, to satisfy an ultraquality imperative, just like nuclear power plants and space flight vehicles. As there are Only Two Stable Paradigms, the electricity-regulation bill approved by Ohio’s Senate is just a new mistaken experiment under economic first, reliability second, tinkering.
Best regards,
José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
The BOTH/AND Assumption of EWPC
By using both the smart grid and distributed resources, EWPC will produce reliable electricity at affordable costs, just like Toyota does with cars.
The BOTH/AND Assumption of EWPC
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.
Thank you very much Mr. Rawlingson for your intervention.
The first statement of your comment "Distributed means of energy production are OK but they must be accompanied by a distributed means of energy storage. If not users will still be dependent upon the grid to supply their needs at times when they cannot - or their lights will go out." is an EITHER/OR assumption, making the rest of the post unnecessary on the BOTH/AND assumption of EWPC.
The BOTH/AND assumption is based on the quote which I posted above as The "Continuity" Scenario is Gone (hit link please if not under the EnergyPulse article) about “The future of electric power,” that in particular says: “Existing national power grids won't disappear. They will operate like the Internet, as part of a complex web through which people will supply electricity, by uploading, as well as downloading it."
As the smart grid is one of the disruptive technologies (please see The Sixth Disruptive Technology), it gives also a good opportunity to explain better EWPC As The New Internet (hit link please), where I said that “… I understand that DER [distributed energy resources] is just one of the six disruptive technologies already identified … under electricity without price controls (EWPC) for the transformation of the electric industry. EWPC is the winning market architecture and design breakthrough paradigm shift that satisfies "... these changes and require new ways of thinking and operating..." that the author [Mr. Tornal] calls for.
I hope the above clarifications may help you and other readers to Let EWPC Come to Fruition (hit link also for details), “…As ‘the heat of combat is over, and a decision’ about EWPC can now be reached, ‘all the bitterness disappears, and people work hard to bring’ EWPC ‘to fruition in the best possible way’…”
Best regards,
José Antonio
Reference and context: Distributed Architectural Renewable Energy Generation, by Brian Braginton-Smith, Executive Director, Sustainable Resources Group.
The BOTH/AND Assumption of EWPC
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.
Thank you very much Mr. Rawlingson for your intervention.
The first statement of your comment "Distributed means of energy production are OK but they must be accompanied by a distributed means of energy storage. If not users will still be dependent upon the grid to supply their needs at times when they cannot - or their lights will go out." is an EITHER/OR assumption, making the rest of the post unnecessary on the BOTH/AND assumption of EWPC.
The BOTH/AND assumption is based on the quote which I posted above as The "Continuity" Scenario is Gone (hit link please if not under the EnergyPulse article) about “The future of electric power,” that in particular says: “Existing national power grids won't disappear. They will operate like the Internet, as part of a complex web through which people will supply electricity, by uploading, as well as downloading it."
As the smart grid is one of the disruptive technologies (please see The Sixth Disruptive Technology), it gives also a good opportunity to explain better EWPC As The New Internet (hit link please), where I said that “… I understand that DER [distributed energy resources] is just one of the six disruptive technologies already identified … under electricity without price controls (EWPC) for the transformation of the electric industry. EWPC is the winning market architecture and design breakthrough paradigm shift that satisfies "... these changes and require new ways of thinking and operating..." that the author [Mr. Tornal] calls for.
I hope the above clarifications may help you and other readers to Let EWPC Come to Fruition (hit link also for details), “…As ‘the heat of combat is over, and a decision’ about EWPC can now be reached, ‘all the bitterness disappears, and people work hard to bring’ EWPC ‘to fruition in the best possible way’…”
Best regards,
José Antonio
Reference and context: Distributed Architectural Renewable Energy Generation, by Brian Braginton-Smith, Executive Director, Sustainable Resources Group.
jueves, noviembre 08, 2007
The Lecture on EWPC Re-Regulation
The new lecture on the power industry is about EWPC re-regulation. With the same old lecture, Professor Banks is correct that E1R2 deregulation is a failure.
Dear Prof. Banks, Mr. Somsel and other intelligent and important writers and readers,
Thank you Fred for the challenge of your lecture. From your response (see below), I understand that the Conspiracy Theory Against Mr. X is confirmed.
That electric deregulation of the E1R2 kind has failed is well known and accepted worldwide for quite some time.
As documented above, and this is very recent, vertical integration with a process of customer wallet cleaning by incumbent utilities, based on an obsolete business model of utilities winning rate cases to regulators, placed the power industry from circa 1970 in the NO PROFIT ZONE and has definitely failed for even more time than E1R2 deregulation.
The more than a decade old debate between E1R2 deregulation and vertical integration has been a total waste of time for the customers and the general public. The new lecture seems to be just the same old lecture, as the fundamental elements of the EWPC winning market architecture and design paradigm breakthrough that emerged in the past two years are not mentioned at all. The new lecture is about EWPC as it is documented in its first version on www.energyblogs.com.
As a synthesis, EWPC is an R1E2 re-regulation under a structure of two interrelated markets:
(1) A controlled and integrated (T&D) transportation market, and
(2) An open market in the generation, retail, customer value chain, under prudential regulation, for generation and retail, instead of price controls for the end-customer.
The above market structure is the solution to the vertical integration problem and the way to go forward with the EWPC paradigm shift, to get the power industry into the PROFIT ZONE with business model innovations. This is the real progress.
Kind regards,
José Antonio
This is what Ferdinand E. Banks wrote on 11.8.07
Dear Prof. Banks, Mr. Somsel and other intelligent and important writers and readers,
Thank you Fred for the challenge of your lecture. From your response (see below), I understand that the Conspiracy Theory Against Mr. X is confirmed.
That electric deregulation of the E1R2 kind has failed is well known and accepted worldwide for quite some time.
As documented above, and this is very recent, vertical integration with a process of customer wallet cleaning by incumbent utilities, based on an obsolete business model of utilities winning rate cases to regulators, placed the power industry from circa 1970 in the NO PROFIT ZONE and has definitely failed for even more time than E1R2 deregulation.
The more than a decade old debate between E1R2 deregulation and vertical integration has been a total waste of time for the customers and the general public. The new lecture seems to be just the same old lecture, as the fundamental elements of the EWPC winning market architecture and design paradigm breakthrough that emerged in the past two years are not mentioned at all. The new lecture is about EWPC as it is documented in its first version on www.energyblogs.com.
As a synthesis, EWPC is an R1E2 re-regulation under a structure of two interrelated markets:
(1) A controlled and integrated (T&D) transportation market, and
(2) An open market in the generation, retail, customer value chain, under prudential regulation, for generation and retail, instead of price controls for the end-customer.
The above market structure is the solution to the vertical integration problem and the way to go forward with the EWPC paradigm shift, to get the power industry into the PROFIT ZONE with business model innovations. This is the real progress.
Kind regards,
José Antonio
This is what Ferdinand E. Banks wrote on 11.8.07
Well, gentlemen, it looks to me as if we have made some real progress here - by that I mean admitting that electric deregulation has failed. That's all that I wanted. A few years ago I encountered people who cursed me roundly for suggesting that that had happened or could happen. Remember what Enron promised Governor Wilson in California about the amount that price would fall with deregulation. And Joseph, can you give give me the exact reference to the paper you mentioned (in EnergyPulse you say) so that I can cite it in my latest rant.
Fred
Reference and context: A New Lecture on Electric Deregulation Failure, by Ferdinand E. Banks, Professor.
miércoles, noviembre 07, 2007
Let EWPC Come to Fruition
As ‘the heat of combat is over, and a decision’ about EWPC can now be reached, ‘all the bitterness disappears, and people work hard to bring’ EWPC ‘to fruition in the best possible way’ to paraphrase Uno Lamm.
Let EWPC Come to Fruition
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.
Dear Joseph,
Thank you very much for allowing me to complete what I understood was a challenge posed to me, by our intelligent and important common friend Fred, at the end of his article, which I initially responded with the article The Magic Deregulation Formula and whose further responses are being documented under the article Response to Professor Banks.
In the initial response I said, among other things, that “… the key finding that will be at the center is that deregulation was and is based on the faulty concept "economy first, reliability second [E1R2]." If reliability first, economy second, [R1E2] is a magic formula that allows to restructure power sectors worldwide into an electric network (integrated transportation) and a money network (on the customer, retail, generation value chain), let so be it.”
As I wrote in the 2005 [seminal EWPC] EnergyPulse article An Alternative Business Case for Demand Response, “…DR is poised to be the demand side risk management tool to complement the traditional "LOLP" supply side risk management tool. There are two sides on the DR coin. On one side, system crashes are mitigated by a least cost mix of supply and demand risk management tools that may be applied in time and space. On the other, DR is the key to the segmentation of customers supply security (a kind of insurance)... Professor Schweppe ‘envisioned a world of customer-based electrical generation and storage,’ which has been happening in the Dominican Republic, for quite some time, missing only the Demand Response System and a truly competitive retail deregulation [now re-regulation] to fulfilled the dream of a country without blackouts.”
That is why, under EWPC, electricity is a special commodity that can be rationed rationally and that can be stored by individual end-customers, as they do in the Dominican Republic and elsewhere. For more details on [physical] risk management updates, please read A Futures Market under EWPC, as “The elements of a futures market under R1E2 EWPC to lead to a stable and competitive electric markets environment are explained.” Look closely on the need to “satisfy the original NYMEX electricity contracts, which require high physical reliability.”
Let EWPC Come to Fruition . . . continued
With respect to your experience at Ontario Hydro, don’t forget to read in detail the general explanation of the Customer Wallet Cleaning Problem and Solution, where I said that “I agree with Mr. Rozenman that regulation not only have big flaws, but the most important thing is that it is just plain obsolete. It is for the obsolete fact that I disagree with him that the debate the debate is not yet settled, as EWPC has been available for over for a year. To understand the chaotic events that explain that the debate is settled please read the Conspiracy Theory Against Mr. X.”
On that theory you could learn that “The vertically integrated utilities paradigm has been in a NO PROFIT ZONE for quite some time, letting utilities make a profit under regulation only by the “consumer having his wallet cleaned out by ever increasing power costs.” To get the power industry in the PROFIT ZONE, there is a need to restructure with the aim to admit business model innovations to develop.”
I agree that by decoupling artificially sales and profits by “costly incremental shifts away from the VIUs [vertically integrated utilities] paradigm” makes customers pay for “‘efficiency’ that people have not decided to buy themselves,” as I explained when I wrote The Sixth Disruptive Technology. In that article I discovered: “…it should have been recognized energy efficiency as the 3rd Disruptive Technology to Cross the Chasm of Geoffrey Moore’s Technology-Adoption Life Cycle model…”
Please read also Full Retail Choice Emerges to see that“ As customer value migrates a paradigm shift of full retail choice emerges under EWPC from R&D discoveries that allows retail and wholesale competition without incumbent retailers.”
Just like you, I am also a long time critic of deregulation that agrees with many of the professor’s points. However, instead on placing myself on the problem side, as a power engineer I have been, since 1995, concentrated on the solution side. By “Working on ideas outside” engineering, I “can enjoy the enthusiasm built on partial ignorance,” as my hero and role model Uno Lamm suggested. Please refer to “Uno Lamm: Inventor and Activist,” by Catherine Wollard, published in March 1988 on the IEEE Spectrum, here and below.
It is such a solution that evolved into EWPC, which makes the deregulation debate totally unnecessary. In fact, such debate was a completely waste of time, which could had been avoided if The BIG California LIE (hit link to read the article about that LIE) had not been enabled, as retail competition “is not only possible, but absolutely necessary to turn the electricity industry into a vibrant value added business for all stakeholders.”
In addition, in the BIG LIE article I repeated that there is a great need to consider A Vertical Integration Conspiracy Theory for the US Judiciary (please hit link also) to provide an ordered framework with which to understand that chaotic event and process.
Finally, unlike the case the HVDC Pacific Intertie, in which “it was estimated that the people in Los Angeles saved $600,000 a day when Columbia River power began to flow south,” the same California IOUs were unable to come up with their BIG LIE. Like Uno Lamm, I understand that “’Among Americans, when the heat of combat is over, and a decision has been reached,’ he says, ‘all the bitterness disappears, and people work hard to bring the final decision to fruition in the best possible way.” That has been a central tenet in my work on the development of EWPC.
Best regards,
José Antonio
Reference and context: A New Lecture on Electric Deregulation Failure, by Ferdinand E. Banks, Professor.
Let EWPC Come to Fruition
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.
Dear Joseph,
Thank you very much for allowing me to complete what I understood was a challenge posed to me, by our intelligent and important common friend Fred, at the end of his article, which I initially responded with the article The Magic Deregulation Formula and whose further responses are being documented under the article Response to Professor Banks.
In the initial response I said, among other things, that “… the key finding that will be at the center is that deregulation was and is based on the faulty concept "economy first, reliability second [E1R2]." If reliability first, economy second, [R1E2] is a magic formula that allows to restructure power sectors worldwide into an electric network (integrated transportation) and a money network (on the customer, retail, generation value chain), let so be it.”
As I wrote in the 2005 [seminal EWPC] EnergyPulse article An Alternative Business Case for Demand Response, “…DR is poised to be the demand side risk management tool to complement the traditional "LOLP" supply side risk management tool. There are two sides on the DR coin. On one side, system crashes are mitigated by a least cost mix of supply and demand risk management tools that may be applied in time and space. On the other, DR is the key to the segmentation of customers supply security (a kind of insurance)... Professor Schweppe ‘envisioned a world of customer-based electrical generation and storage,’ which has been happening in the Dominican Republic, for quite some time, missing only the Demand Response System and a truly competitive retail deregulation [now re-regulation] to fulfilled the dream of a country without blackouts.”
That is why, under EWPC, electricity is a special commodity that can be rationed rationally and that can be stored by individual end-customers, as they do in the Dominican Republic and elsewhere. For more details on [physical] risk management updates, please read A Futures Market under EWPC, as “The elements of a futures market under R1E2 EWPC to lead to a stable and competitive electric markets environment are explained.” Look closely on the need to “satisfy the original NYMEX electricity contracts, which require high physical reliability.”
Let EWPC Come to Fruition . . . continued
With respect to your experience at Ontario Hydro, don’t forget to read in detail the general explanation of the Customer Wallet Cleaning Problem and Solution, where I said that “I agree with Mr. Rozenman that regulation not only have big flaws, but the most important thing is that it is just plain obsolete. It is for the obsolete fact that I disagree with him that the debate the debate is not yet settled, as EWPC has been available for over for a year. To understand the chaotic events that explain that the debate is settled please read the Conspiracy Theory Against Mr. X.”
On that theory you could learn that “The vertically integrated utilities paradigm has been in a NO PROFIT ZONE for quite some time, letting utilities make a profit under regulation only by the “consumer having his wallet cleaned out by ever increasing power costs.” To get the power industry in the PROFIT ZONE, there is a need to restructure with the aim to admit business model innovations to develop.”
I agree that by decoupling artificially sales and profits by “costly incremental shifts away from the VIUs [vertically integrated utilities] paradigm” makes customers pay for “‘efficiency’ that people have not decided to buy themselves,” as I explained when I wrote The Sixth Disruptive Technology. In that article I discovered: “…it should have been recognized energy efficiency as the 3rd Disruptive Technology to Cross the Chasm of Geoffrey Moore’s Technology-Adoption Life Cycle model…”
Please read also Full Retail Choice Emerges to see that“ As customer value migrates a paradigm shift of full retail choice emerges under EWPC from R&D discoveries that allows retail and wholesale competition without incumbent retailers.”
Just like you, I am also a long time critic of deregulation that agrees with many of the professor’s points. However, instead on placing myself on the problem side, as a power engineer I have been, since 1995, concentrated on the solution side. By “Working on ideas outside” engineering, I “can enjoy the enthusiasm built on partial ignorance,” as my hero and role model Uno Lamm suggested. Please refer to “Uno Lamm: Inventor and Activist,” by Catherine Wollard, published in March 1988 on the IEEE Spectrum, here and below.
It is such a solution that evolved into EWPC, which makes the deregulation debate totally unnecessary. In fact, such debate was a completely waste of time, which could had been avoided if The BIG California LIE (hit link to read the article about that LIE) had not been enabled, as retail competition “is not only possible, but absolutely necessary to turn the electricity industry into a vibrant value added business for all stakeholders.”
In addition, in the BIG LIE article I repeated that there is a great need to consider A Vertical Integration Conspiracy Theory for the US Judiciary (please hit link also) to provide an ordered framework with which to understand that chaotic event and process.
Finally, unlike the case the HVDC Pacific Intertie, in which “it was estimated that the people in Los Angeles saved $600,000 a day when Columbia River power began to flow south,” the same California IOUs were unable to come up with their BIG LIE. Like Uno Lamm, I understand that “’Among Americans, when the heat of combat is over, and a decision has been reached,’ he says, ‘all the bitterness disappears, and people work hard to bring the final decision to fruition in the best possible way.” That has been a central tenet in my work on the development of EWPC.
Best regards,
José Antonio
Reference and context: A New Lecture on Electric Deregulation Failure, by Ferdinand E. Banks, Professor.
martes, noviembre 06, 2007
EWPC As The New Internet
EWPC is sufficiently flexible to enable a transformation ot the electric power industry into the new internet.
EWPC As The New Internet
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.
Dear Mr. Tornal, Mr. Powers and Mr. Gould,
With a lot of respect for the author, I understand that DER is just one of the six disruptive technologies already identified (please see The Sixth Disruptive Technology) under electricity without price controls (EWPC) for the transformation of the electric industry. EWPC is the winning market architecture and design breakthrough paradigm shift that satisfies "... these changes and require new ways of thinking and operating..." that the author calls for.
I agree with Mr. Gould about "...a difficult time seeing any plus side in this transition for incumbent utilities..." However, instead of doubts, I see Second Generation Retailer - 2GR business model innovations disruptive technologies, developed under EWPC, eventually fully enabling the new electric internet.
Contrary to the idea that "... often times without the awareness of the elctric utility," 2GRs will have the necessary awareness, as they integrate demand to power system planning, operation and control.
By looking at the "Speaker Notes," of Mr. Powers, I see no inconsistence on EWPC to support it as a likely scenario. Agreeing with the drivers, 2GRs will be able to enable such long-range vision of the "energy-moving business" in the open market, while the centralized transportation (no just transmission) utilities do the actual movement.
For more information on EWPC, please go to www.energyblogs.com, where other 50 articles on EWPC are already posted.
Reference and context: Distributed Energy Resources - The New Internet?, by Jeff Tolnar, Chief Technology Officer, BPL Global.
EWPC As The New Internet
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.
Dear Mr. Tornal, Mr. Powers and Mr. Gould,
With a lot of respect for the author, I understand that DER is just one of the six disruptive technologies already identified (please see The Sixth Disruptive Technology) under electricity without price controls (EWPC) for the transformation of the electric industry. EWPC is the winning market architecture and design breakthrough paradigm shift that satisfies "... these changes and require new ways of thinking and operating..." that the author calls for.
I agree with Mr. Gould about "...a difficult time seeing any plus side in this transition for incumbent utilities..." However, instead of doubts, I see Second Generation Retailer - 2GR business model innovations disruptive technologies, developed under EWPC, eventually fully enabling the new electric internet.
Contrary to the idea that "... often times without the awareness of the elctric utility," 2GRs will have the necessary awareness, as they integrate demand to power system planning, operation and control.
By looking at the "Speaker Notes," of Mr. Powers, I see no inconsistence on EWPC to support it as a likely scenario. Agreeing with the drivers, 2GRs will be able to enable such long-range vision of the "energy-moving business" in the open market, while the centralized transportation (no just transmission) utilities do the actual movement.
For more information on EWPC, please go to www.energyblogs.com, where other 50 articles on EWPC are already posted.
Reference and context: Distributed Energy Resources - The New Internet?, by Jeff Tolnar, Chief Technology Officer, BPL Global.
lunes, noviembre 05, 2007
The "Continuity" Scenario is Gone
The future of the power industry is now restricted to the "Tough Times" and "Rising Expectations" scenarios of Deloitte Research, as the "Continuity" scenario is no longer available.
The "Continuity" Scenario is Gone
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.
Dear Mr. Braginton-Smith, Mr. Reid, and Mr. Gould:
I see the idea being presented in the article as a likely scenario. In fact, it could be associated to the scenarios that appeared in post The Future of the Power Industry in 2006, developed by Deloitte Research in 2005. The scenarios are: "Continuity," "Tough Times" and "Rising Expectations."
As Ed is writing from scenario of "Continuity," Brian is doing so for "Tough Times." The probability that we will be facing "Tough Times."
Reinhold Ziegler, founder of Synergy International, has placed a version of this article -Compliments and Critique of the article: Distributed Architectural Renewable Energy Generation - on energyblogs.com. with a comment that includes a presentation, which in slide 19 has:
The future of electric power
"It is becoming clear that the future of our electric power will come less from large coal, gas and nuclear power plants, but more from millions of building-integrated micro generators and urban wind-turbunes, photoelectric solar panels mounted on the roof-tops of the city with wind farms in the countryside.
Existing national power grids won't disappear. They will operate like the Internet, as part of a complex web through which people will supply electricity, by uploading, as well as downloading it."
We call this process distributed generation and it is being introduced all over the world.
Such future of electric power environment is good for both "Tough Times" and "Rising Expectations," which can be developed under EWPC market architecture and design paradigm. The "Continuity" scenario, based on vertically integrated utilities, has been proven again, and again, not to be viable anymore. The most recent dialogue can be found in the energyblogs.com article Response to Professor Banks.
For the most latests articles of that dialogue please read:
11/03/2007 Positive returns in the power industry that existed under vertical integration are now gone. New positive returns will come from business model inno...
11/02/2007 As there are Only Two Stable Paradigms, the electricity-regulation bill approved by Ohio’s Senate is just a new mistaken experiment under econ...
11/02/2007 Can we concentrate on results? I would say YES, as the knowledge required to decide that the decade old debate between great scams and the apparentl...
Customer Wallet Cleaning Problem and Solution
Customer Wallet Cleaning Problem and Solution
11/01/2007 The vertically integrated utilities paradigm has been in a NO PROFIT ZONE for quite some time, letting utilities make a profit under regulation only...
Best regards,
José Antonio
Reference and context: Distributed Architectural Renewable Energy Generation, by Brian Braginton-Smith, Executive Director, Sustainable Resources Group
Best regards,
José Antonio
Reference and context: Distributed Architectural Renewable Energy Generation, by Brian Braginton-Smith, Executive Director, Sustainable Resources Group
sábado, noviembre 03, 2007
Positive Returns under EWPC
Positive returns in the power industry that existed under vertical integration are now gone. New positive returns will come from business model innovations of retailers’ enterprise solutions to be developed under strong competition.
Positive Returns under EWPC
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.
Dear Prof. Banks,
Thank you for pointing out clearly where you understand the positive returns are in the power industry. I contend that the most important positive returns in the power industry were to be found in power systems interconnections, but they are no longer available.
Under vertical integration, which has demand as an externality, incremental costs decreased up to around 1970. From there on, an unstable period initiated in which incremental costs increased and sometime decreased. That is why Sweden’s old days of low costs and high reliability were to go away and went away, as it happened all over the world. I agree, however, things got away further than necessary for the worst, when the economy first, reliability second, movement got underway.
As incremental costs are no longer decreasing permanently, increasing returns in power systems (the combination of generation and transmission) can’t be guarantee either. Hence, positive returns have been lost in the vertically integrated industry since 1970.
EWPC restructuring brings positive returns to the power industry in the open market with demand integration at the retail level by the large reductions expected in transactions incremental costs under (information technology) Moore’s law, while the regulated transportation market assures a reliability first priority policy for a stable environment. Therefore, the positive returns come by letting the information revolution penetrate the industry.
Instead of state or EU country level regulated first generation retailers, the open market should allow horizontal integration of second generation retailers, at the federal level, in the U.S.; at the EU level, in Europe; and hopefully at the global level, all under federal, EU, and WTO, prudential regulation disciplines, respectively. The positive returns will be the result of software development on business model innovations of retailers’ enterprise solutions, as explained in The Future of the Power Industry in 2006, which I transcribe below:
Repeating the GMH Post The Future of the Power Industry in 2006,
The Future Utility Customer Service Model, by Jamie Wimberly, CEO, Distributed Energy Financial Group and Peter Shaw, Director of Customer Strategy, Navigant Consulting, is at the center of a generative dialogue. The article is in synchronicity with my suggestion to Let's Get Out of Back Rooms to a Generative Dialogue, being a welcome contribution to the future of the electric power sector as a whole.
Since I wrote An Alternative Business Case for Demand Response [two years ago today] as a rebuttal to The Business Case for Demand Response, which Jamie co-authored with Thomas Brunetto, Managing Director, Distributed Energy Financial Group, I have added many comments on EnergyPulse about an emerging End-State of the utility industry.
The reason that “Customers are demanding more information and control over their usage,” as the authors state, is that they want to reduce their energy costs, or, better yet, to increase the value that electricity enable for them.
Almost a [now two] year ago, under the article Strategic Perspectives on Utility Enterprise Solutions, by Warren Causey, Vice President, Sierra Energy Group, I said:
Deloitte Research made a Scenarios Study and found that the "Continuity" scenario is what is expected by most companies in the next 5 years. However, Deloitte also found out that the next five years might turn out very different from the strategic plans of many companies (read utilities). The result is a very different perspective on the interdependencies of markets and Enterprise Solutions.
On one, or both, of the other two scenarios ("Tough Times" or "Rising Expectations"), 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 [now re-regulation] of electric markets.
What the authors are calling the “incremental change scenario,” is the same as the “continuity scenario.” However, I see a lot of progress has occurred in just one year, with the insights added by Mr. Wimberly and Mr. Shaw.
While the authors are proposing to adopt an analytical approach, I am proposing a systemic approach that goes beyond trends – pattern of behavior, “responsive” explanations, as Peter Senge calls them – to generative or “structural” explanations for the discovery of the emerging system. The change is going from a mechanistic thinking to systemic thinking.
Please join the generative dialogue, that cuts across topics, which had the latest (not lasted) insight on the EnergyPulse article: Condemned to the Fourth Quartile? by Matt Chwalowski, Principal Consultant, PA Consulting. Posted on 12.9.06. At this instance out of "Active Discussion" and out of "Highly Read." The post starts as follows:
Positive Returns under EWPC
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.
Dear Prof. Banks,
Thank you for pointing out clearly where you understand the positive returns are in the power industry. I contend that the most important positive returns in the power industry were to be found in power systems interconnections, but they are no longer available.
Under vertical integration, which has demand as an externality, incremental costs decreased up to around 1970. From there on, an unstable period initiated in which incremental costs increased and sometime decreased. That is why Sweden’s old days of low costs and high reliability were to go away and went away, as it happened all over the world. I agree, however, things got away further than necessary for the worst, when the economy first, reliability second, movement got underway.
As incremental costs are no longer decreasing permanently, increasing returns in power systems (the combination of generation and transmission) can’t be guarantee either. Hence, positive returns have been lost in the vertically integrated industry since 1970.
EWPC restructuring brings positive returns to the power industry in the open market with demand integration at the retail level by the large reductions expected in transactions incremental costs under (information technology) Moore’s law, while the regulated transportation market assures a reliability first priority policy for a stable environment. Therefore, the positive returns come by letting the information revolution penetrate the industry.
Instead of state or EU country level regulated first generation retailers, the open market should allow horizontal integration of second generation retailers, at the federal level, in the U.S.; at the EU level, in Europe; and hopefully at the global level, all under federal, EU, and WTO, prudential regulation disciplines, respectively. The positive returns will be the result of software development on business model innovations of retailers’ enterprise solutions, as explained in The Future of the Power Industry in 2006, which I transcribe below:
Repeating the GMH Post The Future of the Power Industry in 2006,
The Future Utility Customer Service Model, by Jamie Wimberly, CEO, Distributed Energy Financial Group and Peter Shaw, Director of Customer Strategy, Navigant Consulting, is at the center of a generative dialogue. The article is in synchronicity with my suggestion to Let's Get Out of Back Rooms to a Generative Dialogue, being a welcome contribution to the future of the electric power sector as a whole.
Since I wrote An Alternative Business Case for Demand Response [two years ago today] as a rebuttal to The Business Case for Demand Response, which Jamie co-authored with Thomas Brunetto, Managing Director, Distributed Energy Financial Group, I have added many comments on EnergyPulse about an emerging End-State of the utility industry.
The reason that “Customers are demanding more information and control over their usage,” as the authors state, is that they want to reduce their energy costs, or, better yet, to increase the value that electricity enable for them.
Almost a [now two] year ago, under the article Strategic Perspectives on Utility Enterprise Solutions, by Warren Causey, Vice President, Sierra Energy Group, I said:
Deloitte Research made a Scenarios Study and found that the "Continuity" scenario is what is expected by most companies in the next 5 years. However, Deloitte also found out that the next five years might turn out very different from the strategic plans of many companies (read utilities). The result is a very different perspective on the interdependencies of markets and Enterprise Solutions.
On one, or both, of the other two scenarios ("Tough Times" or "Rising Expectations"), 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 [now re-regulation] of electric markets.
What the authors are calling the “incremental change scenario,” is the same as the “continuity scenario.” However, I see a lot of progress has occurred in just one year, with the insights added by Mr. Wimberly and Mr. Shaw.
While the authors are proposing to adopt an analytical approach, I am proposing a systemic approach that goes beyond trends – pattern of behavior, “responsive” explanations, as Peter Senge calls them – to generative or “structural” explanations for the discovery of the emerging system. The change is going from a mechanistic thinking to systemic thinking.
Please join the generative dialogue, that cuts across topics, which had the latest (not lasted) insight on the EnergyPulse article: Condemned to the Fourth Quartile? by Matt Chwalowski, Principal Consultant, PA Consulting. Posted on 12.9.06. At this instance out of "Active Discussion" and out of "Highly Read." The post starts as follows:
I think I found by myself, on the website of the PA Consulting Group, the answer to my question: “Should Electricity Without Price Controls (EWPC) be considered as a new paradigm of the electricity industry?”... [see the details please in the specific article]
viernes, noviembre 02, 2007
A New Mistaken Experiment
As there are Only Two Stable Paradigms, the electricity-regulation bill approved by Ohio’s Senate is just a new mistaken experiment under economic first, reliability second, tinkering.
Mr. Paul Wilson
The Columbus Dispatch, Ohio
Dear Mr. Wilson,
On Wednesday, August 29, 2007, I wrote the article Restructuring of Ohio’s Power Industry Business. It seems that the message didn't get to the stakeholders. So, I will give a new warning to them.
Today, in the news “Electricity-regulation bill wins Senate approval,” you inform that “The bill, supported by a coalition led by manufacturers, would require utilities to prove that competition exists before moving to market-based pricing, rather than regulator-approved rates, in 2009. After tweaks in committee hearings, the bill also would require utilities to ensure that what customers pay in a deregulated system is "comparable" to rates on, 2008.”
The public needs to be aware that the approved Ohio’s Senate Bill has a big flaw: for competition to exist, utilities as we know them would disappear. For retail competition to exist there is a need to do without incumbent retailers, as the utilities need to be transformed into integrated (transmission and distribution) transportation utilities.
The central issue, however, is that the transportation utility is not a subject of congressional debate, but the subject of engineering planning, operation and control, to satisfy an ultraquality imperative, just like nuclear power plants and space flight vehicles. As there are Only Two Stable Paradigms, the electricity-regulation bill approved by Ohio’s Senate is just a new mistaken experiment under economic first, reliability second, tinkering.
In the process to allow competition, the Public Utilities Commission of Ohio should shift to prudential regulation from regulations on price controls. So one important question the House Public Utilities Committee needs to answer to go forward is: Can We Concentrate on Results? Please hit the link with the question to learn the answer.
Please forward this message to the stakeholder’s representatives.
Best regards,
José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Already posted on November 2nd, 2007, in www.energyblogs.com.
Mr. Paul Wilson
The Columbus Dispatch, Ohio
Dear Mr. Wilson,
On Wednesday, August 29, 2007, I wrote the article Restructuring of Ohio’s Power Industry Business. It seems that the message didn't get to the stakeholders. So, I will give a new warning to them.
Today, in the news “Electricity-regulation bill wins Senate approval,” you inform that “The bill, supported by a coalition led by manufacturers, would require utilities to prove that competition exists before moving to market-based pricing, rather than regulator-approved rates, in 2009. After tweaks in committee hearings, the bill also would require utilities to ensure that what customers pay in a deregulated system is "comparable" to rates on, 2008.”
The public needs to be aware that the approved Ohio’s Senate Bill has a big flaw: for competition to exist, utilities as we know them would disappear. For retail competition to exist there is a need to do without incumbent retailers, as the utilities need to be transformed into integrated (transmission and distribution) transportation utilities.
The central issue, however, is that the transportation utility is not a subject of congressional debate, but the subject of engineering planning, operation and control, to satisfy an ultraquality imperative, just like nuclear power plants and space flight vehicles. As there are Only Two Stable Paradigms, the electricity-regulation bill approved by Ohio’s Senate is just a new mistaken experiment under economic first, reliability second, tinkering.
In the process to allow competition, the Public Utilities Commission of Ohio should shift to prudential regulation from regulations on price controls. So one important question the House Public Utilities Committee needs to answer to go forward is: Can We Concentrate on Results? Please hit the link with the question to learn the answer.
Please forward this message to the stakeholder’s representatives.
Best regards,
José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Already posted on November 2nd, 2007, in www.energyblogs.com.
Can We Concentrate on Results?
Can we concentrate on results? I would say YES, as the knowledge required to decide that the decade old debate between great scams and the apparently lesser and more familiar customer wallet cleaning have been over has been available for more than a year.
Can We Concentrate on Results?
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.
Dear Prof. Banks, Dr. Rozenman, and other important and intelligent writers and readers,
I have learned a lot from the contributions (and to complete my research to address their inquiries) of Prof. Banks to Mr. Gould, which have accompanied me in this process for almost two years. By the same token, I have also learned a lot from others no so regular interactions with other intelligent and important writers.
I am sorry that sometimes I have been rude in some of my posts, but it is difficult for me to be as diplomatic as required. Thank you for understanding my apologies.
To go forward, I pose to all readers and writers the following question: Can we concentrate on results?
With a lot of respect, I understand that the historic processes are very important, interesting and useful, but even more important and useful, not necessarily interesting, are the results. I submit that these are the results:
1) Vertical integration regulation: wallet cleaning for customers that don’t need the average offers in their customer class.
2) Economy first, reliability second, (E1R2) deregulation: great scams, as documented by Prof. Banks.
3) Reliability first, economy second, EWPC (R1E2) re-regulation: the solution, that has recently emerged to both the customer wallet cleaning and the great scams problems, is for every end-customers to be able to choose the best service plan of the many available in the market, that will result from business model innovations without price controls under competition and prudential regulations. Great leadership is required to get EWPC implemented.
In the presentation A Generative Dialogue to Reach the End-State of the Power Industry (please hit link to download the presentation), I humbly suggested in March 2006, at Carnegie Mellon University that what is needed to go forward is to concentrate in the generative dialogue to introduce the transformation from today's situation to the end-state of the industry for quite some time, by adopting the EWPC winning market architecture and design.
In the post A Generative Dialogue Without Illusions Part 1, I introduced some of Adam Kahane’s ideas about generative dialogues.
Repeating, the question is: Can we concentrate on results? I would say YES, as the knowledge required to decide that the decade old debate between great scams and the apparently lesser and more familiar customer wallet cleaning have been over has been available for more than a year.
Best regards,
José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Can We Concentrate on Results?
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.
Dear Prof. Banks, Dr. Rozenman, and other important and intelligent writers and readers,
I have learned a lot from the contributions (and to complete my research to address their inquiries) of Prof. Banks to Mr. Gould, which have accompanied me in this process for almost two years. By the same token, I have also learned a lot from others no so regular interactions with other intelligent and important writers.
I am sorry that sometimes I have been rude in some of my posts, but it is difficult for me to be as diplomatic as required. Thank you for understanding my apologies.
To go forward, I pose to all readers and writers the following question: Can we concentrate on results?
With a lot of respect, I understand that the historic processes are very important, interesting and useful, but even more important and useful, not necessarily interesting, are the results. I submit that these are the results:
1) Vertical integration regulation: wallet cleaning for customers that don’t need the average offers in their customer class.
2) Economy first, reliability second, (E1R2) deregulation: great scams, as documented by Prof. Banks.
3) Reliability first, economy second, EWPC (R1E2) re-regulation: the solution, that has recently emerged to both the customer wallet cleaning and the great scams problems, is for every end-customers to be able to choose the best service plan of the many available in the market, that will result from business model innovations without price controls under competition and prudential regulations. Great leadership is required to get EWPC implemented.
In the presentation A Generative Dialogue to Reach the End-State of the Power Industry (please hit link to download the presentation), I humbly suggested in March 2006, at Carnegie Mellon University that what is needed to go forward is to concentrate in the generative dialogue to introduce the transformation from today's situation to the end-state of the industry for quite some time, by adopting the EWPC winning market architecture and design.
In the post A Generative Dialogue Without Illusions Part 1, I introduced some of Adam Kahane’s ideas about generative dialogues.
Repeating, the question is: Can we concentrate on results? I would say YES, as the knowledge required to decide that the decade old debate between great scams and the apparently lesser and more familiar customer wallet cleaning have been over has been available for more than a year.
Best regards,
José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
jueves, noviembre 01, 2007
Customer Wallet Cleaning Problem and Solution
The vertically integrated utilities paradigm has been in a NO PROFIT ZONE for quite some time, letting utilities make a profit under regulation only by the “consumer having his wallet cleaned out by ever increasing power costs.” To get the power industry in the PROFIT ZONE, there is a need to restructure with the aim to admit business model innovations to develop.
Customer Wallet Cleaning Problem and Solution
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.
Dear Prof. Banks, Mr. Keller and Mr. Rozenman,
I agree with Mr. Rozenman that regulation not only have big flaws, but the most important thing is that it is just plain obsolete. It is for the obsolete fact that I disagree with him that the debate the debate is not yet settled, as EWPC has been available for over for a year. To understand the chaotic events that explain that the debate is settled please read the Conspiracy Theory Against Mr. X.
The decade long debate between E1R2 deregulation with vertical integration regulation was a real waste of time, as deregulation California style was a real scam that was based on The BIG California LIE, letting Prof. Banks repeats again and again his proper views of the scams. Now, the fixes to deregulation with re-regulation that, for example, include backwards incremental extensions, like capacity markets and NERC mandatory requirements, are just a return to a more costly kind of deregulation. That is what worries Prof. Banks.
In a second, and more responsive, effort on Mr. Keller question “…could one of you gentlemen offer a concrete and real world solution to the problem of the consumer having his wallet cleaned out by ever increasing power costs?”, electricity under regulation – (as another way of saying it is just plain obsolete) - has been for quite some time in a NO PROFIT ZONE (see Adrian Slywosky’s book “The Profit Zone”) with an outdated business model of price controls for the end-customer, in which two intermediaries, the regulator and the utility, misrepresent the real and differentiated needs of the customers. The utility with this NO PROFIT ZONE business model has the advantage to win rate case to the regulator, making a profit only by the “consumer having his wallet cleaned out by ever increasing power costs.”
The solution to Mr. Keller problem is the paradigm shift to EWPC. One of the key things that need to be done is to remove the “native load” barrier in the new Energy Bill and adopting EWPC. Removing the barrier will allow to open the demand side and introduce competition in retail and wholesale, so that new business model innovations can be developed.
To get the power industry in the PROFIT ZONE, there is a need to restructure with the aim to admit business model innovations to develop. In that respect, please read the article The Sense of Urgency for EWPC Restructuring or at least this part of the content:
Dear Professor Ramírez Orquín.
Your article [The Potential for an Effective and Timely Deregulatory Endeavor] is giving the proper emphasis for the sense of urgency on the right king of restructuring of the electric power industry, when you write: "Soaring prices together with the perception of a deteriorating service/product quality contribute to this notion. For the electric power system this trend is particularly worrisome given its vital implications to society."
I agree that “The current restructuring drive has not seemed, as some policy makers expected, to improve this condition and may have actually made it worse.” In 2004, The Cato Institute experts Peter Van Duren and Jerry Taylor recommended total abandonment of restructuring.
Electricity without price controls (EWPC) is a paradigm shift that makes the case for restructuring as explained in Rethinking Electricity Restructuring as EWPC. The new drive would make things better, as technological innovation are waiting to be integrated to power system planning, operation and control with at least six sets of disruptive technologies, as explained in The Sixth Disruptive Technology.
One of the main problems with restructuring was separating transmission from distribution to keep regulated retail together with distribution. In the article Give Engineers What Belongs to Engineers and its hiperlinks the “two dominant components i.e. the socio-normative and the technological ones, both…” will be “working harmonically.”
For more details see the Electricity Without Price Controls and the Grupo Millennium Hispaniola blogs.
Regards,
José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Dominican Republic
Customer Wallet Cleaning Problem and Solution
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.
Dear Prof. Banks, Mr. Keller and Mr. Rozenman,
I agree with Mr. Rozenman that regulation not only have big flaws, but the most important thing is that it is just plain obsolete. It is for the obsolete fact that I disagree with him that the debate the debate is not yet settled, as EWPC has been available for over for a year. To understand the chaotic events that explain that the debate is settled please read the Conspiracy Theory Against Mr. X.
The decade long debate between E1R2 deregulation with vertical integration regulation was a real waste of time, as deregulation California style was a real scam that was based on The BIG California LIE, letting Prof. Banks repeats again and again his proper views of the scams. Now, the fixes to deregulation with re-regulation that, for example, include backwards incremental extensions, like capacity markets and NERC mandatory requirements, are just a return to a more costly kind of deregulation. That is what worries Prof. Banks.
In a second, and more responsive, effort on Mr. Keller question “…could one of you gentlemen offer a concrete and real world solution to the problem of the consumer having his wallet cleaned out by ever increasing power costs?”, electricity under regulation – (as another way of saying it is just plain obsolete) - has been for quite some time in a NO PROFIT ZONE (see Adrian Slywosky’s book “The Profit Zone”) with an outdated business model of price controls for the end-customer, in which two intermediaries, the regulator and the utility, misrepresent the real and differentiated needs of the customers. The utility with this NO PROFIT ZONE business model has the advantage to win rate case to the regulator, making a profit only by the “consumer having his wallet cleaned out by ever increasing power costs.”
The solution to Mr. Keller problem is the paradigm shift to EWPC. One of the key things that need to be done is to remove the “native load” barrier in the new Energy Bill and adopting EWPC. Removing the barrier will allow to open the demand side and introduce competition in retail and wholesale, so that new business model innovations can be developed.
To get the power industry in the PROFIT ZONE, there is a need to restructure with the aim to admit business model innovations to develop. In that respect, please read the article The Sense of Urgency for EWPC Restructuring or at least this part of the content:
Dear Professor Ramírez Orquín.
Your article [The Potential for an Effective and Timely Deregulatory Endeavor] is giving the proper emphasis for the sense of urgency on the right king of restructuring of the electric power industry, when you write: "Soaring prices together with the perception of a deteriorating service/product quality contribute to this notion. For the electric power system this trend is particularly worrisome given its vital implications to society."
I agree that “The current restructuring drive has not seemed, as some policy makers expected, to improve this condition and may have actually made it worse.” In 2004, The Cato Institute experts Peter Van Duren and Jerry Taylor recommended total abandonment of restructuring.
Electricity without price controls (EWPC) is a paradigm shift that makes the case for restructuring as explained in Rethinking Electricity Restructuring as EWPC. The new drive would make things better, as technological innovation are waiting to be integrated to power system planning, operation and control with at least six sets of disruptive technologies, as explained in The Sixth Disruptive Technology.
One of the main problems with restructuring was separating transmission from distribution to keep regulated retail together with distribution. In the article Give Engineers What Belongs to Engineers and its hiperlinks the “two dominant components i.e. the socio-normative and the technological ones, both…” will be “working harmonically.”
For more details see the Electricity Without Price Controls and the Grupo Millennium Hispaniola blogs.
Regards,
José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Dominican Republic
miércoles, octubre 31, 2007
Switching Retailers is NOT as Important
Dear Fred (Banks), Len, Mike, Fred (Plett), Jim, Steve, and Peter
I am glad that the dialogue is getting more balanced and rich, with the participation of all of you important and intelligent people, on three fronts.
1) Vertical integration regulation,
2) Economy first, reliability second, (E1R2) deregulation, and
3) Reliability first, economy second, EWPC (R1E2) re-regulation
To get a better understanding of EWPC, the issue of switching suppliers and “energy retailers” are considered. With that in mind, I have selected as the most important comment posted, that of my friend Professor Banks that said: “We have some customer response here in Sweden because of deregulation, and my wife apparently changes suppliers from time to time.”
The second most important comment was that of my friend Len Gould: “I get to see up close and in detail exactly what "energy retailers" do, which is practically nothing (useful). The distribution company (by regulator mandate) MUST maintain all the customer care, metering, billing, etc. etc. system, at a cost to customers set by the regulator and heavily inflated as much as possible in order to maximize distribution's profits. Would that get cheaper if the retailers took over the delivery of those services, as Jose Antonio appears to be promoting in EWPC? No, because of the distinctive features of large business software, e.g. it costs millions of dollars to service the first customer, but almost nothing to service the next million customers.”
Both comments relate to E1R2 deregulation and first generation retailers (1GRs). EWPC is about R1E2 re-regulation and second generation retailers ((hit link to read about Second Generation Retailer - 2GR). Fred is probably confusing one kind of customer response that adds nothing to physical system risk management, while Len is describing what “energy retailers” do.
In the article A Little Silicon is Necessary but NOT Sufficient, which I wrote as a response to Prof. Banks article, I said: “… Under the R1E2 EWPC markets (in plural), every end customer can participate in the genuinely open retail markets and select the service plan (markets mix) contract that best meet their needs for low cost and/or high value. Such markets are the real-time balancing market, the hour, day and week ahead markets, as well as any other forward market that retailers can provide with their business design innovations. Some customers will also require physical delivery of their futures contract.”
While under E1R2 deregulation it was though that switching 1GR is a good measure of “efficiency,” under R1E2 switching is not important at all, since many customers will find a market mix that satisfies best its requirements for insured electricity for the future. Electricity contracts are similar to insurance contracts, in which customer protection will be done by prudential regulations.
So under EWPC re-regulation switching suppliers very frequently is not measure of efficiency. What is important is the contractual commitment that customers will make to respond in advanced and infrequently (but randomly) when the system might get close to its capacity limit, when for example it is known that a nearby large generator will be out of operation.
Best regards,
José Antonio
I am glad that the dialogue is getting more balanced and rich, with the participation of all of you important and intelligent people, on three fronts.
1) Vertical integration regulation,
2) Economy first, reliability second, (E1R2) deregulation, and
3) Reliability first, economy second, EWPC (R1E2) re-regulation
To get a better understanding of EWPC, the issue of switching suppliers and “energy retailers” are considered. With that in mind, I have selected as the most important comment posted, that of my friend Professor Banks that said: “We have some customer response here in Sweden because of deregulation, and my wife apparently changes suppliers from time to time.”
The second most important comment was that of my friend Len Gould: “I get to see up close and in detail exactly what "energy retailers" do, which is practically nothing (useful). The distribution company (by regulator mandate) MUST maintain all the customer care, metering, billing, etc. etc. system, at a cost to customers set by the regulator and heavily inflated as much as possible in order to maximize distribution's profits. Would that get cheaper if the retailers took over the delivery of those services, as Jose Antonio appears to be promoting in EWPC? No, because of the distinctive features of large business software, e.g. it costs millions of dollars to service the first customer, but almost nothing to service the next million customers.”
Both comments relate to E1R2 deregulation and first generation retailers (1GRs). EWPC is about R1E2 re-regulation and second generation retailers ((hit link to read about Second Generation Retailer - 2GR). Fred is probably confusing one kind of customer response that adds nothing to physical system risk management, while Len is describing what “energy retailers” do.
In the article A Little Silicon is Necessary but NOT Sufficient, which I wrote as a response to Prof. Banks article, I said: “… Under the R1E2 EWPC markets (in plural), every end customer can participate in the genuinely open retail markets and select the service plan (markets mix) contract that best meet their needs for low cost and/or high value. Such markets are the real-time balancing market, the hour, day and week ahead markets, as well as any other forward market that retailers can provide with their business design innovations. Some customers will also require physical delivery of their futures contract.”
While under E1R2 deregulation it was though that switching 1GR is a good measure of “efficiency,” under R1E2 switching is not important at all, since many customers will find a market mix that satisfies best its requirements for insured electricity for the future. Electricity contracts are similar to insurance contracts, in which customer protection will be done by prudential regulations.
So under EWPC re-regulation switching suppliers very frequently is not measure of efficiency. What is important is the contractual commitment that customers will make to respond in advanced and infrequently (but randomly) when the system might get close to its capacity limit, when for example it is known that a nearby large generator will be out of operation.
Best regards,
José Antonio
lunes, octubre 29, 2007
Uno Lamm is a Leader Role Model
Dear Prof. Banks and readers,
This is the quote about Uno Lamm in the article Handling Sweden’s Electric Reform Threats:
Nowhere in that quote can be interpreted that he had to be involved in electric markets to be an example of Swedish leadership. His example is about leadership and just leadership.
Going into the internal reference about Uno Lamm in The Sixth Disruptive Technology you can read:
All of that followed this paragraph (which responded Prof. Banks article):
So, Uno Lamm as a Swedish leader is a role model to follow for handling the reform needs in the Nordic countries.
On the humorous side, I will let readers decide if Fred needs a shot of Aquavit or I need a rhum and coke.
Best regards,
José Antonio
This is the quote about Uno Lamm in the article Handling Sweden’s Electric Reform Threats:
As my hero Uno Lamm proved, when he introduced High Voltage Direct Current technology (see The Sixth Disruptive Technology), facing a strong opposition by the same California IOUs referred to in The BIG California LIE, the Nordid countries don’t need to wait for the experience of the U.S. What they need, I repeat, is a strong leadership.
Nowhere in that quote can be interpreted that he had to be involved in electric markets to be an example of Swedish leadership. His example is about leadership and just leadership.
Going into the internal reference about Uno Lamm in The Sixth Disruptive Technology you can read:
My hero, the Swedish Uno Lamm and the father of HVDC, who won the Pacific Intertie Project for ASEA after facing a strong opposition by [the same] California IOUs [referred below], and later estimated to save customers more than a billion dollars a day, after negotiating a license agreement with General Electric is quoted saying something like this in an interview in 1988: “among Americans, when the heat of the combat ends and a decision has been arrived at, all the trouble disappears and the people work hard to implement the decision in the best way.” I strongly hope this will be the case of EWPC.The summary of the The BIG California LIE is as follows:
The BIG LIE is that retail competition is impossible in electric markets. The implementation of a competitive retail market was the center of the debate in California. Instead of cooperating to implement it, the three big California utilities, that didn't care about the end-custumers, acted very irresponsibly. EWPC is the paradigm shift to show that retail competition is not only possible, but absolutely necessary to turn the electricity industry into a vibrant value added business for all stakeholders.
All of that followed this paragraph (which responded Prof. Banks article):
Writing about that if deregulation could not be achieved in the U.S., … “then it could not be realized any where in the face of earth, at least in the medium to long run” Professor Banks states and adds: “By that I mean after any excess capacity that might be available has been utilized.” Such statement is faulty because, while the generation and transmission capacity may be utilized with respect to current demand, the development of the resources of the demand side can change the situation in the medium run. In addition, the U.S. lobby activities have led to an unacceptable extension of the VIUs paradigm.
So, Uno Lamm as a Swedish leader is a role model to follow for handling the reform needs in the Nordic countries.
On the humorous side, I will let readers decide if Fred needs a shot of Aquavit or I need a rhum and coke.
Best regards,
José Antonio
El Gran Reto
Cándida Acosta - 10/29/2007
Agenda competitividad RD debe ir hacia productividad
HAUSMANN ESTIMA GOBIERNO TIENE QUE TENER LAS “ANTENAS BIEN PUESTAS”
ALAJUELA, Costa Rica.- Ricardo Hausmann, director del Centro para el Desarrollo Internacional de la Universidad de Harvard, dijo que la agenda de competitividad de República Dominicana tiene que estar concentrada en el aumento de la productividad, y no en la transferencia de valor a los sectores productivos.
El profesional de la economía dijo que la economía dominicana ha dado un cambio de la noche al día, desde el tiempo en que visitó este país junto al actual ministro de Hacienda de Chile, Andrés Velasco, a la época actual, en el que la recuperación ha sido muy rápida.
No obstante, precisa que en República Dominicana no todo está resuelto y hay todavía muchos problemas por resolver, como por ejemplo el sector de la maquila (zona franca textil), y el nivel de crédito al de años anteriores, “pero no hay dudas que habían problemas que se veían como nubes muy negras y han logrado una recuperación impresionante”.
Con relación al tema energético, Hausmann señaló que se trata de un problema de gran dificultad. Especificó que problemas como el petróleo y el que enfrenta el sector de maquilas no le hacen bien a esta economía, pero si con todo y esto se ha logrado un crecimiento de 8,3% promedio en el PIB durante tres años es un logro sumamente importante.
Ante la pregunta de cuál sería el camino más factible para mantener el crecimiento del PIB, el director del Centro para el Desarrollo Internacional de la Universidad de Harvard dijo que esta nación debe concentrar su agenda en el tema de la competitividad, porque muchos países han cometido errores en la forma de aplicar su Ley de Competitividad. Conoce que aquí se discute una ley sobre el tema, la cual dijo que desconoce.
Explicó que los países deben concentrar su política de competitividad en “cosas que hacen más productivas las empresas, no en transferencias que las hagan más rentables a costa del resto de la sociedad, ni transferencias que hagan ventas con insumos más baratos o que otras tengan que comprarles sus productos más caros”.
Productividad
El tema central tiene que ser productividad, el Gobierno tiene que tener las antenas muy bien puestas para identificar donde están los obstáculos al crecimiento y a la actividad económica, conjuntamente con formas eficientes para eliminarlos, enfatizó.
Durante la entrevista, efectuada en una de las salas de la Escuela de Negocios INCAE, el economista recalcó que el Gobierno no podrá precisar cuales son los obstáculos si no realiza un diálogo muy profundo sobre los problemas que enfrenta el sector privado y hacer que ese diálogo se legitimice en toda la sociedad para que la política de competitividad sea percibida como una medida que busca el bien común y no como una política social para los ricos.
“Ese me parece uno de los grandes retos y las grandes dificultades”, apuntó al señalar que si se logra generar un ambiente de confianza, de transparencia, de legitimidad, entonces los países pueden lograr enormes avances en resolver problemas y obstáculos que permiten convertirse en un gran destino privilegiado de las inversiones que van a generar los empleos que el país necesita.
Sostuvo que ni las medidas proteccionistas, ni los incentivos fiscales son convenientes en una agenda de competitividad que debe estar concentrada en el aumento de la productividad, en intervenciones que aumenten la productividad, no en transferencias de valor, sino en cosas que creen más valor. Dijo que a veces las empresas no pueden ser más productivas por problemas de infraestructura, “entonces no me dés un regalo, resuelve el problema de infraestructura”.
Original del Listín Diario
Agenda competitividad RD debe ir hacia productividad
HAUSMANN ESTIMA GOBIERNO TIENE QUE TENER LAS “ANTENAS BIEN PUESTAS”
ALAJUELA, Costa Rica.- Ricardo Hausmann, director del Centro para el Desarrollo Internacional de la Universidad de Harvard, dijo que la agenda de competitividad de República Dominicana tiene que estar concentrada en el aumento de la productividad, y no en la transferencia de valor a los sectores productivos.
El profesional de la economía dijo que la economía dominicana ha dado un cambio de la noche al día, desde el tiempo en que visitó este país junto al actual ministro de Hacienda de Chile, Andrés Velasco, a la época actual, en el que la recuperación ha sido muy rápida.
No obstante, precisa que en República Dominicana no todo está resuelto y hay todavía muchos problemas por resolver, como por ejemplo el sector de la maquila (zona franca textil), y el nivel de crédito al de años anteriores, “pero no hay dudas que habían problemas que se veían como nubes muy negras y han logrado una recuperación impresionante”.
Con relación al tema energético, Hausmann señaló que se trata de un problema de gran dificultad. Especificó que problemas como el petróleo y el que enfrenta el sector de maquilas no le hacen bien a esta economía, pero si con todo y esto se ha logrado un crecimiento de 8,3% promedio en el PIB durante tres años es un logro sumamente importante.
Ante la pregunta de cuál sería el camino más factible para mantener el crecimiento del PIB, el director del Centro para el Desarrollo Internacional de la Universidad de Harvard dijo que esta nación debe concentrar su agenda en el tema de la competitividad, porque muchos países han cometido errores en la forma de aplicar su Ley de Competitividad. Conoce que aquí se discute una ley sobre el tema, la cual dijo que desconoce.
Explicó que los países deben concentrar su política de competitividad en “cosas que hacen más productivas las empresas, no en transferencias que las hagan más rentables a costa del resto de la sociedad, ni transferencias que hagan ventas con insumos más baratos o que otras tengan que comprarles sus productos más caros”.
Productividad
El tema central tiene que ser productividad, el Gobierno tiene que tener las antenas muy bien puestas para identificar donde están los obstáculos al crecimiento y a la actividad económica, conjuntamente con formas eficientes para eliminarlos, enfatizó.
Durante la entrevista, efectuada en una de las salas de la Escuela de Negocios INCAE, el economista recalcó que el Gobierno no podrá precisar cuales son los obstáculos si no realiza un diálogo muy profundo sobre los problemas que enfrenta el sector privado y hacer que ese diálogo se legitimice en toda la sociedad para que la política de competitividad sea percibida como una medida que busca el bien común y no como una política social para los ricos.
“Ese me parece uno de los grandes retos y las grandes dificultades”, apuntó al señalar que si se logra generar un ambiente de confianza, de transparencia, de legitimidad, entonces los países pueden lograr enormes avances en resolver problemas y obstáculos que permiten convertirse en un gran destino privilegiado de las inversiones que van a generar los empleos que el país necesita.
Sostuvo que ni las medidas proteccionistas, ni los incentivos fiscales son convenientes en una agenda de competitividad que debe estar concentrada en el aumento de la productividad, en intervenciones que aumenten la productividad, no en transferencias de valor, sino en cosas que creen más valor. Dijo que a veces las empresas no pueden ser más productivas por problemas de infraestructura, “entonces no me dés un regalo, resuelve el problema de infraestructura”.
Original del Listín Diario
domingo, octubre 28, 2007
Response to Professor Banks
Dear Professor Banks and Mr. Gould,
As promised, I just published the following articles in energyblogs.com in response to the article and the comments.
The Natural Monopoly Transportation System 10/28/2007 at 06:05 PM...EWPC provides a new configuration, in which the natural monopoly is reduced to the transportation system of the electric market, where the old config...
Handling Sweden’s Electric Reform Threats 10/28/2007 at 06:54 PM...Strong leadership is needed to complete the reform process in the Nordid countries to benefit end customers, by introducing a paradigm shift to EWPC...
A Futures Market under EWPC 10/28/2007 at 07:03 PM...The elements of a futures market under R1E2 EWPC to lead to an stable and competitive electric markets environment are explained. A Futures Marke...
A Little Silicon is Necessary but NOT Sufficient 10/28/2007 at 07:18 PM...There is more to markets than meter electronics. It is important to understand the need for retailers as the bridge between the retail and wholesale...
Best regards,
José Antonio
As promised, I just published the following articles in energyblogs.com in response to the article and the comments.
The Natural Monopoly Transportation System 10/28/2007 at 06:05 PM...EWPC provides a new configuration, in which the natural monopoly is reduced to the transportation system of the electric market, where the old config...
Handling Sweden’s Electric Reform Threats 10/28/2007 at 06:54 PM...Strong leadership is needed to complete the reform process in the Nordid countries to benefit end customers, by introducing a paradigm shift to EWPC...
A Futures Market under EWPC 10/28/2007 at 07:03 PM...The elements of a futures market under R1E2 EWPC to lead to an stable and competitive electric markets environment are explained. A Futures Marke...
A Little Silicon is Necessary but NOT Sufficient 10/28/2007 at 07:18 PM...There is more to markets than meter electronics. It is important to understand the need for retailers as the bridge between the retail and wholesale...
Best regards,
José Antonio
A Little Silicon is Necessary but NOT Sufficient
There is more to markets than meter electronics. It is important to understand the need for retailers as the bridge between the retail and wholesale markets.
A Little Silicon is Necessary but NOT Sufficient
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.
It is important to signal that Prof. Banks properly mentioned retailers as a required institution when he wrote: “… it should never be forgotten that while initially deregulation was crafted to prohibit large California utilities (i.e. ‘distributors’ or ‘retailers’) from signing long term contracts when they begin to encounter very high prices, they were not allowed to pass them to e.g. households and small businesses. Why was that? It was because consumer (retail) prices could have escalated by as much as 200%, and as Governor Gray Davis made clear, the California economy might have been shocked into recession.”
That is only true, where lacking a proper institutional market architecture and design. As can be seen in A Futures Market under EWPC, it is no longer necessary to have regulated monopoly retailers to sign long term contracts with generators.
In that basis, I respectfully disagree with Mr. Gould in that “the intelligent application of a little silicon intelligence we can do better by providing a genuine free market for every customer,” while a necessary technological aspect is identified, it is totally insufficient in the institutional sense. A genuine free market in which all customers participate in the wholesale market as he proposes is an unnecessary administrative burden that also leads to an unreliable E1R2 market (please see IMEUC: Unreliable Service and Price Spikes).
To understand how to participate in the wholesale market, in the article “Understanding Demand: the Missing Link in Efficient Electricity Markets,” Marija Ilic et al write: “the ability to expose customers to real-time pricing provides the needed incentives to create demand elasticity. LSEs [competitive retailers] through better understanding of load profiles, customer’s demand elasticities and willingness to reduce or shift load in exchange for compensation, can more effectively bid demand into the wholesale electricity markets and reduce overall market price…”
Except for the balancing real-time market, market price results from generation and load bid commitments made ex-ante under the restrictions of R1E2. Under the R1E2 EWPC markets (in plural), every end customer can participate in the genuinely open retail markets and select the service plan (markets mix) contract that best meet their needs for low cost and/or high value. Such markets are the real-time balancing market, the hour, day and week ahead markets, as well as any other forward market that retailers can provide with their business design innovations. Some customers will also require physical delivery of their futures contract.
In fact, under EWPC all end-customers can participate fully in the market. Some of them will be able to participate in the wholesale markets as they do already in many jurisdictions. Most of them will participate in a genuine retail market, being able to choose, when prepared to do so, a pure and risky balancing real-time market that contradicts Governor Davis statements. However, it is not practical, nor economic, to impose that all end-customers should participate in the wholesale market, as there are very costly procedures to follow.
A Little Silicon is Necessary but NOT Sufficient
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.
It is important to signal that Prof. Banks properly mentioned retailers as a required institution when he wrote: “… it should never be forgotten that while initially deregulation was crafted to prohibit large California utilities (i.e. ‘distributors’ or ‘retailers’) from signing long term contracts when they begin to encounter very high prices, they were not allowed to pass them to e.g. households and small businesses. Why was that? It was because consumer (retail) prices could have escalated by as much as 200%, and as Governor Gray Davis made clear, the California economy might have been shocked into recession.”
That is only true, where lacking a proper institutional market architecture and design. As can be seen in A Futures Market under EWPC, it is no longer necessary to have regulated monopoly retailers to sign long term contracts with generators.
In that basis, I respectfully disagree with Mr. Gould in that “the intelligent application of a little silicon intelligence we can do better by providing a genuine free market for every customer,” while a necessary technological aspect is identified, it is totally insufficient in the institutional sense. A genuine free market in which all customers participate in the wholesale market as he proposes is an unnecessary administrative burden that also leads to an unreliable E1R2 market (please see IMEUC: Unreliable Service and Price Spikes).
To understand how to participate in the wholesale market, in the article “Understanding Demand: the Missing Link in Efficient Electricity Markets,” Marija Ilic et al write: “the ability to expose customers to real-time pricing provides the needed incentives to create demand elasticity. LSEs [competitive retailers] through better understanding of load profiles, customer’s demand elasticities and willingness to reduce or shift load in exchange for compensation, can more effectively bid demand into the wholesale electricity markets and reduce overall market price…”
Except for the balancing real-time market, market price results from generation and load bid commitments made ex-ante under the restrictions of R1E2. Under the R1E2 EWPC markets (in plural), every end customer can participate in the genuinely open retail markets and select the service plan (markets mix) contract that best meet their needs for low cost and/or high value. Such markets are the real-time balancing market, the hour, day and week ahead markets, as well as any other forward market that retailers can provide with their business design innovations. Some customers will also require physical delivery of their futures contract.
In fact, under EWPC all end-customers can participate fully in the market. Some of them will be able to participate in the wholesale markets as they do already in many jurisdictions. Most of them will participate in a genuine retail market, being able to choose, when prepared to do so, a pure and risky balancing real-time market that contradicts Governor Davis statements. However, it is not practical, nor economic, to impose that all end-customers should participate in the wholesale market, as there are very costly procedures to follow.
A Futures Market under EWPC
The elements of a futures market under R1E2 EWPC to lead to an stable and competitive electric markets environment are explained.
A Futures Market under EWPC
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.One of the key elements to develop competition between generation, retail and both of them, without price controls, is the guarantee of the development of a vibrant future market. Electricity markets are no longer radically different after the R1E2 discoveries.
As I expressed in the Conspiracy Theory Against Mr. X “An underlying intention of the conspiracy theory is to send a strong message to investors and Wall Street, that the unstable environment of the industry is about to end, and that financial capital is set to be replaced by production capital, as the industry becomes once again very predictable with the implementation of EWPC.” A key instrument for predictability is futures contract, which facilitates power generation development and financing, without the need for contract signing by monopoly retailers.
I agree that under E1R2 deregulation it is not possible hedge electricity. However, under R1E2 EWPC re-regulation, a futures market can be developed to satisfy the original NYMEX electricity contracts, which require high physical reliability.
John Flory, at the time with Tabors, Caramanis & Associates, wrote: “To maintain the integrity of this future market, NYMEX insists that the future contract clearly provide for physical delivery,” which could never be accomplished with E1R2 deregulation. Under R1E2 EWPC, NYMEX requirement is fulfilled with the ultra-quality imperative.
Flory added: “Thus, the futures contract’s main value is providing a tool for price risk management, but, it is defined in such a way as to not jeopardize the reliability of physical delivery… Futures contracts provide another important function in addition to price risk management. That function is price discovery. That is, by following the transaction prices in the futures market, a participant discovers the market price for electricity for the next 12/18 months.”
The key to such high physical reliability is the ultraquality imperative, which was explained as follows in EWPC: People Coordinating and Cooperating with Electrons Part 2:
A Futures Market under EWPC
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.One of the key elements to develop competition between generation, retail and both of them, without price controls, is the guarantee of the development of a vibrant future market. Electricity markets are no longer radically different after the R1E2 discoveries.
As I expressed in the Conspiracy Theory Against Mr. X “An underlying intention of the conspiracy theory is to send a strong message to investors and Wall Street, that the unstable environment of the industry is about to end, and that financial capital is set to be replaced by production capital, as the industry becomes once again very predictable with the implementation of EWPC.” A key instrument for predictability is futures contract, which facilitates power generation development and financing, without the need for contract signing by monopoly retailers.
I agree that under E1R2 deregulation it is not possible hedge electricity. However, under R1E2 EWPC re-regulation, a futures market can be developed to satisfy the original NYMEX electricity contracts, which require high physical reliability.
John Flory, at the time with Tabors, Caramanis & Associates, wrote: “To maintain the integrity of this future market, NYMEX insists that the future contract clearly provide for physical delivery,” which could never be accomplished with E1R2 deregulation. Under R1E2 EWPC, NYMEX requirement is fulfilled with the ultra-quality imperative.
Flory added: “Thus, the futures contract’s main value is providing a tool for price risk management, but, it is defined in such a way as to not jeopardize the reliability of physical delivery… Futures contracts provide another important function in addition to price risk management. That function is price discovery. That is, by following the transaction prices in the futures market, a participant discovers the market price for electricity for the next 12/18 months.”
The key to such high physical reliability is the ultraquality imperative, which was explained as follows in EWPC: People Coordinating and Cooperating with Electrons Part 2:
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 [2006] 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.
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