Customer Reliability and System Reliability

Demand Integration is based on the fact that reliability has two sides: “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).”

Customer Reliability and System Reliability

By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity

First posted in the GMH Blog, on March 17th, 2008.

Copyright © 2008 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. This article is an unedited, an uncorrected, draft material of The EWPC Textbook. Please write to javs@ieee.org to contact the author for any kind of engagement.

Demand Response came to public awareness when several large and very costly system blackouts disrupted the U.S., Italy, and other industrialized countries. Those countries have a need for a synchronized power system market architecture and design that minimizes the likelihood of domino like cascading failures. The essential requirements of Ultraquality Transportation and Demand Integration to power system planning, operations and control are key ingredients for significantly reducing blackout disruptive powers, which are not addressed by present utility centered paradigms and IMEUC as shown in Power Markets Essential Requirements and Power Markets Essential Requirements - II, which is summarized by the paragraph:

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

Under EWPC the “Level of [customer] Reliability [is, not just should be,] simply a market factor purchased as needed just like Level of Power etc.” In my [seminal], and only article on EnergyPulse, An Alternative Business Case for Demand Response, I stated: “The business case of Demand Response (DR) is enhanced under free markets, innovation, and probabilistic (risk) mindsets. 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). Because of its fine grain nature, DR can help mitigate delays (intended or not) of lumpy investments in generation, transmission, and distribution.”

Transportation Ultraquality, a MUST that IMEUC lack, includes a process to perform system adequacy (developing long run systemic risk management) and system security (executing short run systemic risk management) by developing/executing “a least cost mix of supply and demand risk management tools that may be applied in time and space” to implement Demand Integration to power system planning, operation and control.

Reference and context: A Fresh Approach to Managing Peak Demand, by Gary Paul, VP, Outsourcing Business Development, Capgemini

Well Beyond Low Reserves Managing

NONE of today’s utilities should be allowed to take as inevitable a bare bones approach to increase efficiency, introducing a high leverage shake-up to the industry. Unlike traditional utilities, competitive Second Generation Retailers will have “end-to-end responsibility and be willing to have a stake in delivering results… ” to end-customers.

Well Beyond Low Reserves Managing

By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity

First posted in the GMH Blog, on March 17th, 2008.

Copyright © 2008 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. This article is an unedited, an uncorrected, draft material of The EWPC Textbook. Please write to javs@ieee.org to contact the author for any kind of engagement.

Under EWPC, NONE of the “… utilities will … take a bare bones approach…” that Capgemini sees as inevitable. Those utilities, which like dogs are unable to learn new tricks, insist in keeping a “bares bone” obsolete non competitive business model of winning rate cases to the regulator. That is an unnecessary risk taken by governments and the power industry that is solved under competition by the EWPC market architecture and design paradigm shift, under a NO jurisdiction left behind.

EWPC Retail Competition, to be done by Second Generation Retailers - 2GRs, involve business model innovations, which go well beyond managing peak demand or low generation, that reduces reserves, anytime, anywhere, by introducing everywhere a high leverage shake-up. For example, a High Leverage Shake-Up in California (please hit the link here and elsewhere to get to the corresponding article) is needed to repair the immense damage done to the worldwide power industry with the The BIG California LIE. The shake-up, however, can be initiated in wherever jurisdiction that wants to take the leadership that California has been unable to show so far.

In the article “COMPETITION RULES! TALK AMONGST YOURSELVES... ,” Martin Rosenberg quotes” four articulate CEOs”:

WE FACE HUGE, COMPLEX GLOBAL ENERGY CHALLENGES. COMPETITION UNLEASHES ALL THE POSSIBILITIES TO HELP SOLVE THESE CHALLENGES FOR OUR CUSTOMERS.

Jim Burke, CEO, TXU Energy

CUSTOMER FIRES ENERGY COMPANY.

Lois Hedge-Peth, COO, Direct Energy

COMPETITION DRIVES INNOVATION AND LOWER PRICES IN BOTH WHOLESALE AND RETAIL ENERGY MARKETS. PERVASIVE COMPETITION WILL ALLOW OUR INDUSTRY TO EFFECTIVELY ADDRESS THE MAJOR ISSUES INCLUDING CLIMATE CHANGE, NEED FOR NEW GENERATION INVESTMENTS AND GRID INVESTMENTS.

Michael Kagan, President, Constellation NewEnergy

THE POWER INDUSTRY HAS BY THE THE LOWEST CAPACITY UTILITIZATION RATE AMONG CAPITAL-INTENSIVE BUSINESSES, AND ONLY COMPETITIVE RETAIL MARKETS CAN END MORE THAN A CENTURY OF INEFFICIENCY.

Mark Jacobs, CEO, Reliant Energy

Capgemini defines “the electrical energy market” as that market that includes “… generators, system operators, transmission and distribution service providers, retailers, energy service companies, consumers, regulators and legislators…”

In response to another Capgemini article (see The Smart Grid Transportation Utility), I concluded that “Dramatic and radical change is coming to the electric utility industry as the utility itself evolves to the smart transportation grid, under a complete rethinking of the electric industry. Front and back office generation and customer facing activities become free market activities under prudential regulations.”

The system operators and the transmission and distribution service providers become the integrated (T&D) transportation utility under a compact with a responsibility of transport, instead of a responsibility to serve, in exchange for a regulated price control tolls payment. The “ability to earn a return on their investments in” the transportation infrastructure under traditional regulation is without any doubt. As “[T]he current state of the electrical infrastructure in North America is not sustainable…,” the paradigm shift to EWPC will enable a sustainable smart grid transportation utility electrical infrastructure in America and the rest of the world.

Under EWPC, the investments necessary for Demand Integration (no just smart metering) will be coordinated by Second Generation Retailers. The broader set of benefits of aggregating retail demand to produce wholesale demand, refining grid planning, and improving grid monitoring and control, are part of the Demand Integration processes to power system planning, operation and control.

Instead of an artificial decoupling of the utility grid and the utility enterprise, like that under structural separation of the grid and the enterprise that lead to a Complex and Ugly System (see The Good, the Bad and the Ugly), real decoupling is produced by having distribution integrated with transmission in the transportation utility compact leading to the Good and Simple System.

As they take on today’s utilities enterprise activities on a competitive basis, 2GRs integrate the functions of retailers, load serving entities, and aggregators, increasing the efficiency and effectiveness of the whole system. Unlike utilities, competitive 2GRs will have “end-to-end responsibility and be willing to have a stake in delivering results… ” to end-customers. So, paraphrasing the author, “… [2GRs will] look beyond the technology into the opportunities and incentives the technology unlocks. Indeed, [2Grs will] take a more comprehensive view of smart metering. More important than the technology itself is the role it plays in enabling system operators, 2GRs and customers to … improve market efficiency.” 2GRs “should seek out partners who will work collaboratively with them to ensure the success…” of their business models.

Reference and context: A Fresh Approach to Managing Peak Demand, by Gary Paul, VP, Outsourcing Business Development, Capgemini

The Good, the Bad and the Ugly II

This follows up the comments on the EWPC article The Good, the Bad and the Ugly. I certainly agree with Warren Causey that the idea of demand response as a condition of service seems to be emerging. EWPC is about ending the rampant value destruction to generate large value creation.

Don,

Be a good sport. As you will see below, this is "a fascinating time-period in which to live."

EWPC is no about the left or the right. It’s about ending the rampant value destruction originated in the Old System, the Bad System, and even more the Ugly System. The Good EWPC System is about developing the resources of the demand side for innovation to flourish and generate a lot of value creation in the benefit of ALL stakeholders.

I certainly agree with Warren Causey that the idea on mandatory demand response seems to be emerging. As part of the Sierra Energy Group, his idea is to be taken seriously as he is in close contact with the private sector of the industry. It used to be called earlier in California as “demand response as a condition of service.” I don’t see how that has anything to do with left win. I think it has ALL to do with Law of the Situation: the utilities don’t understand.

This is what Warren Causey also wrote in the post All the issues crux of the matter :

With regard to good ideas dying at the utility/commission staff interfaces, I don’t disagree at all. In fact, I consider that as proof of the argument in my original post, and as both the crux of the issue and the fly in the ointment of Dr. Silverio’s, and other bloggers’, restructuring proposals. My educational training actually is in history and that’s why I consider this a fascinating time-period in which to live.

Over the last couple of generations, the U.S. has become increasingly socialist (regardless of the party in power) and people increasingly expect the government regulate everything and solve every problem. The issue with that is that government bureaucracy (and state-controlled enterprises are extensions of that bureaucracy) is inherently the worst possible way to solve any problem. You can ask the Russians what a long, slow dive into an empty swimming pool feels like. Of course don’t pay to much attention to what they say because now they seem intent on climbing, dazed, back up onto the board and trying it again.

When you introduce government planning into any operation at any level of government (local planning commissions and their interventions into private property are a nightmare) and remove or distort economic incentives, you produce a horse designed by a committee—it looks a lot like a camel. Add politics (most state regulators are elected and national politicians’ raison d’etre is to get elected regardless of the consequences) and the possibility of allowing free markets to work out problems via trial-and-error disappears.

During so-called “deregulation,” not one regulator or one “staff,” which by Mr. Pullin’s description constitutes the bureaucracy, disappeared. Don’t blame the staffs, they’re just doing what bureaucrats do!


The following is taken from the WTO Website:

Virtually all decisions in the WTO are taken by consensus among all member countries and they are ratified by members' parliaments. . . At the heart of the system — known as the multilateral trading system — are the WTO’s agreements, negotiated and signed by a large majority of the world’s trading nations, and ratified in their parliaments. These agreements are the legal ground-rules for international commerce. Essentially, they are contracts, guaranteeing member countries important trade rights. They also bind governments to keep their trade policies within agreed limits to everybody’s benefit.

Fondos de Pensión, Subsidios y Ahorro de Energía

En su editorial "Preocupante" de este 15 de marzo del 2008, el Listín Diario afirma que "Ya muchos están comenzando a presentir que . . . el plan de pensiones como los servicios de salud, serán solamente un nuevo impuesto y al final todo ciudadano tendrá que pagar un servicio marginal que será el que realmente supla sus necesidades."

La Bitácora Digital del GMH cumple hoy 34 meses en su labor de divulgación y los temas de los fondos de pensión, el ahorro de energía y el de los subsidios, siguen siendo de mucha actualidad e importancia, especialmente cuando el petróleo está por las nubes y los Estados Unidos están en medio de lo que parece cada vez más una gran depresión y una crisis sistémica de su sistema financiero.

Los fondos de pensión dominicanos pueden colaborar grandemente con la solución de la crisis sistémica del sector eléctrico, para reforzarse mutuamente de forma positiva. Dado que la capitalización no genera los incentivos para que los consumidores inviertan en ahorro de energía, la profundización de la reforma debería facilitarla y en ese sentido los fondos de pensión podrían asegurar medios para incrementar grandemente su rentabilidad, al tiempo que le reducen los costos de electricidad a los propios trabajadores y permiten focalizar y reducir los subsidios a la población. Esa es la idea innovadora que evitaría que los planes de pensión se conviertan en un nuevo impuesto invirtiendo en el ahorro de energía y generando grandes beneficios en el sistema interconectado con la profundización de la reforma que no son obvios todavía.

Anteriormente, Gustavo Alba Sánchez en respuesta a la nota Una Crítica Eléctrica al Discurso Presidencial, propuso "en linea con tu aserto de que falta financiamiento para promover medidas tendentes al ahorro de energia, creo que si gran parte del financiamiento que ahora se destina a compras de automoviles se dedicara a equipos domesticos de mayores eficiencia energetica, y aun mas, a paneles solares y molinos de vientos que asociados a los ya existentes bancos de baterias e inversores en muchos hogares dominicanos, podrian constituirse en un conjunto generador de gran impacto en el ahorro de combustible fosil." Mi respuesta a su propuesta que aparece a seguidas debajo de esa nota, se sintetiza en la necesidad de la profundización de la reforma para alinear los incentivos y reducir grandemente el impacto negativo de la costosa política que ha generado el gran mercado sálvese quien pueda de soluciones individuales.

Como dije en HOY ECONOMÍA - Detengamos el hurto, "El problema nodal es estructural. Uno de los elementos estructurales defectuosos es precisamente la distribuidora y su ineficiente modelo de negocios que no está diseñado para servir al público y que invita a los subsidios del gobierno." También explique en "HOY ECONOMÍA - El hurto no es el problema que "Aunque los detallistas ofrecerán un servicio individual, en zonas de hurto elevado se hará al transformador más cercano, facilitando el proceso." Por eso, como la profundización de la reforma desarrolla un servicio individual al cliente y permite a su vez focalizar los subsidios de forma clara y transparente, y sin que sea a través de los precios de electricidad.

En ese sentido, el GMH invita al diálogo y al debate, recordando varias notas colocada en esta Bitácora Digital y resumiendo abajo algunas ideas tomadas de las estadísticas de la Asociación Internacional de Organismos de Supervisión de Fondos de Pensiones (AIOS) que aparecen en su Boletín 17.

Síntesis: Solución Energética Sistémica

Cooperativas Eléctricas, Normas Prudenciales y Fondos de Pensión

8 Notas Sobre Fondos de Pensiones

La AIOS es una entidad civil sin fines de lucro, compuesta por los organismos de supervisión de los sistemas de pensiones de capitalización individual de los siguientes países: Argentina, Bolivia, Chile, Colombia, Costa Rica, El Salvador, México, Panamá, Perú, República Dominicana y Uruguay.

Mientras el promedio de los miembros de la AIOS tienen 21.6% de sus fondos invertidos en moneda extranjera, el país al igual que El Salvador no tienen un centavo fuera. La inversión en empresas extranjeras que producen equipos de eficiencia energética que sean seleccionados por su alto potencial generaría una relación mutua de rentabilidad.

De julio 2006 a julio 2007, las utilidades en términos del patrimonio neto resultaron 7.1%, estando por debajo del promedio de los 10 países que fue de 17.1%. La rentabilidad bruta real del mismo período fue de tan solo 3.3%, lejos de Perú con 51.4%, Chile 20.8%, Argentina 18.5%, Mexico 11%, Uruguay 8.5%.

The Good, the Bad and the Ugly

The California commissioners need to shift their mindsets “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.” That is the EWPC story that emerged from a generative dialogue, enriching the debate between the story of incumbent utilities and the story of the coalition.

The Good, the Bad and the Ugly

By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity

First posted in the GMH Blog, on March 13th, 2008.

Copyright © 2008 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. This article is an unedited, an uncorrected, draft material of The EWPC Textbook. Please write to javs@ieee.org to contact the author for any kind of engagement.

The summary of the EWPC article The BIG California LIE says “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-costumers, 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.”

As I said in the EWPC article High Leverage Shake-Up in California, to which this article is a follow up, I am changing the opinion of “Instead of cooperating to implement it, the three big California utilities, that didn't care about the end-costumers, acted very irresponsibly,” since the utilities were not alone, but were also prisoners of the system like FERC and the PUC.

The good news is that the PUC is trying to amend the BIG LIE, by working hard to show the whole world that retail competition is possible. But to show it, the powerful commissioners will need to change their mindsets with a paradigm shift to EWPC.

So, I agree everyone should get both sides of the story. But there are not only an advocate and an opponent, as it was to be. To make things simple, I will say that there are only three sides to the story, the Good, the Bad and the Ugly.

The EWPC’s System: the Good System emerged as a Simple System.

This is an emergent story. The aim is a high leverage systemic transformation to insert the power industry in the third industrial revolution. The leverage is to come from the development of business model innovations, including the smart grid, that mutually reinforce themselves.

The Simple System leaves the transportation grid – a natural monopoly – as the integrated transportation only utility, that takes the central stage from generation by fulfilling an ultraquality imperative. Ultraquality transportation is a characteristic of the system for high power quality and system reliability, and not a characteristic of the unreliable parts like the generating units.

The smart grid transportation utility will provide for the long-term stability needed for investments in the power system, eliminate cross-subsidies and avoid unintended consequences, by providing a fundamental systemic solution to the worldwide electric industry systemic crisis. Generation and retail become fully competitive activities in the open market. No customer gets discriminated.

My story: “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.”

The incumbent’s System: the Bad System is an evolution of the Old System.

This story is lead by the three California utilities, which have a lot of power and have the California legislators - the status quo - in their side. The Bad System has large power customers who had already signed direct access contracts, but discriminates everybody else to remain as utility customers.

The incumbent utilities’ story: “… expanded direct access could undermine the long-term stability needed for investments in the power system, shift costs from one group of customers to another and produce unintended consequences such as the failed deregulation." I agree that it is to be expected with a symptomatic solution of the systemic crisis, resulting by remaining imprison by the generation centered stage utility system.

The Coalition System: the Ugly System is a very Complex System.

This story is led by a coalition of power companies and government agencies that now wants to revive the “direct access” part of the failed deregulation experiment. The CPUC is looking for a symptomatic solution within the boundaries of the present imprisoning system.

Competition was closed in California until 2017 when the long term contracts between the California Department of Water Resources expire. But the PUC decided to look at whether the contracts could be assigned to someone else, such as the utilities. Such symptomatic solution is bound to be a low leverage system intervention, that increases even more the complexity of the existing system.

The coalition story: “…direct access allows customers to choose rates and services that help them compete and manage risks while developing a broad power market that can provide more options and lower prices for customers.” This is not possible with structural separation as the Carnegie Mellon Electricity Industry Center working paper showed. To make it possible a paradigm shift to EWPC is needed.

Competitividad y Aranceles a Gases Invernadero

En muchas partes del mundo los sectores productivos se quejan de cómo los altos precios de electricidad afectan la competitividad. Resulta que en otros lugares en que se emplean fuentes para producir electricidad que exportan altas cantidades de gases invernadero, dándole ventajas comparativas a los sectores productivos de esos países.

Esas ventajas comparativas se pueden convertir ahora en ventajas desleales de comercio internacional si se negocian e implantan disciplinas en la OMC para imponer aranceles a la exportación de gases invernadero por parte de las empresas al medioambiente global. Las condiciones para esas disciplinas están más que dadas en la actualidad.

La unión de los países que dependen fuertemente de importaciones de petróleo, en vez de invertir en desarrollo de centrales a carbón, lo que deben hacer es constituir un grupo de presión en la OMC para facilitar el desarrollo de energías limpias sin tener que subsidiarlas. El mecanismo sería la negociación de esos aranceles, los cuales generarían grandes ingresos de exportación a las empresas que menos contaminen.

Esta idea en bruto necesariamente debe estar ligada a exportaciones cada vez menores a la atmósfera de los gases invernadero.

Al respecto, acabo de colocar una nota debajo del artículo Still Another Look at Global Warming, por Ferdinand E. Banks, que dice:

The WTO could be entrusted as the "single agency” with "the power to enact globally binding environmental legislation." Clearly the WTO disciplines should be developed with a corresponding "miracle" attitude in place.

That is in line with what I suggested earlier, that instead of a tax or emissions trading, tariff schedules on exports of GHG should be in place. Since this is no a tax, the tariffs schedules would have a range that would be negative, meaning that company export below the threshold level would generate a credit for the company. This is just an idea for discussion to suppress GHG, by changing the tariffs schedules and reducing the corresponding thresholds as time goes on.

The case for WTO disciplines has already been studied earlier, I recall around the year 2000 in the energy and environment task forces of the WTO. In fact, there is an important unfair competition issue involved, making GHG suppression a trade issue amenable to binding agreements.

Just like Demand Integration, GHG Suppression, is just another externality that can be handled by 2GRs for the electricity industry. California is once again in the process of shaking-up the power industry, as can be seen in the EWPC article High Leverage Shake-Up in California. Since California has probably invested more than any other place in the world in the suppression of GHG gases, their companies could well become competitive by the process. The coalition of California businesses promoting “direct access” should look closely into this idea.

It is very clear that in the process, transportation should undergo GHG Suppression and thus shift to electricity. That is already happening with cities mass transportation initiatives.

High Leverage Shake-Up in California

California has a great opportunity to repair the damages of the BIG California LIE to the world. The CPUC can do it by introducing a high leverage shake-up of the power industry that results in a win-win proposition for every stakeholder, becoming the example of indiscriminate access of electricity for the third industrial revolution.

High Leverage Shake-Up in California

By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity

First posted in the GMH Blog, on March 11th, 2008.

Copyright © 2008 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. This article is an unedited, an uncorrected, draft material of The EWPC Textbook. Please write to javs@ieee.org to contact the author for any kind of engagement.

The California Public Utilities Commission (CPUC) has begun a process that could allow businesses and homeowners to bypass utilities and buy power on the open market. See Shake-up could be coming in electricity. The CPUC is considering a limited form of deregulation called “direct access.” This time there is hope that the intervention of the systemic electricity crisis does not result once again in a BIG California LIE.

On the EWPC article Shrinking the Regulator’s Jobs, I updated my views on the BIG California LIE and wrote that “I am now convinced that FERC, the CPUC and the three largest California utilities actions were integral part of the natural systemic response that led to the vicious circle of the mistaken efforts that has had a large impact on the delay of restructuring worldwide.” In that light, for details (please hit corresponding link of the EWPC article here and below) see Slicing the Last of the Regulated Monopolies.

However, direct access could be just another form of low leverage structural separation, which maintains in place incumbent utilities and produces well known unintended consequences. See Utilities vs. Neelie Kroes.

To become a high leverage shake-up, the process should allow all customers, without any discrimination, to buy and sell power (Watt-Vars and NegaWatts-NegaVars) in the open market. The term “bypass” is a trap; utilities should be restructured by having the CPUC consider the following:

Adopt a shared vision of the end-state of the electricity industry for quite some time, as provided by the Electricity Without Price Controls (EWPC) paradigm. See Creative Destruction of the Old Electric Paradigm.

Adopt the essential requirements of the electricity industry which are: Active Demand, Retail Competition and Ultraquality Transportation. See Power Markets Essential Requirements and Power Markets Essential Requirements - II.

Perform restructuring to provide a high leverage shake-up that minimizes unintended consequences by considering the management of systemic risks in the long run and the short run. See Another EWPC Discovery and Another EWPC Discovery II.

Redefine utilities as transportation only utilities that provide Ultraquality Transportation. See The Smart Grid Transportation Utility.

Retain price controls on the transportation utilities closed market. Shift from price controls to prudential regulations in the open market. For details see Shrinking the Regulator’s Jobs.

Introduce “direct access” under Second Generation Retailers - 2GRs with statewide Retail Competition. Later on those 2GRs should be able to operate in federal and worldwide markets as EWPC becomes the new paradigm, where the large value creation will result in a win-win proposition for every stakeholder. See The Sixth Disruptive Technology.

Another EWPC Discovery

This is the summary of the important discovery: instead of “retail competition for electric generation” as the Working Paper reads in page 3, what is needed in the third industrial revolution to reduce the risks in the power industry is Retail Competition and Active Demand (to get Demand Integration), under Ultraquality Transportation, which in turns are the three essential requirements of EWPC.

Another EWPC Discovery

By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity

First posted in the GMH Blog, on March 8th, 2008. Updated on March 9th, 2008.

Copyright © 2008 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. This article is an unedited, an uncorrected, draft material of The EWPC Textbook. Please write to javs@ieee.org to contact the author for any kind of engagement.

Thanks to Don Giegler for helping me inquire further into the essential elements that are generating uncertainty in the power industry, and that are fueling higher than necessary risks as a consequence of the restructuring experiments implemented. A new and important EWPC finding is the result.

The vertical integration paradigm mindset had a large negative impact on restructuring, which we can now be reversed by making a shift to the EWPC paradigm mindset. The abstract of the Working Paper CEIC-08-03, starts with “Restructuring of the electricity industry was expected to improve the operating efficiency of electric power generators, leading to lower production costs and retail prices.” That is a great statement for the gone days of the second industrial revolution, but not for the third industrial revolution that we are experimenting.

I have written earlier that power generation should no longer be at center stage in the industry anymore. The finding help stress, very clearly indeed, that under EWPC center stage shifts to the regulated transportation utility, which will concentrate on both system adequacy and system security to enable maximum social welfare in the open retail and wholesale markets.

Under EWPC, the transportation (transmission and distribution) utility will operate in a very stable regulatory environment, with a guaranteed rate of return in the traditional sense, letting the transportation expansion plans to be developed at least costs for the whole power system (not just for transportation). Wall Street should be very happy with those companies’ investments on the smart grid. Uncertainty gone for transportation investments!

Demand Integration should be in the long run the most important source of lower costs, and/or higher value, to customers, as transaction costs of retail operations decrease, helping increase the efficiency of the whole system. It is Demand Integration coupled with higher levels of coordination in operation that will help available base load central station generation operate at higher load factors, while leading to more stable market prices. That way, Wall Street will be pleased on those investments as they operate in a relatively more certain environment.

This is the summary of the important discovery: instead of “retail competition for electric generation” as the Working Paper reads in page 3, what is needed in the third industrial revolution to reduce the risks in the power industry is Retail Competition and Active Demand (to get Demand Integration), under Ultraquality Transportation, which in turns are the three essential requirements of EWPC.

Reference and context:

EWPC article Power Markets Essential Requirements,

EWPC “article” Power Markets Essential Requirements - II

Comments under the EnergyPulse article New Market Signals Are Urgently Needed to Change the Global Warming Threat, by Rafael Herzberg, Partner, Interact Ltd., Energy Consulting

Power Markets Essential Requirements

Should we keep wasting time and money fixing unfeasible markets propositions? To perform the actual implementation of the EWPC paradigm shift, it is wise to start on the essential requirement of the markets system.

Power Markets Essential Requirements

By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity

First posted in the GMH Blog, on March 5th, 2008.
Copyright © 2008 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. This article is an unedited, an uncorrected, draft material of The EWPC Textbook. Please write to javs@ieee.org to contact the author for any kind of engagement.

Thanks Todd for your post.

We should forget the details, and focus just on the essence.

In addition to the ultraquality requirement (not considered at the outset of deregulation), there are 8 possible discreet combinations of the following three variables. Every feasible paradigm (of the 16 possibilities many are just not feasible) needs to select a YES or a NO as an answer to make a paradigm shift.

1) Wholesale Competition: YES or NO
2) Retail Competition: YES or NO
3) Active Demand: YES or NO. (Also not considered at the outset of deregulation.)

In the essence of EWPC all four variable are YES. The combination of Active Demand and Ultraquality Transportation (retained by the closed transportation market) leads to the requirement of Demand Integration to power system planning, operation and control, which is accomplished by 2GRs while performing Retail Competition and Wholesale Competition (in the open market).

Under vertical integration (fully regulated plans – Don’s paradigm) all three answers are NO. Ultraquality is a YES, but property of generation and transmission, as Inactive Demand is considered as an externality. The world changed making vertical integration unfeasible, and as a result we need to change policies, from Inactive Demand to Active Demand, as you explained on 1.15.08 in the excellent contribution that I named as An Undiscussed Elefant. Here again, to keep the ultraquality requirement leads to the need of Demand Integration by 2GRs.

At the outset, restructuring had inactive demand and separate transmission and distribution, with distribution most of the time under the incumbent utility. Lack of an ultraquality requirement and active demand in the original restructuring market architecture and design made it unfeasible. Trying to fix the BIG flaws of the original restructuring has resulted in an inordinate increase in complexity (as many unneeded rules tied to earlier contractual and regulatory arrangements remain buried while giving unnecessary commercial rights) by adding costly incremental extensions of Capacity Markets (a feature of vertical integration), NERC mandatory requirements, recently Demand Integration, etc. That is an extremely destructive and uncertain method to get there.

Since IMEUC has NO Retail Competition nor Ultraquality, and thus NO Demand Integration to power system planning, operation and control, it is just an incomplete and unfeasible proposition.

The above is just another confirmation that EWPC is the winning market architecture and design paradigm. Should we keep wasting time and money fixing unfeasible propositions?

An Undiscussed Elefant

Posted by Todd McKissick on 1.15.08, under the article Climate Change & Energy Security - What's Really at Stake in the 2008 Election. It is posted as part of an inquiry made by Todd to myself.

There seems to be an elephant in the room that no one is discussing. We all know that governmental policy is at best only influenced by corporate interests and at worst entirely driven by them. Why then, is the solution always to look to them to fix our problems? I firmly believe that the only way to solve this problem is to put all our available investment into new and alternative technologies. These are the only thing that fully offsets fossil problems. Sure, conservation (in it's many forms) is needed but that will happen in proportion to price and awareness. Unfortunately, it only delays the big crunch (regardless of whether you're worried about GW or economy or security). Sure, investment is needed in extending our current supplies whether that's crude, NG or even nuclear but again it's only a delay. From a long term point of view, the only genuine solution is fully renewable technologies. Why not speed up that development?

There are those that say these technologies have too many problems. Examples include scale, dependability, cost and even aesthetics. The reality is that these are all more easily solvable than the much touted 'delays' being offered as our best first goal.

My research has found literally hundreds of backyard inventors that have created very viable systems to solve each of our needs. One guy is modifying hummer vehicles as a publicity stunt to show they can have less emissions, get over 85 mpg and have more performance than stock. His cost is around $30,000, but estimates it to be under $3,000 when built-in at the factory. What kind of mileage could he get in a conservative car? Why isn't the wonderful government all over this guy throwing money at him? Detroit is just now beginning talks though, so who knows.

Another guy in Africa modifies motorcycle engines for $100 to double their mileage and halve their emissions. He's been fighting the patent process for a couple years that I know of.

Another small company is making home microCHP boilers and putting the waste heat to domestic use for a 40% overall savings. They got involved with a large corporation and are playing some strange game with their marketing now. With their product hitting the market 3 years ago, one has to wonder why it's no longer available.

There are hundreds of independant stories like this. There are also dozens of publicized stories of research based 'breakthroughs' in the PV or bio markets as well. Most have primary goals of being a cheaper solution to the consumer overall. When these become mainstream choices available to the consumer, they will make conservation a moot point (for that home). They will make the economic issue moot as well because the money will be spent at the lowest consumer level and be directly offset by fuel savings. They will also completely eliminate a portion of fossil fuel use to the extent that they generate. Lastly, their adoption will be more distributed, faster and easier than any other option, save only a distracting CFL switchover. That adoption will also become worldwide which doubles the reduction in trade deficit felt by less crude imports.

The problem is that these solutions are not getting their fair shake in the market. Investment by vulture capitalists is not appealing to them. Government grants have too many strings and too long of a timeline. Publicly funded research (universitys, etc.) has mostly continued research dollars as their primary goal. That leaves only two options, non-profit research grants and personal loans. Since non-profits have so many loopholes to jump through and have to maintain their non-profit status, they basically follow government guidelines on which technologies to assist.

We need to change policy to allow anyone to invest, loan or gift money fairly to our nations' creative individuals to get some of these to market. The outcome will be tremendous benefits to our energy woes, our economic woes and possibly even bolster the housing market. In the end, we need these new solutions anyway, why not focus on them and their current roadblocks now?

Utilities vs. Neelie Kroes

Following the recent 280.5 million Euro fine ordered by Neelie Kroes, European Commissioner for Competition, to the Microsoft Corporation for failing to comply with the European Commission’s antitrust ruling, E.ON “became the first major continental power company to propose a break-up of major parts of its network,” apparently “handing a victory to the European Commission in its efforts to break the stranglehold the Continents dominant players have on the market,” as reported by The Independent (UK).

According to Business Week, the European authorities are being pushed by the British for utilities “to give up control of profitable distribution networks used to transport energy across the Continent. . . The goal is to level the playing field and make it easier for new entrants to take on incumbents such as GDF and Germany's E.ON. Analysts figure structural separation will help bring down end-user prices by letting new firms compete with former state-owned monopolies.”

Such structural separation of utilities is a low leverage intervention that doesn’t level the playing field as it was demonstrated in Spain, where incumbents made a lot of distortions. In addition, in such separation, the business critical issue of customer satisfaction is left unaddressed by first generation retailers. I suggest that the European approach needs to change to empower the customer. The separation required is to shed the T&D grid to come up with an integrated T&D transportation grid, as envisioned in the EWPC market architecture and design paradigm shift.

A recent working paper, “Electricity Prices and Costs Under Regulation and Restructuring,” published by the Carnegie Mellon Electricity Industry Center, offers negative results of the low leverage structural separation in the U.S.A. According the authors, Seth Blumsack, Lester Lave and Jay Apt, “Restructuring was expected to improve the operating efficiency of electric power generators, leading to lower production costs and retail prices.” The paper “concludes that there have been some efficiency gains” for generators, but not necessarily for consumers.

Customers should be empowered to make timely decisions that regulator and utilities cannot do for them in a cost effective manner. They need to get involved as soon as possible to enable demand integration to power system planning, operation and control (See the EWPC article Demand Integration is NOT the Province of Politics.) The growth of the power industry should be centered in the increase of the communications assets intensity to reduce the energy assets intensity.

Tam Hunt is right: “Energy efficiency is far cheaper than any power technology and there is vast potential to increase efficiency in the US. . .” and elsewhere. But a cost efficient implementation cannot be done by regulatory mandates; it requires a high leverage restructuring of the power sector introducing Second Generation Retailer - 2GR to develop The Sixth Disruptive Technology “To do a better job of managing our dwindling energy resources…”

To enable such leverage it is necessary Shrinking the Regulator’s Jobs. Today´s reality can be understood by a general agreement that "There are massive problems to be solved in the electric industry, costing massive amounts of money, and with very little time to do it," that is giving rise to the Global Citizens' Call to Arms to perform the shrinking.

I hope that Neelie Kroes and her staff gets interested in learning about EWPC as soon as possible.

Apagones Asechan a Chile

Como resultado de la Ley Corta (ver Porque la Ley Corta de Chile es una Ley Corta), los chilenos vuelven de nuevo a preocuparse los apagones que los asechan, como se puede ver más en la siguiente noticia.

03/03/2008

MARCELO TOKMAN

Gobierno Confía en que No Habrá Cortes de Luz en Marzo



Diario Estrategia On-Line

El ministro de Energía reconoció que pese a las medidas acordadas para no llegar a esa situación, factores como la salida de otra central del Sistema podrían provocarlo. En todo caso, precisó que “no nos hemos puesto en el escenario”.

—Diversas autoridades han tocado el tema del posible racionamiento en este mes marzo, ¿se llegará a esa situación?

—Hemos tomado todas las medidas a nuestro alcance para evitar que haya racionamiento, pero no olvidemos que tuvimos una seguidilla de factores que han significado un escenario muy complejo desde el punto de vista energético.

—¿Cuáles son estos factores?

—El marco general está dado cuando comenzó la incertidumbre de los envíos de gas de Argentina, que produjo un congelamiento de las inversiones que, aunque fue resuelto con la Ley Corta 2 de 2005, los proyectos demoran en materializarse, por lo que todavía estamos con estrechez. Además, los envíos de gas han empeorado año tras año.

—¿Qué otras situaciones han afectado?

—La generación hidro sigue siendo muy importante dentro del sistema, sobre todo en el SIC, lo que nos deja muy vulnerables a las condiciones hidrológicas, en un 2007 que fue el tercer año más seco en los últimos 50 años. También tuvimos las temperaturas más bajas en muchos años, y hasta hubo un terremoto. Muchas cosas que anticiparon un 2007 muy complejo y que 2008 también lo será, por eso tomamos múltiples medidas.

—¿Se han detectado más dificultades?

—A comienzos de año nos dimos cuenta de tres factores adicionales que agravaron la situación. La salida de Nehuenco, que inicialmente estaría fuera un mes y medio, pero probablemente estará fuera hasta fines de junio, y son 370 MW que tienen un impacto; En segundo lugar, y lo único que se veía tal vez como positivo, era que la poca precipitación coincidió con temperaturas muy bajas y las estimaciones indicaban una buena acumulación de nieve, lo que anticipaba una importante cuota de generación hidroeléctrica para 2008, pero como lamentablemente subieron mucho las temperaturas a mediados de diciembre, el deshielo se anticipó. Finalmente, el fenómeno de La Niña está en pleno, recién en la última revisión se ve una reversión en las temperaturas del Océano Pacífico, aunque estaremos en una situación más cercana a lo normal los últimos meses del invierno, lo que implica pronósticos no muy auspiciosos en términos de precipitaciones para este año.

Las Medidas

—¿Cómo se reaccionó a estas complicaciones?

—Además de las medidas tomadas, fue necesario algunas adicionales, que anunciamos a comienzos de mes. Las principales eran tres: Los mecanismos del decreto de racionamiento, que son de orden más preventivo, como reducción del voltaje, y que de alguna forma se intervienen las decisiones del CDEC para que sea más conservador en el uso de las aguas; la prolongación del horario de verano, y la flexibilización en el uso de aguas del Maule y el Laja, de forma tal que solamente se utilizan si ya se despachó todo el resto del parque de generación. También están las conversaciones con las generadoras para ver si comenzarán a usar el 90 Bis, que es la posibilidad que ellos incentiven la disminución del consumo.

—¿Cómo ha sido el diálogo con las generadoras?

—Les señalamos el contexto de estrechez para solicitar dos acciones concretas. Una es que conversen con los clientes de mayor tamaño la posibilidad de un acuerdo en el cual disminuyan el consumo, y por otro lado, saber si efectivamente van a hacer uso de esta nueva posibilidad.

—¿Qué respuestas han dado?

—Se nos dijo que hay interés en algunas de estas empresas para empezar a utilizar este mecanismo prontamente.

—De concretarse, ¿qué incentivo tendrán los clientes para disminuir su consumo?

—Un primer incentivo, independiente de este mecanismo, es el encarecimiento del petróleo, que ha estado sobre los US$100 el barril, más el encarecimiento de la electricidad producto de la ausencia de capacidad de generación hidro efectiva, es lamentablemente un beneficio evidente, que explica que la tasa de crecimiento de la demanda esté más baja de lo proyectado.

—¿Y las empresas?

—Una generadora tiene un contrato donde debe vender a precio nudo, y (en caso de no poder generar) el costo de cumplir con ese compromiso es muy grande. Es una brecha muy significativa respecto al costo marginal, que en el SIC ha alcanzado US$300 por MW, entonces el beneficio que tiene un generador que reduce lo que tiene que vender y libera ese MW para venderlo en el mercado spot o no se ve en la obligación de tener que comprar en el mercado spot, es enorme.

Impacto Económico

—Entonces, ¿se da por descartado el racionamiento?

—Nosotros no podemos descartar racionamiento, pero creemos que dados los escenarios previstos para este mes, no debiera haber. Sin perjuicio de ello, si en algún momento se produce una falla en una central de tamaño significativo, como pasó con Nehuenco, puede ser una situación más compleja.

—Las medidas anunciadas, ¿podrían afectar la producción de empresas?

—Ocurre todo lo contrario. En ausencia de estas medidas, sí habría un costo mayor para la actividad económica, porque el costo de que haya racionamiento y problemas de suministro es enorme.

—¿Cuánto podría impactar en la economía un racionamiento?

—No nos hemos puesto en el escenario, porque estamos preocupados de tomar las medidas para evitar que ocurra. Si bien no lo podemos evitar, lo que hacemos es tratar de evitarlo; por otro lado, la experiencia de dimensionar efectos económicos y macroeconómicos está en otra parte, estamos concentrados específicamente en el sector energético.

Negociaciones

—¿Cómo se ha desarrollado la negociación con Argentina, de la que surgió el swap de Central Puerto y Colbún?

—Estamos llevando hace tiempo conversaciones, intercambios muy frecuentes, en el contexto de lo que nos solicitaron las Presidentas, para ver si existe posibilidad de lograr algún tipo de acuerdo que dé un poco más de certeza respecto de qué ocurrirá con los envíos de gas durante este año. En ese contexto, revisamos el tema de los swap y se llegó al acuerdo de autorizar esta operación, pero la verdad es que estamos todavía en medio de esas conversaciones.

—¿Cuándo habría un acuerdo?

—Es de esperar que durante el mes de marzo ya podamos tener novedades.

---------------------------------------------------------------------------

SI SE DECIDE INCORPORARLA

Recién en 12 ó 15 Años Podria Haber Energía Nuclear

Luego del informe de la Comisión Zanelli, encargado por la Presidenta Michelle Bachelet para ver las posibilidades de desarrollar energía nuclear en Chile, las investigaciones se han mantenido. “Estamos con distintos estudios. Durante el mes de marzo y abril licitaremos un número de estos, enfocados en los temas de seguridad e institucionalidad, y al mismo tiempo hay otros estudios permanentes, que no sólo afectan la energía nuclear, sino que otras decisiones: Uno para modelar la demanda futura y proyectarla para los próximos 30 años, por ejemplo”, explica el ministro Tokman, consciente de que para tomar una decisión de esta magnitud “hace falta responder muchas preguntas”.Por ello, la autoridad solicitó un presupuesto al Congreso para los nuevos estudios que se requieran, como también conformar un “grupo asesor con gente de la CNE, además de tres integrantes de la Comisión Zanelli (Jorge Zanelli, Diego Infante y Alejandro Jofré)”, precisa. También se ha recibido la colaboración de la Organización Internacional de Energía Atómica. Aunque esto no significa que se trate de una iniciativa que se pueda concretar de aquí a un par de años.“Si esto se quiere hacer seriamente, en la etapa que está Chile, recién entre 12 y 15 años más podríamos contar con esta alternativa. Hemos metido recursos, tiempo y colaboración internacional para analizar seriamente la alternativa”, concluye el ministro de Energía.

Estado Fallido = Qué Paisaje = Somos un Garabato

En su columna Los Buenos Días del Director, en el periódico El Día, el Dr. Rafael Molina Morillo trae hoy ¿Fallido, paisaje o garabato? que podemos abajo. Su conclusión es que "... depende únicamente de nosotros los dominicanos, que debemos ser más exigentes con las autoridades que elegimos y con nosotros mismos, para que las cosas sean como Dios manda. Solo así dejaremos de ser fallidos, paisajes o garabatos."

Primero se dijo que este era un Estado fallido, pero esa teoría parece haber sido descartada, principalmente cuando se compara la República Dominicana con el vecino Haití. Pero eso es como “coger piedras para los más chiquitos” y así no tiene gracia la cosa.

Lo cierto es que, si no somos ya un Estado fallido, andamos cerca de serlo, a juzgar por la falta de institucionalidad que se nota en varias áreas de la administración pública y de los derechos humanos. Muchas cosas andan torcidas o simplemente no funcionan. Eso no necesita demostración…¿o sí?

Hay una forma más poética de decirlo, y de tanto repetirla, está gastada la frase: “Esto no es un país, sino un paisaje”. Equivale, en el fondo, a lo mismo.

Sin embargo, en conversaciones informales con colegas periodistas he escuchado varias veces, como quien no quiere la cosa, un nuevo término para referirse al estado de desorden, impunidad, corrupción, mentiras y politiquería que impera en esta, nuestra tierra.

Esa forma de describir a nuestra nación es que somos “un garabato”, o sea un trazo indefinido y desordenado que se estampa sin pretensión alguna en un pedazo cualquiera de papel.

No es que sea pesimista ni que menosprecie lo dominicano. Al contrario, lo que me gustaría es que las cosas fuesen de otra manera. Y eso depende únicamente de nosotros los dominicanos, que debemos ser más exigentes con las autoridades que elegimos y con nosotros mismos, para que las cosas sean como Dios manda. Solo así dejaremos de ser fallidos, paisajes o garabatos.

(r.molina@codetel.net.do)

Enabling AMI’s Growth

A realistic growth of AMI requires that system’s imprisoned utilities and regulators let go, by changing our most basic ways of thinking. “If these do not change, any new ‘input’ will end up producing the same fundamentally unproductive types of actions.” The result will be much needed industry consolidation and opportunity for innovative AMI competitive providers to emerge to fuel AMI growth without today’s limitations.

Enabling AMI’s Growth

By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity

First posted in the GMH Blog, on March 1st, 2008.

Copyright © 2008 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. This article is an unedited, an uncorrected, draft material of The EWPC Textbook. Please write to javs@ieee.org to contact the author for any kind of engagement.

Mark Hall, Research Analyst, Chartwell Inc., has written the very timely article Advanced Metering Growth to Expand Significantly, but Industry Penetration Still Low. In the article, I'd found very instructive that “the number of installed ‘smart’ meters – those that are both advanced and serve as a gateway to customers’ homes – are almost nonexistent.”

Mark adds that “Based on the 18.5 million residential AMR endpoints represented by the 111 utilities Chartwell surveyed, it is estimated that two out of every 15 residential AMR meter is two-way and capable of delivering customer data on an hourly basis.” Such “gauge [of] a realistic industry ratio of true advanced metering installations” as he names it, signals that utilities and regulators are imprisoned in a system that doesn’t enable them to do the job required.

The potential for Advanced Metering Infrastructure (AMI) growth is indeed very large. There is, however, a typical systemic problem that gets in the way. In the “Dance of Change,” Peter Senge et al write: “Our core premise … is that the sources of these problems cannot be remedied by more expert advice, better consultants, or more competent managers. The sources lie in our most basic ways of thinking. If these do not change, any new ‘input’ will end up producing the same fundamentally unproductive types of actions.”

To enable growth, it is essential to place attention on the limiting processes to make them visible and on the fundamental shift in thinking to develop the necessary leverage. The limiting processes inherent in today’s systems are found in the interaction of the regulator and the utility, which come from the great power of the larger culture, structures, and norms that exert great resistance against the best efforts of effective growth. EWPC is a market architecture and paradigm shift that changes the roles of the regulator and the utilities with a high leverage intervention to enable larger AMI and smart grid growth.

The intervention separates the utility grid from the utility enterprise. First, the utility grid retains the utility characteristics as a new transportation utility compact with a responsibility to transport under tolls price controls. The EWPC article The Smart Grid Transportation Utility (hit link here and further down to get more details) shows how to remove the limitations, imposed by the utility enterprise, which has priority over the utility grid; and that the regulators remain with a well known job. See also the EWPC article Shrinking the Regulator’s Jobs.

Second, the state utility enterprise, however, is shifted to the open market, where they become competitive retailers (see Second Generation Retailer - 2GR) in the federal market. So the state limitations on the federal retail markets are removed, while regulation shifts from price controls to prudential regulations. This way, regulators are not longer involved in risky AMI bets for which they are unprepared, passing such market innovation risks to the market with 2GRs. See the EWPC article The Sixth Disruptive Technology.

The result will be much needed industry consolidation (Chartwell reports 111 utilities surveyed) and much needed opportunity for innovative AMI competitive providers (other than Sensus and Itron, which seem to have the larger market share) to emerge under EWPC to fuel AMI growth without the above limitations. In addition, free of such limitations, a mutually reinforcing activity is expected to develop between the smart grid and AMI.

DL: Repite Promesa Solución Electricidad

Promesa de solución al sector eléctrico vuelve a reeditarse

Publicada en Diario Libre

Energía. Fernández anunció, en su toma de posesión en 2004, que uno de los retos del gobierno era la solución al problema de los apagones

SD. Aunque la política económica fue dada de alta, como dijo en su discurso de este miércoles, algunas promesas del presidente Leonel Fernández cuando asumió el cargo se volvieron a repetir ante la Asamblea Nacional.

Cuando asumió el mando en el 2004, el mandatario dijo que uno de los principales retos que tenía era el problema energético, y aunque en esa ocasión no puso fecha para solucionarlo, en su alocución de este 27 de febrero volvió a repetir lo mismo sobre el tema, y hasta anunció el año para el fin de los apagones: el 2012.

Algunas de las promesas que habían sido anunciadas con anterioridad se cumplieron, pero también presentó cifras que como el caso del turismo, que tuvo un crecimiento casi nulo el año pasado, no se corresponden con la realidad.

El caso de la construcción de la autopista eléctrica viene desde el 2003, y luego el 2006, y aún no termina, y las plantas a carbón en Manzanillo no arrancan.

Una de las prioridades de su gobierno en el 2004 era la energía renovable. La ley fue promulgada el 8 de mayo del 2007, pero varios proyectos, con cifras millonarias, no despegan debido a que el Presidente no promulga el reglamento.
Fernández promovió la aprobación de la Ley 57-07 que otorga incentivos a la ejecución de proyectos que impliquen la explotación de energía renovable. En la actualidad hay más de 700 megas concesionados en energía eólica.

El país ha recibido 20 propuestas para desarrollo de proyectos alternativos, la mayoría en el área eólica. Los parques que han recibido el visto bueno estarán en Baní, Montecristi y Puerto Plata, y se negocia un proyecto de 300 megas de Hiberdrola de España para instalarlo en Pedernales.
Elogios

Pese a que la promesa sobre electricidad se repite, con relación a indicadores económicos el Gobierno cumplió su misión, tal como reconoce el propio Fondo. La economía creció, la banca se fortaleció, la tasa de interés es más baja y la de cambio se mantiene estable, tal como dijo Fernández en su discurso.

De José Javier

The World Shouldn’t be Running Out of Electricity

According to Alan Caruba, America is running out of electricity, but in fact the whole world is running out of electricity by keeping in place several flawed or obselete market architecture and design paradigms. The American Public Power Association proposed that “all industry participants need to work together to design a regulatory system for electricity markets that truly benefits consumers, businesses and the environment.” Such a regulatory system has already emerged and is the EWPC market architecture and design paradigm.

The World Shouldn’t be Running Out of Electricity


By José Antonio Vanderhorst-Silverio, Ph.D.

Systemic Consultant: Electricity

Copyright © 2008 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. This article is an unedited, an uncorrected, draft material of The EWPC Textbook. Please write to javs@ieee.org to contact the author for any kind of engagement.

Bob,

Thank you for your comment, as it gives the opportunity to prove that Len’s opinion (not Len!) about 2GRs is wrong once again. As you see below the incentives to 2GRs are not well widely understood yet in business strategy practice, but nonetheless have been in used for quite some time by many organizations implementing third industrial revolution technologies. But first, I agree with him regarding the anticompetitive ploy. In fact, under Rafael’s article I suggested “that as a global issue, this might be a trade matter closer to WTO tariff agreements on CO2 [change that GHG] "exports" to the global commons by a given user.”

Your “definition [that] consumer energy efficiency and conservation enable consumers to use LESS energy . . . will never be a profitable activity for an energy retailer” applies to the perverse incentives that today’s utilities have and maybe first generation retailers to “encourage investment in themselves and in generation and distribution but only to maximize their own efficiencies, with the result being minimized lower energy prices for consumers.” 2GRs will be centered on a total customer solutions strategy, instead of the traditional best product strategies of low costs and differentiation mindset.

2GRs do not have those perverse incentives as they offer customers no just low costs, but even more so, high value propositions to stay in business by developing information intensive business model innovations. The whole point is that customers will be able to invest in long term projects in coordination with the long term development of the power system, while 2GRs integrate demand to power system planning, operations and control, as well as compete among themselves and generators in the wholesale market by aggregating their retail portfolios.

I repeat that “"Tam is right that ‘energy efficiency is far cheaper than any power technology and there is vast potential to increase efficiency in the US. . .” and elsewhere. But a cost efficient implementation cannot be done by regulatory mandates’… ” since client’s energy businesses costs and value requirement and opportunities vary widely. This last explanatory phrase stresses the need for Shrinking the Regulator’s Jobs as soon as possible. This is how 2GRs will help a world that might be running out of electricity.

In a recent white paper, the American Public Power Association finds this “a time of increasing peril for electricity consumers – both in present costs and future reliable service…” and “wants … to contribute to a constructive dialogue to develop sorely needed reforms … [of] electricity markets …” and suggests that “all industry participants need to work together to design a regulatory system for electricity markets that truly benefits consumers, businesses and the environment.” Such a regulatory system has already emerged and is the above mentioned EWPC market architecture and design.


Reference and context:

America is Running Out of Electricity, by Alan Caruba, CEO, The Caruba Organization.

Consumers in Peril: Why RTO-Run Electricity Markets Fail to Produce Just and Reasonable Electricity Rates, by American Public Power Association, February 2008.

A Debate: 24 Horas de Verdad

En su discurso de rendición de cuentas del 27 de Febrero, ante los Honorables Miembros de la Asamblea Nacional, el Presidente Leonel Fernández:

Manifestó que “Hay dos grandes desafíos que se ciernen sobre el horizonte de la República, los cuales son objeto de legítima preocupación por parte de la población. Me refiero a los problemas del sector eléctrico y la seguridad ciudadana;”

Reiteró que “el Gobierno ejecuta el ‘Plan Integral de Recuperación del Sector Eléctrico’ a los fines de que a más tardar en el año 2012, haya sido resuelto uno de los más grandes males que ha venido afrontando la sociedad dominicana desde hace más de 30 años;” y

Al respecto declaró que “En definitiva, los avances mostrados en la recuperación del sector eléctrico nos permiten asegurar que a más tardar en el año 2012 se habrán erradicado definitivamente los apagones, se habrá terminado de electrificar todo el país y se habrán reducido significativamente los precios de la energía a los consumidores. . . Sólo entonces podremos realmente decir que la República Dominicana entró al Siglo XXI.

Para erradicar los apagones, el Gobierno Dominicano ha adoptado la iniciativa de EdeEste de ir designando circuitos como de 24 Horas en función del Índice de Recuperación de Efectivo (CRI por sus siglas en inglés). El próximo paso, para que dicha erradicación sea de verdad, debería ser compensar a los clientes cuando la distribuidora incumple dándole apagones a esos circuitos, de forma que no se trate solamente de buenas intenciones, sino de una calidad de servicio garantizada.

Dando ese paso se sabrá de inmediato que los clientes no solo estarán dispuestos a recibir una calidad acorde a sus necesidades y a su capacidad de pago, sino que resultará evidente las deficiencias del sistema para llevarlo a cabo, ya que a nivel del cliente no se trata simplemente de reducir los precios sino de reducir sus costos totales en el uso de la electricidad en que los costos de los apagones los afectan de manera desigual. Es entonces cuando se sabrá que el llamado “Plan Integral de Recuperación del Sector Eléctrico” necesita ser redefinido para insertarnos de verdad en el Siglo XXI.

Así es que el GMH acoge como suya la nota Debate Civilizado, en que concuerda totalmente con el Dr. Rafael Molina Morillo en que hace falta “un debate decentemente montado y respetuosamente conducido…” para entonces “… realmente decir que la República Dominicana entró al Siglo XXI” habiendo tomado en cuenta de manera civilizada la “legítima preocupación por parte de la población” para resolver definitivamente la crisis del sector eléctrico.

En la nota Electricidad Competitiva: Si Queremos, Podemos, el GMH dejó bien claro, entre otras cosas, que:

Con esta campaña electoral se debería garantizar que el partido ganador inicie la solución definitiva de la crisis de electricidad, respondiendo a una visión compartida que permita colocarnos como los líderes de los sectores eléctricos del mundo.

La reducción del poder del gobierno no vendrá por iniciativa de los políticos. Vendrá de una visión compartida por las fuerzas vivas y productivas de la nación, en apoyo a la competitividad sistémica para responder a la globalización.

Aunque no estamos acostumbrados a pensar que en ocasiones la forma más rentable es la de cerrar paulatinamente un negocio, este es precisamente el caso de las distribuidoras que no son competitivas. Si se insiste en privatizar las distribuidoras que desaparecen como tales en la visión, estaremos en efecto retrocediendo y dificultando cada vez más el desarrollo del país en la medida que pasa el tiempo. El nuevo proyecto de CDEEE con el Banco Mundial no debe seguir esa reversa.

Es importante destacar, que aparentemente ni el Banco Mundial, ni el Banco Interamericano de Desarrollo, está en capacidad de impulsar la reducción del poder del gobierno; los bancos necesitan la ayuda de la opinión pública. Es solo a través de un debate público y contradictorio en que se examine a profundidad las interioridades del llamado “Plan Integral” que la sociedad dominicana tendrá la seguridad de que la crisis eléctrica quede resuelta de forma definitiva.

Actualización 28 de febrero 4:15 p.m. Si verdaderamente "el ‘Plan Integral de Recuperación del Sector Eléctrico’ a los fines de que a más tardar en el año 2012, haya sido resuelto uno de los más grandes males que ha venido afrontando la sociedad dominicana desde hace más de 30 años” fuese una panacea, ¿porqué Representante BID Propone Pacto Eléctrico?

Debate Civilizado

Tomado de la columna "Mis Buenos Días," del Dr. Rafael Molina Morillo, en el periódico El Día del 28 de febrero, 2008.

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Estaba mirando y escuchando, a través de la televisión, un debate entre Barak Obama y Hillary Clinton, ambos aspirantes a ser el candidato o candidata del Partido Demócrata de los Estados Unidos, para la Presidencia de esa nación.

Ambos estaban serenos, bien portados, respetuosos, hasta se sonreían el uno a la otra, o la una al otro, como usted quiera. Exponían sus argumentos sin interrumpirse y sin poner mala cara ni expresiones burlonas. A veces hasta admitían estar de acuerdo con el adversario. Y estaban sentados tan cerca, que a veces me parecía ver que sus brazos se rozaban inadvertidamente.

En otras palabras, parecían gente civilizada. Digo “parecían” porque nadie sabe lo que estaban sintiendo por dentro ni qué malos pensamientos se anidaban talvez en sus cabezas. Pero lo importante, para mí, era el ejemplar comportamiento de ambos por igual.

Los políticos dominicanos deberían aprender de ese modelo, pero ¡qué lejos estamos de ese nivel educativo! Empezando porque no se ponen de acuerdo para aceptar un debate decentemente montado y respetuosamente conducido. Siempre hay uno o varios que se creen superiores a los demás y “no pueden rebajarse al nivel de sus insignificantes adversarios”. Otros tienen miedo, o saben que van a hacer el ridículo. Y también están aquellos a quienes no les interesa para nada un debate porque solamente están en busca de “lo mío”.

Lo peor del caso es que, si se logra el milagro de organizar un debate entre líderes políticos o aspirantes a la Presidencia, se corre el riesgo de que el mismo termine “a rabazos limpios” o se convierta en un vulgar intercambio de insultos y acusaciones temerarias.

Mas aún conociendo ese riesgo, soy partidario de que en cada proceso electoral haya debates públicos, frente a todo el país, a través de la televisión. Cuando lo logremos, habremos dado un gran paso.

(r.molina@codetel.net.do)

Global Citizens' Call to Arms

In the article "It may be lights out," Warren Causey suggests agreement with Marty Rosenberg’s article Energy and Presidential Debates by writing that “There are massive problems to be solved in the electric industry, costing massive amounts of money, and with very little time to do it.” Mr. Causey adds that “NERC Chair and CEO said essentially the same thing.”

In a comment to Mr. Causey’s article, Mark Kaminski doesn’t “see any alternative call to arms.” The alternative has been available in Electricity Without Price Controls (EWPC).

EWPC is not just “A faith-in-the-market alternative,” as it has two interacting and balancing markets: a controlled transportation (a compact of the integrated transmission and distribution - the new utility - with a responsibility to transport electricity) market and an open retail and wholesale market. The first is still under price control regulation of tolls, while the second is under prudential regulations.

To get introduced into the alternative anyone should look at the EWPC article Shrinking the Regulator’s Jobs, written under a systemic perspective. To get people to “step up” as Mr. Rosemberg suggest, in my response to Bob Amorosi’s comment to this article, I wrote the following call to arms:

I believe that the media we are sharing [on the energy Central Network] is giving us an emergent unconventional alternative that we need to approach on how to make it happen by telling elective officials what to do, just as other grassroots movement did it in the past in different circumstances. This is also an era of transformation, where leadership is of the utmost importance to resolve the anomaly of the obsolete business model of utilities winning rate cases to regulators, when customers can do it better for themselves if given choice under market competition.

The alternative is a network of engaged global citizens. Eamonn Kelly in his book "Powerful Times: rising to the challenges of our uncertain world," suggests that "Participating together, passionate people will continue to discover and fulfill their potential and exercise their individual and collective power in pursuit of a shared moral purpose."

Kelly adds "we can and must become a 'bigger we.' We have globalized the economy and culture, but we have not yet globalized our sense of ourselves; that lies in our better future... This will not be driven by national governments; it is not how they perceive their role. Neither will it be a priority of businesses small or large, even as they embrace the concept of moral wisdom; it is not their business. In fact, there is only one actor we can expect to promote the growing consciousness of a global self, and that is us: individuals, people, citizens. We have voice, we have passion, we have information, we have unprecedented power, and we have an incredible common stake - only the future of our emergent yet fragile civilization... In the elegant words of the late U.S. President Ronald Reagan, ‘If not us, who? If not now, when?’"

Shrinking the Regulator’s Jobs

There is a need for a shared vision to restructure the power industry, shrinking regulators jobs to price controls of the remaining transportation electric utilities and letting end-customers make their own investments and purchasing decisions of electricity. The shared vision needs to go to the public opinion so that high level political decisions are enabled to restructure the electricity industry and shrinking regulators jobs.

Shrinking the Regulator’s Jobs

By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity

Copyright © 2008 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. This article is an unedited, an uncorrected, draft material of The EWPC Textbook. Please write to javs@ieee.org to contact the author for any kind of engagement.

In a timely article, Tam Hunt asks What does $100 per barrel oil mean for us? As the market hit the $100.01 figure yesterday, I suggest that it means that it is about time to start to shrink utilities regulators jobs. I hope that after reading this, Tam is not longer "torn between [a] desire for fair rules to apply to all utilities, and [a] desire for local autonomy."

Just before the great depression of the 1930's, someone like Bob Amorosi (see some of the references under Tam’s article) probably had written "there is no other emerging industry in America to absorb the legions of lay off workers that would create." With his comment, I think Bob just might have signaled the high likelihood of another great depression scenario. At that time, the problem was a banking systemic risk and the solution a paradigm shift to go in favor of the second industrial revolution creative destruction. Presidential leadership was great at the time.

I contend that the problem now is an energy systemic risk and the solution in the electric sector is the EWPC paradigm shift, to go along with the third industrial revolution communication paradigm shift. Hierarchical top down restructuring leadership is missing yet, but we can help push it by letting evolve a networked bottom up shared vision.

The WSJ article referred by Jeff Presley, written by Paul Ingrassia, starts with "Our cities have been straining at their seams, ‘declares a full-page newspaper automotive advertisement.’ Traffic is jam-packed. Parking space is at a premium. And our suburbs have spread like wildfire. People are living farther from their work, driving more miles on crowded streets," reflects a systemic problem (well known at MIT) that is solved by mass transportation, as the personal car itself makes a vicious circle that increases energy waste more and more for societies.

In fact, there is at least another industry that is absorbing Detroit’s jobs – the electricity industry. Gerald B. Sheblé, writing on the Jan/Feb 2008 IEEE Power & Energy magazine, “noticed significant mass transportation developments in Portland Oregon; Nice, France; Minneapolis, Minnesota; and Saint Louis, Missouri…” Detroit jobs are already moving to electric power mass transportation jobs, meaning that we need to solve the electricity problem itself and the regulators are in the way.

Ingrassia’s Lesson Two: “Market forces, not government regulation, provide the most effective impetus…” is welcomed to shrink regulators’ job. As regulators are not longer able to represent the end-customers better than themselves in the third industrial revolution, demand integration to power system operation and control will enable efficient long run investments by all parties under EWPC.

Explaining the shift towards shrinking regulator’s jobs, MIT Professor Lester Thurow wrote in 2000 “In the process of globalization governments are losing many of their powers to regulate their economies. If firms don’t like one nation’s system of regulations, they just move their activities to different countries… Systems of government regulation are not taken as given but viewed as a selection of restaurants where one has to choose where one wants to eat based upon the menu offered.” It seems that the CPUC as many other regulators just don’t imagine to restructured themselves out their jobs. A shared vision needs to emerge for restructuring to take place aligned with globalization.

So, I am now convinced that FERC, the CPUC and the three largest California utilities actions were integral part of the natural systemic response that led to the vicious circle of the mistaken efforts that has had a large impact on the delay of restructuring worldwide. As you all know, I disagree with FERC chief that "Deregulation is here to stay,” unless they introduce the EWPC market architecture and design paradigm shift that leaves regulators with just price control over the electric transportation utility. As can be seen in the article Demand Integration is NOT the Province of Politics, state and federal governments have already come to a dead end with the many incremental extensions of the old vertically integrated utility paradigm.

In Don Giegler’s quote of Jordan, the "... disastrous restructuring of California's electricity industry and that artificially created market structures have many unintended consequences..." were all the time under FERC, CPUC and the three large California utilities, as can be seen in the EWPC article Slicing the Last of the Regulated Monopolies (the update to the article by Lester P. Silverman, a director of McKinsey & Company, on The New York Times of July 21st, 1996, is highly recommended reading for everyone):

“The California Public Utilities Commission issued a decision in December 1995 that made it official: the investor-owned electric utility industry in California will be restructured to allow for wholesale and retail competition beginning in 1998,” as it is reported in Barbara R. Barkovich & Dianne V. Hawk, "Charting a new course in California," IEEE Spectrum, July 1996, pp. 28-29.

Barkovich and Hawk, reported something Mr. Silverman didn’t know: "The debate in California has changed remarkably over the past year or two. Discussion now focuses not on whether retail competition or direct access is possible, but on how to make it happen. The three California investor-owned utilities affected by the commission's decision convened an industry working group, called the Western Power Exchange (Wepex) to address the issues related to implementing the new competitive retail market. Its responsibility has included making three filings to FERC by the end of April 1996, seeking [I am copying only the filing to break transmission and distribution, to keep native load and avoid competition]:

• A determination of the dividing line between transmission, over which the FERC has jurisdiction, and distribution, whose regulation is expected to be left to the states."

So, by not allowing retail competition was one of the key issues that delayed proper worldwide restructuring with the The BIG California LIE, whose summary 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.”

Now I update my mechanistic thinking with a systemic one, not to say that in the BIG California LIE, the CPUC and FERC also acted very irresponsibly. In fact, I take back that “the three big California utilities, that didn't care about the end-customers, acted very irresponsibly,” as it adds unnecessary confrontation. In fact, the Fifth Discipline explains that “We all tend to blame someone else… for our problems. System thinking shows us that there is no separate ‘other’; that” the CPUC, the California utilities, FERC, and the customers “… are part of a single system. The cure lies in your relationship with your ‘enemy.’”

Finally, lets’ look at Paul Ingrassia’s remaining lessons under EWPC:

Lesson One: “Incremental progress shouldn't be dismissed.” Agreed once a very clear shared vision, like that of EWPC paradigm shift is understood allowing high level leadership to take place.

Lesson Three: “New technology will require new infrastructure, presenting a chicken-or-egg problem,” that is solved by restructuring under EWPC and applying Lesson One.

It seems that the missing element is still some a top down action like the one by U.S. President Franklin D. Roosevelt or even GM’s President Mr. Cole that “had the guts and the clout” to resolve a car infrastructure issue. Now that oil is very costly, and global warming seems to be a great threat, the alternative I am proposing is to generate a worldwide network public opinion leadership or grassroots movement to try to tell elected officials what to do.

While remaining open to debate and dialogue to come up with the emergent shared vision, I suggest readers to browse the first 90 EWPC articles and select those of interest in the links First 45 EWPC Blog Articles and Second 45 EWPC Blog Articles.