Reform on Obama Address: Health Care 9; Education 1; Energy 0.

This post responds to the M.I.T. Technology Review Blog post What the Fed Can Learn from California's Energy Policy, By Katherine Bourzac. I contend that the Fed does not want to learn anything from California energy policy, because the state developed a flawed electricity reform in order to keep an “outdated regulatory system. It is time to put in place tough, new common-sense rules of the road so that our” energy “market rewards drive and innovation, and punishes short-cuts and abuse.” In those two quotes, I only change what President Obama said in his address to the joint session of Congress, by introducing the word energy, instead of financial. There is an urgent need for a real reform.

To support the need for awareness, I searched a transcript of Mr. Obama address to add the number of times that he said the word reform on the “three areas that are absolutely critical to our economic future: energy, health care, and education.” The score was 0, 9 and 1, respectively. The reason for the zero score in energy is a BIG LIE that originated in the California electricity reform, as can be seen inside the EWPC article Shared Vision: Consumer Driven Electricity System Reform.

While the large number of green jobs created in the last 30 years could be correct, the costs to create those jobs have been a lot higher than necessary because of regulated programs inefficiencies. By including the cost effective consumer driven reform, while going “line by line through the federal budget in order to eliminate wasteful and ineffective programs,” the Obama administration should expect to identify another “trillion dollars in savings over the next decade,” as a result of the reform.

A lot of the saving will be in many of the energy efficiency programs in the budget itself without the suggested reform. To learn how to implement the reform, please consider also the EWPC article How to Increase the Leverage of Stimulus Bill to Global Green Energy.

Shared Vision: Consumer Driven Electricity System Reform

Similar to the needed heath system reform, the Obama and the Fernández administrations can benefit all electric system stakeholders with a cost effective consumer driven reform.

Shared Vision: Consumer Driven Electricity System Reform

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

First posted in the GMH Blog, on February 25th, 2009.

Copyright © 2009 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 objective of this post is for readers to send this message to the Presidential Committees, in the U.S. and here, in support of this shared vision of a consumer driven electricity reform.

For the background of this article, this is also part of my second response to the founder of the Funglode Campus Virtual, Mr. Jan Herder, as part of the ongoing discussion Esperando Invitación del Comité Presidencial (please hit its link to read it). To get readers interested in sending the post, I will justify the need for such reform.

Both the Obama administration and that of President Fernandez have great opportunities to benefit from a necessary and urgent cost effective reform of the electricity industry. During the Bush administration, the key disruption was the Enron scandal, which was received here by President Mejia to enable the ongoing counter reform. The reason of the disruption was not what most people were made to believe; it was something else. Even though it’s excessive greed, Enron was not the underlying cause; the cause that pushed Enron, and also enabled the very expensive Madrid Agreement in the Dominican Republic, was a flawed wholesale market driven reform.

As may be seen in the EWPC article The BIG California LIE, I show that "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-customers, 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."

Going forward then, in the U.S. and the here in the Dominican Republic, the most important thing is to have an electricity system reform, similar to what Harvard’s professor Regina Herzlinger has been writing about the health system reform in the U.S. Dr. Herzlinger suggests that "of course you have to pay... the question is how much?," as Steve Bailey wrote one year ago in The Boston Glove article "How much is too much to pay?"

Mr Bailey added that "Herzlinger is the nation's leading advocate for consumer-driven healthcare reform - the belief that what we need is not more money in the system but consumers who have more power, more information, and more choice." Consumer-driven electricity reform, with exactly the same belief, is what should be the aim of a shared vision, which helps unleash what is explained in the article EWPC as a Timely Basic Innovation.

EWPC as a Timely Basic Innovation

As time goes by, an increasing number of people will agree that the EWPC creation is in fact a fundamental organizational innovation to restructure the global power industry to help enable a sustainable world.

EWPC as a Timely Basic Innovation

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

First posted in the GMH Blog, on February 22nd, 2009.

Copyright © 2009 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.

Xxxxxxxxxxxxxxxxxxxxxxxxx There is nothing more powerful than an idea
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx whose time has come.

Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Victor Hugo

Up to know, I have been writing about electricity without price control (EWPC) market architecture and design as a paradigm. It is a new paradigm for the power industry that has a very different center of attraction than that of the investor owned utilities (IOUs) paradigm, that served us so well in the Industrial Age, but that for all practical purposes its pervasive influence needs to end. From now on, I suggest that the EWPC creation will be recognized also as a basic innovation by an increasing number of people.

In chapter 5, “Never Doubt What One Person and a Small Group of Co-Conspirators Can Do,” of its book “The Necessary Revolution,” Peter Senge recalls:

… a timeless story of what historians call ‘basic innovations,’ fundamentals changes in technology and organization that create new industries, transform existing ones, and, over time reshape societies. Basic innovations – such as the emergence of electrification, the automobile, commercial air travel, digital computing, and most recently the Internet – involve not just a single new technology but a collection of new inventions, practices, distribution networks, businesses and business models, and shifts in personal and organizational thinking.

By reading closely to what Senge recalls as basic innovations, I recognized that EWPC is one of them. As any insight, which is the result of lateral thinking, the idea of EWPC as a basic innovation is now very easily explained. By becoming a systemic consultant, I have been emulating Senge´s suggestion of the Leader’s New Work [see chapter 15 of the revised edition of The Fifth Discipline] while EWPC emerged.

Quoting the first edition of The Fifth Discipline, the case of commercial air travel was mentioned in my 2005 rebuttal article An Alternative Business Case for Demand Response, where I wrote that:

The DC-10 [it was actually the DC-3] initiated commercial air travel at the time of the Great Depression, it happened when all required technologies became available, and were tightly integrated…. In that same sense, electric power systems will also “fly” reliably (a very low frequency and duration of crashes) and experience commercial quality electricity under complete deregulation [that later emerged as the EWPC reregulation], when Demand Response gets tightly integrated with AMI and other existing technologies under a proper market design. DR will enable the system to operate within the Normal Operating State, returning back as soon as possible from the Alert and Emergency States with Demand Response actions. This is poised to be the End-State of the electricity industry for the long run [I replaced ‘the long run’ later on to ‘quite some time.’]

As can be inferred from that rebuttal article, EWPC is an extension of the seminal work of the late M.I.T. professor Fred Charles Schweppe and his colleagues, which was recently recognized, once again, in the EWPC article I will Tell You Who is Going to Get the Power, from which the following August 2005 quote is taken:

Contrary to the belief that IEEE Spectrum was wrong, Professor Fred C. Schweppe, of MIT, brilliantly predicted a mayor tech breakthrough in electric power, when he said [in 1978] that “There is a good chance that by the year 2000 the term blackout (societal definition) will be considered to be a term out of the Dark Ages." The chance has been there all along, except that a powerful lobby has prevented it, by keeping the natural monopoly of distribution related or integrated with non monopoly retail marketing.

Going over the collection of more than 140 EWPC articles, that I claim each is a “holographic image from a different perspective of the whole EWPC market architecture and design paradigm shift,” it is easy to convince readers that EWPC has all the characteristics of a basic innovation. Most of those characteristics are specified in the single EWPC article The Sixth Disruptive Technology, whose summary states:

A set of 6 disruptive technologies can be identified “To do a better job of managing our dwindling energy resources…” AMI and the Smart Grid are the fourth and fifth disruptive technologies to allow a breakthrough paradigm of the power industry for the 21st Century, as the required technologies become available, and will be tightly integrated by business model innovations - the sixth disruptive technology - developed by 2GRs into a systemic superior solution. The first three disruptive technologies are demand response, distributed generation and storage, and energy efficiency.

The characteristics of “shifts in personal and organizational thinking,” mentioned above, are summarized by EWPC being a paradigm shift to transform the power industry away from the IOUs paradigm. An explanation of the paradigm shift can be found in the recent EWPC article To Dr. Chu: Align Stimulus to Clean Energy Reform, from which I quote:

It is well known that the IOUs paradigm has a strong inertia against energy efficiency… Its strong magnetic attraction perverse incentive cannot be sufficiently mitigated with artificial decoupling of profits and sales … Something else is needed to apply an urgent policy …

What is needed … is a paradigm shift to a new center of magnetic attraction with a very large inertia, where natural decoupling of profits and sales exists. That is the survival mechanism of competing retailers to get sales from customers that add value to them. The new paradigm replaces the magnetic attraction of the obsolete business model of having IOUs win cases to the regulator with the new source of attraction of competitive business models to be developed by Second Generation Retailers (2GRs) … aiming to the development of federal business model innovations.

One of the most important discoveries of EWPC is the need for applying the system architecture ultraquality imperative heuristic to the power system, leading to the policy of Reliability First, Economy Second (R1E2). The key deregulation flaw was in fact the destruction of the system by not recognizing the high importance of preserving a key element of the institutional memory of the IOUs paradigm, by shifting to an unstable E1R2 policy. As a representative to the policy is the EWPC article Free Market and Central Planning, Under R1E2, which is summarized as [I know it is not very humble, but that is how it emerged]:

This is my synthesis of the EWPC paradigm shift that maximizes social welfare. Although it is a non-trivial subject, it seems that many intelligent and important readers of earlier posts may just understand it. Maybe, I could get a prize for it, as it goes against the politically correct and the popular consensus of our time.

All along, I have spent a lot of patient time to try to develop EWPC first, and foremost, in my country, the Dominican Republic, which has a definite advantage to recoup very large coordination savings which are the result of an uncoordinated and vibrant Everyone for Himself (EFH) wide open market. That EFH market, as large as one half of the formal market, is also available in the U.S., as described in EWPC article Handling Smart Grid & Intelligent Utility High Complexity.

For that, and many other reasons, I have shown that DOE and non risk averse IOUs have all the justification they need to get involved in the development of EWPC. In fact, EWPC will be much less expensive that business as usual, as explained in the EWPC article How to Increase the Leverage of Stimulus Bill to Global Green Energy.

Recently, I was invited the Caribbean Regional Negotiating Machinery (CRNM) to participate in an Energy Services Consultation, where I proposed an offensive trade and investment service strategy, which is intended to capitalize the mentioned advantages of the Dominican Republic. Later on, I stressed the proposal by sending a message that included as an example the EWPC article Propelling the Power Industry to a Superior Solution Path. I promised then to try to develop the strategy by forming a virtuous team of Caribbean nationals.

I strongly and humbly believe that EWPC is in fact a fundamental organizational innovation to restructure the global power industry to help enable a sustainable world. Explaining the case of the U.S. Green Building Council (USGBC), in The Necessary Revolution, Senge quotes Jim Hartzfeld of Interface, who became its president saying “In retrospect, it’s crazy to think that a small group of people could think about transforming a whole industry that represents 8 percent of the U.S. GDP, but that’s exactly what we had in mind.” Similar to case of the USGBC which mutually reinforces EWPC, with all due respect, that’s exactly what I have had in mind all along.

In any case, as the EWPC system architect, I like to be able to interview, select, and work together in partnership, with a small group of global co-conspirators consultants’ insiders, that represent the larger whole system to form a virtuous EWPC team, to get sufficient resources for the start up phase, and to develop the needed theory and practice of profound knowledge. If you think you are such a remarkable consultant, and want to “cross the threshold,” as Joseph Jaworski defines it in his book Synchronicity, to the EWPC paradigm, please write to me at javs@ieee.org, by sending a brief statement of what you are able to do to help complete the documentation to transform the power industry.

Handling Smart Grid & Intelligent Utility High Complexity

Two recent articles deal on how to tackle the high complexity of Smart Grid & Intelligent Utility visionary iniatives. This article shows how to divide and conquer.

Handling Smart Grid & Intelligent Utility High Complexity

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

First posted in the GMH Blog, on February 21st, 2009.

Copyright © 2009 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.

Mr. Roger Gray is the author of the Jan/Feb 2009 edition of Intelligent Utility article Get Involved - The "Who" of Intelligent Initiatives - How you organize to implement your intelligent utility vision is more important than the smart grid system you pick. In fact, neither the intelligent utility nor the smart grid are single systems. Rather, intelligent utility is a vision implemented by strategy, business process, and system change.

This is my suggestion on how to start to handle the complexity of intelliget initiative:

Mr. Roger Gray

There are two key elements on your article that I selected:

1) "Involvement in the intelligent utility effort transcends the utility and goes beyond its walls."

2) "As utilities start to organize to plan and implement intelligent utility and smart grid projects, we need to recognize what is a fundamental weakness in our industry: marketing and the customer relationship."

What those two elements are begging for is an emergent whole system that goes beyond the walls of the utility, in which customers are able to make real choices. As you will see that is only possible by separating the grid from the enterprise, as explained next.

This is what I wrote under the article Hype Aside, Building the Smart Grid will require Both 'Top Down' and Bottom Up Approach," by Tim Wolf , Vice President, Plexus Research, an R. W. Beck Company:

Mr. Tim Wolf,

It seems to me that your article is a perfect contribution to continue with incremental extensions of the investor owned utilities (IOUs) paradigm. I gather that by reading "... developing a sound Smart Grid plan that transcends organizational boundaries within the utility and establishes at least a 5- to 10-year time horizon." After the Theory of the U was developed, we know how to tackle problems with very high complexity, you are in a fact restricting yourself to learn from the past.

As system architects do, why no transcend the boundaries of the utility itself to learn from the whole power system, that is trying to emerge since the 80s? The emergent future is a paradigm shift, which is discontinuous from the present. As mentioned in the EWPC article Propelling the Power Industry to a Superior Solution Path, Mr. Steve Pullins (and much earlier myself) most of the value creation is occurring after the meter, in a vibrant open market where many disruptive technologies are available.

Those disruptive technologies, however, are generating a very costly everyone for himself (EFH) market, that I started to mentioned after the IEEE Power & Energy article a Dominican strategy, as Dominican “customers have invested large amounts of money to reduce shortage costs individually.” As we look carefully, the same thing has been happening in the U.S., as can be seen in the post U.S Power Service is Regulated as a 3rd World Country, that says:

According to the Galvin Electricity Initiative, "the U.S. electric power system is designed and operated to meet a ‘3 nines’ reliability standard. This means that electric grid power is 99.97% reliable. While this sounds good in theory, in practice it translates to interruptions in the electricity supply that cost American consumers an estimated $150 billion a year… In other words, for every dollar spent on electricity, consumers are spending at least 50 cents on other goods and services to cover the costs of power failures...”

That is how large was already the vibrant U.S. EFH market when that quote was made. It is easy to know that as digital penetration increases, that competitive market will keep growing, while leaving behind an obsolete IOUs market. That is why Mr. Pullins findings lead to the awareness needed for IOUs investors to adopt as soon as possible the EWPC paradigm in their favor.

Sufices to say that the EWPC paradigm separates the whole emerging system into two subsystems that mutually reinforce each other. One open wholesale and retail market system and one regulated transportation (T&D) only system that should evolve into the smart grid. That is the vision.

Besides the above documents, among the more that 130 EWPC articles, I suggest to start reading this two:

1) The Sixth Disruptive Technology

2) Leadership Answers What to do First

Regards,

José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
EWPC System Architect

Taleb: Hay que Cambiar el Sistema

Jose Antonio Vanderhorst Silverio ha comentado el vídeo Roubini and Taleb discuss the crisis

Excelentes uugerencias que podríamos aplicar para cambiar el sistema del sector eléctrico

Roubini and Taleb tell CNBC Geithner will fail

Submitted by Tony Wikrent on Mon, 02/09/2009 - 21:12. financial collapse Macro Economics Nasem Taleb Nouriel Roubini TARP Wall Street rescue
CNBC has a ten-minute interview with Nouriel Roubini and Nasem Taleb in which Taleb said Geithner is "that class of people who have failed, and they're going to fail again."

The entire interview is an interesting example of how insane media people are. They kept trying to get Roubini and Taleb to provide investment recommendations, to which Roubini and Taleb all but said "You stupid horses asses, the world economy is collapsing! There's no investment that's safe right now, and there won't be any safe investments until the whole rotten system is replaced!"

One of the CNBC idiots even said that since such horrible bears as Roubini and Taleb have achieved "rock star status" it's a sure sign that the bottom has been reached. Honest! (I wish I could make this crap up, and make a living writing best-selling novels.)

Taleb especially kept trying to pound home the idea that the entire system is intellectually bankrupt as well as financially insolvent, and there is no solution other than to change the system. He also said we need to get rid of the people that failed. Incredibly, the ditzes of CNBC wanted to know who had failed. The first name out of Taleb's mouth was Ben Bernanke.

Like I wrote above, this is a classic example of main stream media insanity. And, it's also a good antidote to the euphoria that President Obama generated with his first press conference, which gave the nation proof positive that we finally have a chief executive able to coherently string together more than two sentences.

Geithner's show is tomorrow, and I suspect that it's going to be difficult to launch any criticism of what he unveils against the tide of good will the President created this evening.

How to Increase the Leverage of Stimulus Bill to Global Green Energy

By balancing the influence of supply side and demand side, it is possible to develop retail markets and wholesale markets that mutually reinforce each other to increase the leverage of the economic stimulus and to set a leadership example for the whole world.

How to Increase the Leverage of Stimulus Bill to Global Green Energy

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

First posted in the GMH Blog, on February 18th, 2009.

Copyright © 2009 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.

Kevin Bullis post The Stimulus Will be a Boon to Green Energy, dated Tuesday, February 17, 2009, is synthesized with “The law, to be signed today, will help renewable energy businesses and improve efficiency.”

There should be no doubt that a green revolution is in the making, with the stimulus bill missing only a highly leverage systemic paradigm shift to increase its global leverage, for which DOE, IOUs investors, and the global society in general, have strong arguments. Today’s old paradigm has a center of attraction that favors the supply side fossil fuels, but does not favors demand side renewable energy and energy efficiency.

The new paradigm, which is neutral to the supply side and the demand side, will exert a great leverage attraction to the demand side, just to balance the accumulated excesses on the supply side induced by the old paradigm. The leverage comes from the electricity without price control (EWPC) market architecture and design paradigm.

As can be seen in the EWPC article Propelling the Power Industry to a Superior Solution Path, the assumption that competitive wholesale markets are a prerequisite to efficient retail markets have been disproved. As can also be seen in the EWPC article, that assumption went against the warnings of the late M.I.T. professor Fred Charles Schweppe and his colleagues, back in the 80s. Dr. Schweppe, the leading power systems control authority at the time, suggested an “energy marketplace [that] involves the utility and its customers operating as partners,” which is the essence of the smart grid initiatives. EWPC is an extension of Schweppe’s the Spot Pricng of Electricty.

That flawed assumption had a global pervasive impact. With its origin in EPAct 92, the assumption got even into the purpose of the COMPETE Coalition, which advocates: “… well functioning, competitive wholesale electricity markets which enable state governments to implement retail electric service options best sited to their regional needs and which enable consumers to benefit from the best possible price and service." We all know that organized wholesale markets have undergone a series of costly incremental extensions under the attraction of the old paradigm.

EWPC extends Schweppe’s development by involving customers operating as partners of the utility to make a big difference: “Under EWPC, retail electric service is not simply enabled by wholesale electricity markets. Retail electric markets and wholesale electricity markets mutually reinforce each other to provide a fully functional [competitive] electric service. That is why EWPC is able to produce a superior solution path through innovation in retail electric service at the federal level.”

Please read the EWPC article to learn about the strong arguments that DOE, IOUs investors and the general public have in order to convince state governments to join them. The article summary says; “To raise the competitive balance of the power industry to a superior solution path, “public utility commissions … have to let go of their authority to regulate rates at the retail level.” PUCs need to let go in order to enact an EWPC based EPAct that opens to competition a federal wholesale and retail electricity market, creating investments, innovations, and jobs with a lot future.”

Síntesis Estado del Arte de Industria Eléctrica

Los intercambios que se han producido debajo del artículo Propelling the Power Industry to a Superior Solution Path, han generado una primera versión del Estado del Arte de la industria eléctrica. Lo que sigue es una adaptación de esa primera versión del mercado americano al dominicano. Los antecedentes aparecen en dicho articulo.

Sin tratar de ser exhaustivo, ni perfecto, el Estado del Arte de la industria eléctrica envuelve:

Una separación de la distribución física de la comercialización al detalle para crear valor a los inversionistas y los clientes;

Sin distribuidoras desagradables bajo la EWPC, la política primero confiabilidad, segundo economía, es la clave para reducir los precios. La EWPC ayudará a crear “inversiones, innovaciones, y puestos de trabajo con mucho futuro,” permitiendo que los clientes puedan alterar la forma en que compran electricidad, como Schweppe imaginó.

Los agentes privados no deben ignorar el mercado Sálvese Quien Pueda (SQP) donde la creación de valor está creciendo rápidamente ni pelear con los consumidores; el mercado SQP que está después del medidor está en la Zona Con Rentabilidad, mientras, para todos los propósitos prácticos, los agentes antes del medidor, están ya en la Zona Sin Rentabilidad y deslizándose muy rápido.

“Para mantenerse relevante ante los clientes,” los agentes privados con mentalidad competitiva, que están dispuestos a arriesgarse, están a favor de un mercado libre a nivel nacional, basado en los elementos esenciales de la EWPC; se requieren modelos de negocios innovadores para integrar el mercado SQP a la planificación, operación y control del sistema interconectado, para pasar a la Zona Con Rentabilidad.

Los mejores agentes privados con mentalidad monopólica, que no están dispuestos a arriesgarse, tratarán fusiones y adquisiciones de otras redes.

Tan pronto se promulgue una ley de electricidad basada en la EWPC, la industria eléctrica podrá ser propulsada por medio de un proceso a una meseta mucho más elevada.

Diario Libre: Mesa Energía hace 26 Propuestas Fueron Consensuadas en Cumbre

Tomado de Diario Libre

Buscan priorizar energía base a bajo costo con carbón mineral

SANTO DOMINGO. La mesa de electricidad, hidrocarburos y energía renovables consensuó una propuesta de 26 puntos durante la primera fase de la Cumbre por la Unidad Nacional Frente a la Crisis Mundial, donde se plantea entre otros temas la reducción gradual del subsidio energético a más tardar el 30 de junio del 2010.

La iniciativa procura disminuir los kilovatios de 700 a 200 y el desmonte del Programa de Reducción de Apagones (PRA) acogiendo para tales fines un cronograma que elaboró la Corporación Dominicana de Empresas Eléctricas Estatales (CDEEE).

El cronograma reduce la participación del PRA en el suministro total de energía desde un 12.21% hasta un 7.67% durante el 2009.

También se propuso la implementación de una tarifa técnica, calculando el valor agregado de distribución (VAD) de las Distribuidoras de Energía para ponerlo en ejecución a más tardar en junio del 2010.

En la mesa además hubo acuerdo en solicitar a la Comisión Presidencial para el Apoyo al Sector Eléctrico promover la contratación de proyectos para la reducción de pérdidas y la comercialización.

Asimismo, en modificar en un plazo no mayor de 90 días el reglamento de la Ley 57-07 para que se permita la venta de energía renovable a cualquier agente del mercado y no exclusivamente a la CDEEE. Buscan priorizar la energía base de bajo costo mediante la utilización de carbón mineral y gas natural.

"Declarar de alto interés nacional la conversión de las plantas de gas de San Pedro de Macorís para el Uso de gas natural", refiere una de las propuestas.

Durante tres semanas distintos representantes del empresariado y la sociedad civil presentaron propuestas que tienen una implicación presupuestaria de RD$26,800 millones. La primera etapa concluyó el pasado viernes 13 y para el próximo jueves 19 en la Pontificia Universidad Católica Madre y Maestra (PUCMM) de Santiago se celebrará una plenaria donde serán presentadas las propuestas consensuadas.

Noticia original

Propelling the Power Industry to a Superior Solution Path

To raise the competitive balance of the power industry to a superior solution path, “public utility commissions … have to let go of their authority to regulate rates at the retail level.” PUCs need to let go in order to enact an EWPC based EPAct that opens to competition a federal wholesale and retail electricity market, creating investments, innovations, and jobs with a lot future.

Propelling the Power Industry to a Superior Solution Path

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

First posted in the GMH Blog, on February 15th, 2009.

Copyright © 2009 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.

This article is a follow up that reinforces the essence of the EWPC article Just as Pogo, IOUs Found the Enemy. This is done while following a set of personal opinions provided a few weeks ago by Mr. James Carson. It can be inferred that a regulation deregulation debate is a costly distraction for all stakeholders, especially for IOUs.

To support even more that IOUs met the enemy, I found strong findings that have also been made at DOE, by a team led by Steve Pullings. A key example can be found in the article How Private Investment Is Pushing Utilities to the Edge, where Mr. Pullings gives three options on the trend that innovations and investment “are turning new companies into competitors for utility customer attention and dollars:”

Utilities may choose to fight this trend when it starts to show harm to the bottom line, but the fight may be with the consumer. It is not a good plan to make an enemy of your customer base while trying to retain them.

Utilities may choose to ignore this Edge investment movement. However, this can only be a short-term strategy until revenue loss forces reconsideration of this strategy.

Utilities may choose to get involved in the Edge Movement. While risky and not a typical space for utilities, it may be the only way to stay relevant to customers. This means new business models and new unregulated (probably) lines of business. Today, internal and regulatory policies do not recognize this need. Utilities could leverage this consumer interest in ET [energy technologies] with regulators.

All three options lead to the same conclusion: Just as Pogo, IOUs “met the enemy and he is us.” If the customer is not the enemy, just as Pogo they are. If they choose to ignore the trend, sooner or later they will see that they are their own enemy. However, as they recognize being their own enemy and decide to get involved, IOUs investors need to push for regulatory policies that enable the EWPC market architecture and design paradigm.

As readers may recall, under the EWPC article Breakthrough Suggestions for Today's Utilities Environments, Warren Causey wrote: “In order to adopt EWPC, public utility commissions would have to let go of their authority to regulate rates at the retail level. This is a political issue. PUCs are political entities. Commissioners pretend to believe they are "serving the public interest" by protecting the public from nasty old utilities.”

Most of the responses to Mr. Carson that I will provide below, can be found on the interchanges we had two years ago, under the article Playing with Fire - The 10 Tcf/year Supply Gap -- Part I, by Andrew Weissman, Editor-in-Chief & Publisher, EnergyBusinessWatch.com. Other elements can be found on my presentation at Carnegie Mellon University a few months later.

1. Fred C. Schweepe was one of the few holders of institutional memory.

Mr. Carson changed a bit his opinion about Schweppe as he read occasionally in the past two years. But my opinion is that Schweppe held institutional memory back in the 80s. As an example of key insights, Prof. Schweppe and his team made two critical warnings, which I posted on 12.20.06 under the Playing With Fire article:

The deregulation concept of this chapter is based on a supply and demand marketplace. Most of the other deregulation literature is oriented only to the supply side i.e., to deregulating generation without altering the way users buy electricity. We believe that deregulation which considerers only the supply side of the supply-demand equation is very dangerous and could have very negative results… A second major difference between this chapter and most of the rest of the deregulation literature lies in our concern that the economics and physical security of power systems not be destroyed or compromised.

In those days the warnings should have been considered as tall orders, but they were just ignored by using the wisdom of crowds (more below). Instead, an immense value destruction, not just for the U.S., but for the global power industry, as the dangerous and negative results came true, in addition to the destruction of the economics and physical security, as the policy economy first, reliability second (E1R2) was deployed with organized markets.

2. The separation of the Anti-System Utility

Mr. Carson opinion is that IOUs have changed their opinion considerably, but forgot to talk about the key issue: about the separation of the grid and the enterprise, as Warren Causey calls them, to enable deregulation that considers the demand side of the supply-demand equation as physical distribution is kept regulated, but retail gets deregulated (with prudential regulations). Readers can take a look at the EWPC article The Anti-System Utility, by hitting its hyperlink. This is part of what the article says:

When an organization operates as a system, the value of the whole is greater than sum of the value of its parts.

Reading carefully the article by Warren Causey, I come to the following conclusion:

The sum of the potential value of the grid plus the sum of the potential value of the enterprise is greater than the potential value of the utility, meaning that the utility instead of being organized as a system, it can be though as an anti-system.

What is the problem? Incumbent’s monopoly mindsets and political interference.

The monopoly utility operates a cash cow and so the priority is the enterprise, not the grid, nor customer service. In addition, the utility is also a political target. So grid’s investments are postponed, over and over.

What’s the solution? To restructure by a paradigm shift from VIUs to EWPC.

In order to make the industry robust, competitive and fully functional, EWPC separates the utility grid from the enterprise, with the former integrated to transmission and the latter open to competition. When that is done, the new utility becomes the transportation grid and several 2GRs (see link Second Generation Retailer - 2GR) take over a segment of the market by adding to their part of the enterprise the non-trivial functions of competition and integration of demand to the industry. Incumbents IOUs should decide whether they select one and only one of three activities (no Chinese walls allowed) of the restructured industry: generation, transportation, and retail.

As the grid is integrated with transmission, the resulting transportation utility budget is applied entirely to the modernization of the greater grid in a given area. As the regulated enterprise is transformed into several competing enterprises (aka Second Generation Retailers), the political target disappears, and investments, innovations, and jobs with a lot future are created.

So, as nasty old IOUs became regulated anti-utility they have no longer a chance to get involved. To get involved, IOUs investors will need to compete as 2GRs under an EWPC energy policy act (EPAct). Otherwise, they shoul become regulated wires only utilities.

3. Center attention in the essential systemic elements of the transformation.

While the devil is in the details, we can forget them as I explain now. Any professional system architect, which knows how to get the true systems’ requirements, will agree with me. The practice of system architecture is powerful because it allows separating the essential systemic elements from the many different incarnations. To restructure the power industry under EWPC only the true requirements are needed. In fact, active demand calls for active distribution. Passive demand and distribution was a hidden underlying assumption made by William Hogan when he claimed that “Retail Access is Easy, It’s Getting Wholesale Access that is Hard.” In slide 7 of the my presentation says:

The death of Fred Schweppe in 1988 and a misunderstanding by William Hogan in 1992 of Schweppe’s work on the energy marketplace were “small chance events early in the history of” deregulation that “tilt[ed] the competitive balance, ”to an inferior solution path, as W. Brian Arthur explained in general in his Scientific American, February 1990, article “Positive Feedbacks in the Economy.”

4. The policy reliability first, economy second (R1E2) is based on the essential ultraquality imperative

In the first point above, Schweppe and his colleagues had the “…concern that the economics and physical security of the power systems not be destroyed or compromised.” Just as the architeture and design of a nuclear power plant or a deep space vehicle, which needs to meet the ultraquality imperative, power system (R1) architecture and design can not be done by the wisdom of crouds as should be done polically for money system (E2) of the open market. To address the concern, there is a need for the R1E2 policy to lift the competitive balance to a superior solution path. Positive feedbacks are actually to be enabled by customer utility interactions.

5. Active Demand is another essential systemic element not considered at the outset of deregulation.

As explained in point 3, Dr. Hogan claim that retail access because he misunderstood Schweppe. In a post under the “Playing with Fire…” Energy Pulse article I quoted Schweppe et al saying that:

It turns out, that Schweppe’s said: "conventional metering is replaced by a Marketing Interface to Customer (MIC) which, in addition to measuring power usage, multiplies the usage by posted price and records the total cost [3]," which means that Homeostatic Utility Control was what we are now calling demand response.

The regulated “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…”

It is really a pity that Hogan misunderstood that Demand Response had been around longer than deregulation. That means that wholesale deregulation without retail deregulation has destroyed “the economics and physical security of the power systems.” In addition, under EWPC article Demand Integration is NOT the Province of Politics, it is only in the "2007 Assessment of Demand Response and Advanced Metering," that “the Federal Energy Regulatory Commission (FERC) has issued the incorporation of demand response to transmission planning.”

6. The excessive complexity of organized wholesale markets is the result of the restructuring mistake.

The way to avoid the extremely destructive and uncertain method is to apply system architecture to find the true requirements, as mentioned in point 3. By discovering the essential systemic elements it is possible to apply the lesson that Dee Hock, CEO Emeritus VISA International, gave us: “Simple, clear purpose and principles give rise to complex and intelligent behavior. Complex rules and regulations give rise to simple and stupid behavior.”

7. To forget distracting details, a system architect is needed

DOE and IOUs will agree that with the system architecture approach, we can forget the details by selecting a system architect to lead the effort of developing an attractive open federal market as suggested in the EWPC article To Dr. Chu: Align Stimulus to Clean Energy Reform.

Esperando Invitación del Comité Presidencial

Dr. Leonel Fernández, presidente de la República y del
Comité Presidencial para el Fortalecimiento del Sector Eléctrico

Señores asesores del referido Comité

Monseñor Agripino Núñez Collado, presidente del Consejo Económico y Social;
Lisandro Macarrulla, presidente del CONEP;
Juan Vicini Lluberes, vicepresidente del Grupo Vicini;
Roberto Bonetti, vicepresidente de MercaSID;
Celso Marranzini, dirigente empresarial;
José Luís Corripio, presidente del Grupo Corripio;
Félix García, presidente de Multimedios El Caribe y del Grupo Linda;
Secretario de Estado de Hacienda;
Contralor General de la República;
Secretario de Estado de Economía, Planificación y Desarrollo; y
Consultor Jurídico del Poder Ejecutivo.

CDEEE, secretario de dicho Comité

De mi más elevada consideración:

Como ha sido divulgado por la prensa, el próximo 27 de febrero, el Presidente Fernández anunciará las propuestas que acogerá el gobierno. En el caso de la electricidad, entiendo que lo hará con base a la sabiduría y el poder de sus asesores en el Comité Presidencial. Hoy visité el Hotel Dominican Fiesta para participar en la evaluación y encontré que la Mesa sobre Energía no estaba programada para sesionar.

Mi plan era presentar importantes inconsistencias, como, por ejemplo, las que identifiqué con las notas Efectos Secundarios de las Propuestas Consensuadas en la Mesa de Energía y La Capitalización Ofrece la Electricidad Más Cara. Es de notar, que la primera de las propuestas consensuadas en la referida Mesa les pasa el control a ustedes, lo cual podría muy bien explicar la razón de que dicha Mesa no sesionara. Así que espero que lean atentamente dichas ejemplos que corroboran la lección de Platón: “El principio es la parte más importante del trabajo,” que respalda mi solicitud de reunirme con ustedes en su primera reunión de trabajo.

Esas inconsistencias se explican porque en la reestructuración de los mercados eléctricos se cometió un error trascendental al principio de dicho proceso. Al ser seleccionado por la Federación Nacional de Comerciantes y Empresarios de la República Dominicana (Fenacerd) y el Consejo Dominicano de Detallistas de Provisiones (Codepro) como su vocero en la primera reunión de la Mesa sobre Energía elaboré la nota Propuesta Sector Comercial en Electricidad e Hidrocarburos y la introduce como una propuesta para el orden emergente. En consonancia con mi solicitud ante ustedes, en dicha propuesta incluí como una medida de corto plazo “designar un experto arquitecto de sistemas, quien seleccionará un equipo de consultores, para diseñar el proyecto de la electricidad sin apagones arbitrarios que resultará en la solución definitiva de la crisis del sector eléctrico.”

Ahora bien, para dar otro ejemplo de referido error trascendental, que se explica con los efectos secundarios y la información de que la capitalización lleva a una electricidad más cara, repito un párrafo de la nota Introducción a la Economía de los Servicios Eléctricos, que publiqué el día de Navidad del 2008, y que les remití a ustedes con el asunto, "RD Debería Ser Líder de la Economía de los Servicios Eléctricos," destacando que el orden vigente no tiene futuro. En respuesta, el Sr. José Luís Corripio me mostró su interés de que me invitaran.

Es evidente que las recomendaciones de Bernardo Vega están orientadas a que se siga con el orden vigente con sustanciales mejoras. Debe resultar evidente que el orden vigente no tiene futuro. Por eso, en la nota Solicitud a 1ra. Audiencia del Comité Presidencial para el Fortalecimiento del Sector Eléctrico, sigo la lección de Platón, de que “El principio es la parte más importante del trabajo,” para humildemente sugerir además los elementos de lo que en este artículo es reconocido como la economía de los servicios eléctricos. No debe quedar ninguna duda, que las primeras tareas en la economía de los servicios eléctrico será enfrentar el robo de electricidad de los clientes y también a los clientes. La restructuración del sector es sin lugar a dudas el mejor compromiso irreversible para sacar la política del mismo. En cuanto al mecanismo para pagar los mil millones de dólares que se deben, reitero lo que dice el artículo que me publicó el matutino El Caribe Renegociar con Visión de Futuro.

De nuevo es grato reconocer que ustedes, que representan al poder político y al poder económico del país, conforman un Comité Presidencial fuerte, coherente y equilibradamente representativo del futuro dominicano, lo cual es esencial para que dirijan los trabajos dentro de un proceso en que prime la sabiduría.

Quedando al total servicio de ustedes.

Con mucho aprecio, afecto, respeto y admiración, me despido de ustedes.

José Antonio Vanderhorst Silverio, Ph.D.
Consultor Sistémico: Electricidad
Propulsor de la EWPC
Semilla Orgánica del Grupo Millennium Hispaniola

La Capitalización Ofrece la Electricidad Más Cara

Exclamando que “¡Es hora de actuar. Es hora de exportar!,” varias organizaciones del sector privado, con elevado poder y de gran prestigio, proponen una lista de siete importantes y urgentes puntos, el primero de los cuáles es:

Suministro eléctrico eficiente: Elaborar un plan integral tomando como base la propuesta del Consejo Nacional de la Empresa Privada; un cambio de visión en el manejo del sector y el cumplimiento de la Ley General de Electricidad.

Con el merecido respeto que le tengo a cada una de esas organizaciones, humildemente expreso que ellas creen que la propuesta del CONEP es una solución inmediata al problema de electricidad y están lamentablemente en el proceso de hacerse daño a ellas mismas y a sus miembros. En verdad, hay una medida consensuadas en la Mesa sobre Energía que es superior a la propuesta del CONEP:

Convocar, 30 días después de concluida la Cumbre, a una jornada especial para revisar el modelo de capitalización y las posibilidades de integración vertical de la industria eléctrica a través de la creación de empresas publicas (no estatal, no privada), abiertas a la inversión en general.

No tengo ninguna duda de que la integración vertical es mucho más eficiente que la capitalización. De ser contratado, estoy en posibilidad de demostrarles el error de grandes proporciones que estaríamos cometiendo. Adicionalmente, si la integración vertical se realiza por medio de cooperativas, como, por ejemplo, las de NRECA, que no son estatales, ni privadas, en que el ánimo de lucro se reduce, abiertas también, por ejemplo, a la inversión de los fondos de pensión, los resultados serían muy superiores.

Tampoco tengo ninguna duda de que la integración vertical es ineficiente con relación a la electricidad sin control de precios (EWPC), como verán a continuación. La EWPC profundiza la reforma sin los graves defectos de ofrecer ganancias excesivas generadas por las liberaciones de los mercados a nivel global a los que tienen el poder de controlar el mercado.

Algunas personas confunden la EWPC con, por ejemplo, las reforma de los sectores eléctricos de Inglaterra y del estado de Texas, que incluyen la liberación de los mercados mayorista y minorista como lo hace la EWPC. Un informe reciente de los 10 años de historia de la liberación del mercado de Texas demuestra que los precios en Texas son superiores a los precios de los mercados similares con integración vertical, principalmente por los defectos y complejidad de las reglas y por que los clientes no participan activamente.

La historia recién mencionada refleja que, al igual que en Texas, las distorsiones en el mercado mayoristas dominicano son patentes. Aquí, en vez de recurrir a un comité de vigilancia de mercado, para contrarestar comportamientos anticompetitivos a causa de la deficiencia de reglas excesivamente complejas, lo mejor es profundizar la reforma para reducir dicha complejidad, reemplazando un mercado minorista administrado, por un mercado en que los clientes puedan participar activamente.

En Texas, lo que existe en el mercado minorista son detallistas que denomino de primera generación, que compiten solamente a base de precios. Con la EWPC, los detallistas de segunda generación concentran su labor en cooperar con sus clientes para reducir sus costos y/o aumentar el valor que le ofrece el servicio de electricidad. Eso solo es posible si se sustituye la regulación de control de precios por una regulación prudencial y una arquitectura y diseño de mercado adecuada.

En Texas, la reducción de los precios minoristas solo puede ocurrir a base de una guerra de precios, lo que no ha ocurrido y todo luce indicar que no va a ocurrir. Mientras en el mercado mayorista tejano ocurre una inestabilidad típica de los mercados mayoristas volátiles, como la que impulsó el Acuerdo de Madrid.

Esa intervención y otras intervenciones sucesivas importantes que le restan transparencia, de cuando en cuando, al mercado dominicano es lo que ha impedido que llegue la tan ansiada generación de bajo costo al país. En efecto, la combinación de al menos la incertidumbre de las intervenciones, dicho Acuerdo de Madrid y el establecimiento de un tope excesivamente bajo de los precios del mercado mayorista, ha mantenido cerrado para todos los propósitos prácticos el mercado mayorista.

Con las reglas claras y estables de la EWPC, el tope de los precios del mercado mayorista lo ponen los detallistas de segunda generación, con base al desarrollo de los recursos del lado de la demanda. Asimismo, contrario a la reforma dominicana y a la tejana, los precios del mercado spot no se fijan con base a la operación en tiempo real, en que los detallistas de segunda generación no tienen la posibilidad de colocar el referido tope. La gran inversión de plantas de emergencia e inversores es lo que le facilitará a los detallistas de segunda generación desarrollar sus modelos de negocio para completar el desarrollo de los recursos de la demanda para garantizar un servicio eléctrico de alta confiabilidad en el sistema interconectado.

Un servicio eléctrico nacional con elevada calidad de servicio, es la clave para atraer inversión extranjera al país en los sectores que mencionó el Embajador Fannin, el cual no es factible con la propuesta del CONEP, porque le generará un elevado costo de apagones a esos inversionistas. Al pagar por una energía de alta calidad, los sectores nacionales que no necesitan esos elevados niveles de calidad podrán acceder a los niveles de calidad que necesiten a precios relativamente menores. Es así como se generarán círculos virtuosos que nos ayudarán a promover la prosperidad.

El precio spot de la EWPC es para una electricidad del sistema altamente confiable que se programaría con una semana de anticipación. Es de esa forma que los detallistas de segunda generación ofrecen su oferta de precios horarios al igual que lo hacen los generadores. Los precios resultantes no son siempre simplemente los precios del cruce de la oferta y la demanda en cada hora, sino que se optimizan a nivel diario y semanal los rejuegos intertemporales para optimizar el despacho comprometido.

El mercado de balance en tiempo real servirá para que aquellos agentes del mercado que no cumplen sus compromisos sean deudores de aquellos que respondan por ellos. El resultado es que los precios en general serán inferiores a los de la integración vertical para la mayoría de la población, gracias a la eliminación del control de precios de la capitalización y de la integración vertical.

Es muy importante reconocer que la EWPC va a favor de la corriente de las tecnologías de información, mientras que la propuesta del CONEP y la integración vertical van en contra. La EWPC genera ahorros elevadísimos, al capitalizar las inversiones que han hecho los consumidores para contener los precios del mercado mayorista en los momentos en que el sistema podría de otra modo estar operándose en límites, que son aquellos donde ocurren los precios horarios más elevados y las mayores fallas del sistema interconectado. La EWPC va mucho más a favor de la corriente, en caso de que se impongan impuestos a las emanaciones de gases invernadero, en que el aumento de la eficiencia en el lado de la demanda cobra mucho más importancia de la que ya tiene hoy.

Las reglas de juego de la EWPC no solo ofrecen la solución definitiva a la crisis del sector eléctrico, sino y mucho más importante que ofrecen la solución global de los mercados eléctricos. Recientemente, presenté en una consulta organizada por el CARIFORO, sobre los servicios de energía en el Caribe, la oportunidad de generar una estrategia ofensiva de comercio exterior para liberar e integrar los mercados de servicios de energía de gas y electricidad de todo CARIFORO.

Al ser los pioneros del mundo en la liberación de los mercados eléctricos, podremos desarrollar empresas y recursos humanos que facilitarían mucho mejor al sector eléctrico sumarse a las cinco asociaciones firmantes del comunicado al país y a la autoridades para exclamar ¡Es hora de actuar. Es hora de exportar!

P.D.: 1) Favor de valorar esta nota asignándole un punta del 1 al 5, en que 1 es menor y 5 el mayor. 2) Igualmente si usted se considera un seguidor de estas notas , haga el favor de tomar menos de un minuto para inscribirse en la esquina superior izquierda de esta Bitácora Digital.

To Dr. Chu: Align Stimulus to Clean Energy Reform

A system architect should lead a high leverage clean energy reform transformation of the power industry for DOE to distribute as soon as possible the funds of the stimulus package. Dr. Steven Chu will be able to use the state’ financial delivery mechanisms with highest leverage with this advice for each state that is able to open competition at the federal market by introducing the EWPC paradigm.

To Dr. Chu: Align Stimulus to Clean Energy Reform

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

First posted in the GMH Blog, on January 26th, 2009.

Copyright © 2009 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 Department of Energy (DOE) will have a very large stimulus package that Dr. Steven Chu wants to distribute as soon as possible. One part of that stimulus should go to the smart grid. But the smart grid is something confusing and inefective under the status quo of the investor owned utilities (IOUs) paradigm. DOE is in the best position to pay for a well defined smart grid [1], as described in this advice.

Clean energy reform is certainly needed, as this is the right moment to start to end the vicious pervasiveness of fossil fuels with a lot of cash at hand [2, 3]. In this article Dr. Chu will find the bests clues he needs to pay for the smart grid. Now we know that IOUs know that they themselves are the enemy [4]. So what remains is convincing states governments to once and for all have their regulators let go the obsolete price control business model [5]. That can be done by using wisely the stimulus package one state government at a time.

It is well known that the IOUs paradigm has a strong inertia against energy efficiency [6]. Its strong magnetic attraction perverse incentive cannot be sufficiently mitigated with artificial decoupling of profits and sales [7]. Something else is needed to apply an urgent policy, like the 80-20 challenge that Peter Senge suggested [8]. Describing that challenge, Senge wrote “Though the details of these goals differ, their central message is the same: To stabilize CO2, in the atmosphere at levels that minimize the threat of catastrophic consequences will require a 60 to 80 percent reduction in emissions within the next two decades!”

What is needed to meet the 80-20 challenge is a paradigm shift to a new center of magnetic attraction with a very large inertia, where natural decoupling of profits and sales exists. That is the survival mechanism of competing retailers to get sales from customers that add value to them. The new paradigm replaces the magnetic attraction of the obsolete business model of having IOUs win cases to the regulator with the new source of attraction of competitive business models to be developed by Second Generation Retailers (2GRs) [9], aiming to the development of federal business model innovations.

The new paradigm is the electricity without price control (EWPC) market architecture and design, where the emergent power industry is separated into a state regulated transportation market, that takes the center stage, and the wholesale and retail open federal market, where business transactions will develop. The smart grid transportation (transmission and distribution) only utility (SGToU) [10] is the key development that interfaces with 2GRs’ Enterprise Solutions [11].

The open markets (i.e., week ahead) should regularly close during the parallel operations planning process and the firm commitments of supply and demand to produce a set of time (i.e., hourly), and space, reference spot prices schedules for a reliable electricity commodity. After the regular market closes, the SGToU takes control of the whole power system that goes beyond the power meter. During real time operation a balancing markets results for supply and demand deviations from the firm commitments. The balancing market results in the payment of economic transaction in the wholesale market for generators and 2GRs that deviate from their committed schedules to those that respond to said deviations.

If the stimulus package is to have enough effectiveness this is the time to have the states governments that want to receive funds to make commitments to shift from price control regulation to prudential regulations to open their retail markets to federal competition, by adopting the EWPC paradigm. Dr. Chu has an opportunity to use the funds through the states financial delivery mechanism with highest leverage with this advice. The electricity reform effort should be lead by a single system architech available to all state goverments.

References:

[1] Will Anyone Pay for the SmartGrid?

[2] The End of the Vicious Pervasive Fossil Fuels is Near

[3] To Cut Carbon ASAP the IOU Paradigm Must End

[4] Just as Pogo, IOUs Found the Enemy

[5] Will Dr. Chu Turn Around the Power Industry?

[6] Steven Chu: Four Years of Low Hanging Fruits

[7] Forget Decoupling Under Price Controls

[8] Peter Senge et al, The Necessary Revolution: How individuals and organizations are working together to create a sustainable world, Doubleday Press, 2008.

[9] Second Generation Retailers

[10] The Emerging SmartGrid

[11] K2007 Retailers’ Enterprise Solutions

Efectos Secundarios de las Propuestas Consensuadas en la Mesa de Energía

Por José Antonio Vanderhorst Silverio, Ph.D.
Consultor Sistémico
Arquitecto del Sistema EWPC
Semilla Orgánica del GMH
8 de febrero, 2009

El defecto principal del modelo de capitalización es la distribuidora, que supone un estado intermedio inestable de cosas, en vías de desaparecer en la medida en que se reducen los clientes regulados a través del tiempo, pero que en realidad no ocurre por incentivos perversos. Al igual que el modelo verticalmente integrado, el modelo de capitalización incentiva el desarrollo de los recursos de la oferta (por ejemplo, inversiones en generación) y desincentiva de forma perversa el desarrollo de los recursos del lado de la demanda (por ejemplo, inversiones en eficiencia energética que son más rentables).

El resultado de un siglo de dependencia a nivel global con modelos como esos es un elevado desarrollo en los recursos del lado de la oferta y un elevado subdesarrollo en los del lado de la demanda. Ese desequilibrio hace mucho más costoso el servicio de electricidad, si se suman el costo de abastecimiento de las facturas (lo que se pretende reducir con energía barata) y el costo de desabastecimiento en que incurren los consumidores (el efecto secundario de la energía barata que sale cara).

Se necesita un modelo equilibrado (un estado final de cosas) que incentive por igual el desarrollo de los recursos de la oferta y el desarrollo de los recursos del lado de la demanda. Debe ser evidente que por el gran subdesarrollo acumulado en el lado de la demanda, habrá mucho mayores oportunidades de negocio en el desarrollo de los recursos del lado de la demanda con vocación a un nuevo conjunto de reglas de juego valiosas en el mercado global que sirva como un proyecto desarrollista.

Cada una de las propuestas consensuadas en la Mesa sobre Energía, aparenta ser el resultado de un pensamiento mecánico con miras a obtener un efecto primario positivo, sin considerar los efectos secundarios que pueden malograr el resultado del conjunto. Así, por ejemplo, al proponer la medida de “CONVOCAR, 30 DIAS DESPUES DE CONCLUIDA LA CUMBRE, A UNA JORNADA ESPECIAL PARA REVISAR EL MODELO DE CAPITALIZACION Y LAS POSIBILIDADES DE INTEGRACION VERTICAL DE LA INDUSTRIA ELECTRICA A TRAVES DE LA CREACION DE EMPRESAS PUBLICAS (NO ESTATAL, NO PRIVADA), ABIERTAS A LA INVERSION EN GENERAL” se sigue manteniendo el desequilibrio en el modelo y con ello sus perniciosos efectos secundarios.

Es absolutamente necesario considerar también en esa Jornada Especial el cambio hacia un modelo que separe la comercialización de electricidad para incentivar el desarrollo de modelos de negocios que incentiven el desarrollo de los recursos de la demanda, facilitando la competencia con la oferta al por mayor y entre los comercializadores al detalle. De adoptarse un cambio de modelo a uno que incentive el desarrollo de los recursos de la demanda en que desaparece la distribuidora, la gran mayoría de las propuestas consensuadas necesitarían ser evaluadas de nuevo por los participantes en la Mesa de Trabajo sobre Energía.

Reconociendo que participamos de un mundo cada vez más interdependiente, es necesario también que se consideren medidas ofensivas de comercio exterior que incentiven también el desarrollo de los recursos de la demanda y desincentiven el uso de los combustibles fósiles, de forma que la industria y el comercio dominicanos sean relativamente más competitivos. La energía aparentemente barata saldrá muy cara si el protocolo post Kyoto produce los resultados esperados.

Un Consenso Crucial para la Cumbre: el Reto Global 80-20

Por José Antonio Vanderhorst Silverio, Ph.D.
Consultor Sistémico
Arquitecto del Sistema EWPC
Semilla Orgánica del GMH
7 de febrero, 2009

Los miembros de la Mesa de Trabajo sobre Energía (Electricidad, Hidrocarburos y Energía Renovable) no están trabajando juntos para colaborar en la creación de un mundo sostenible, como sugiere Peter Senge en su nuevo libro “The Necessary Revolution” (La Revolución Necesaria). Senge fue nombrado como uno de 24 personas que han “tenido la mayor influencia en estrategia de negocios en el último siglo,” por el Journal of Business Strategy.

Todo lo contrario, están atrincherado y por eso tienen una estrategia para defender el orden establecido. Están trabajando resignados como isleños, sin darse cuenta de la verdadera realidad de un orden global emergente. Según Senge, “negocios, dominados por mucho tiempo en las industrias minera y de minerales, abogan ahora por las inversiones en energías renovables, como el viento y la solar.”

La Mesa de Trabajo de Energía está concentrada en arreglos rápidos, como los que se hicieron en las sillas del Titanic que en definitiva se hundió. Al tratar los temas por partes, el gobierno, parece estar tratando de reducir la presión que enfrenta a lo amplio de la sociedad dominicana con toda una serie de arreglos rápidos, en vez de concentrar la atención en unas pocas soluciones fundamentales, como lo es la del sector eléctrico con miras participar de manera activa en el orden global emergente. Senge afirma que “si vemos cada problema – sea falta de agua, cambio climático o la pobreza – como separados, y tratamos cada uno de forma separada, las soluciones a las que llegaremos serán de corto plazo, a menudo oportunistas, “arreglos rápidos,” que no enfrentan los desbalances profundos” sociales y ambientales.

Senge introduce el caso de la urgencia del orden global emergente con el reto 80-20: reducir las emisiones de carbono en 80 por ciento en 20 años. Se trata en pocas palabras del fin de la Era Industrial, que se ha convertido en una burbuja que está al punto de explotar. Senge explica que “lograr esto requerirá un mar de cambios en la clase de energía que usamos, los carros que manejamos, los edificios en que vivimos y trabajamos, las ciudades que diseñamos, y las formas en que la gente y los bienes se mueven alrededor del mundo, así como otros cambios que nadie puede siquiera adivinar.”

Un consenso nacional para enfrentar el reto 80-20 debería ser muy fácil de lograr si estamos dispuestos a cambiar nuestra forma de pensar. La transición hacia el 80-20 debe restarle rápidamente competitividad a las exportaciones de muchos países que han venido contaminando el planeta, haciendo que negocios locales sean relativamente más competitivos. Al mismo tiempo, la reducción en la acidez de los mares hará que nuestros corales dejen de ser destruidos y la incidencia de enfermedades respiratorias deje de repercutir como lo hace en el bolsillo de los pobres.

Ayer no participé en la Mesa de Trabajo, porque regresaba de una importante reunión de consulta entre interesados sobre los servicios de energía que tuvo lugar en Trinidad, a la que me invitó la Maquinaria Regional de Negociaciones del Caribe (CNRM por sus siglas en inglés). En ella presenté la EWPC como una estrategia ofensiva de comercio exterior, que sería presentada ante la Organización Mundial del Comercio (OMC), para integrar y liberar el gran mercado de servicios energéticos del CARIFORUM. Orientada al orden emergente, la estrategia no solo se concentra en asegurar los derechos de propiedad de los inversionistas, sino también y con igual intensidad asegurar en la OMC los derechos de propiedad de los consumidores que también podrán participar como productores. A mi regreso compré el nuevo libro de Senge y lo empecé a leer.

Por todo lo anterior, el libro de Senge debería ser de estudio y aplicación obligatoria para los directivos de las Mesas de Trabajo de la Cumbre. Al respecto, para contribuir en la creación de un mundo sostenible, sugiero suspender los trabajos hasta tanto dichos directivos dominen las enseñanzas del libro.

Hoy Digital: Abogan en Cumbre por Mejor Servicio Eléctrico

2 Febrero 2009, 10:17 PM

Sectores del comercio objetan apagones arbitrarios

Escrito por: MAYELIN ACOSTA GUZMÁN (m.acosta@hoy.com.do)

Instituciones que agrupan a sectores comerciales presentaron en la Cumbre por la Unidad una propuesta para lograr un servicio eléctrico sin apagones arbitrarios.

La Federación Nacional de Comerciantes y Empresarios de la República Dominicana (Fenacerd) y el Consejo Dominicano de Detallistas de Provisiones (Codepro) explicaron que la misma busca que todos los apagones sean compensados para asegurar que cada cliente pueda tener un servicio de menor costo y/o máximo valor agregado. Esta se basa en una transformación integral del sector en su conjunto, con alcance interdependiente a corto, mediano y largo plazo.

Entre las acciones a realizar a corto plazo se encuentra designar un experto y equipo de consultores para diseñar el proyecto de la electricidad sin apagones arbitrarios que resultará en la solución definitiva de la crisis del sector eléctrico.

También iniciar la compensación de los apagones, definiendo una nueva categoría de Servicio Eléctrico Con Seguro que los clientes podrán elegir libremente y publicar sus tarifas en función del circuito a que corresponda.

Noticia original

¿Harán Falta Líderes Visionarios?

Por José Antonio Vanderhorst Silverio, Ph.D.
Consultor Sistémico
Arquitecto del Sistema EWPC
Semilla Orgánica del GMH

Con la nota Agreguemos Valor a Cumbre de “Fuerzas Vivas”, traté de introducir el pensamiento sistémico a ese proceso. No obstante, el sistema diseñado e implantado en la primera reunión de la Mesa de Trabajo sobre electricidad, hidrocarburos y energía renovable, parece basarse en el pensamiento mecánico.

Dicho sistema consistió en separar el corto plazo de los mediano y largo plazos, concentrando la atención en medidas cortoplacistas para enfrentar la coyuntura de crisis y posiblemente darle ventajas al status quo al cerrarle el paso por ahora a las propuestas visionarias. Frente a otra idea de concentrarnos en el corto plazo y no pedirle demás a la cumbre, la nota Respuesta Editorial del Listín Diario: Salgamos del Subdesarrollo iba en el mismo sentido, aunque ahora parece que los otros dos plazos van después del 27 de febrero, cuando quizás sea muy tarde. Hay también otra versión mucho más preocupante y es que van a separar los corto y mediano plazos del largo plazo.

Por eso, de esa última nota resalto el párrafo que todavía aplica a separar en lo inmediato el largo plazo:

Por lo anterior, no importa si la Cumbre “fue convocada para medidas puntuales, para dar respuesta a la crisis económica mundial con acciones concretas que puedan gravitar a lo largo de este año.” Lo que importa es la necesidad de la transformación, en vez de ser simplemente “un ensayo para un ejercicio mayor y más profundo de diálogo y concertación, en el futuro.” Una vez acordado el enfoque sistémico de conocimiento profundo, resultará evidente responder la pregunta de la nota ¿Será la Reforma Constitucional Anti-sistémica? para poder aplicar el cuarto de los siete consejos.”

Dichos consejos aparecen en la nota “7 Consejos a la Cumbre de las “Fuerzas Vivas”. Es así que es fundamental adoptar la necesaria transformación visionaria hacia implantar el sistema de conocimiento profundo, que se explica en “The New Economics: For Industry, Government, Education.” El site resumido.com destaca:

En este libro, que marca el epílogo de su carrera, Deming introduce su Sistema de Conocimiento Profundo. El sistema consiste de cuatro aspectos: - Entender el sistema.- Teoría del conocimiento.- Entender las variaciones.- Psicología.Se trata de un sistema basado en la cooperación (en lugar de en la competencia), que ayuda a la gente a disfrutar del trabajo y del aprendizaje, a la vez que trae éxito a largo plazo en el mercado. .Escrito en 1993, poco antes de su fallecimiento, ofrece una perspectiva única sobre un momento crucial en la historia económica de Estados Unidos: el cambio hacia la economía basada en el conocimiento.

Asimismo, en el discurso de orden en la XLI graduación ordinaria de la Universidad APEC (Unapec) el Rector, Justo Pedro Castellanos Khouri, explicó las razones del éxito del Plan de Nación Irlandés, diciendo:

El punto de partida del denominado “milagro celta” es, sin dudas, el gran acuerdo nacional suscrito en 1987 entre el sector público, el sector privado y el liderazgo obrero, que no se limitó a enfrentar una coyuntura de crisis, como era aquella en la que se firmó, sino que con amplitud de miras y grandes dosis de responsabilidad, confianza y generosidad definió el país que querían y por el cual apostarían en los próximos decenios.

David Lovegrove, Director Divisional del International Development Ireland (IDI), aporta datos relevantes sobre la historia y las características del acuerdo. Rememora cómo, previo al acuerdo, encharcados en la crisis, “todo el mundo le echaba la culpa a todo el mundo. Los empleadores culpaban a los sindicatos, los sindicatos, al gobierno, y este, a los agricultores. Todos estaban apuntando a un culpable”; y cómo en la hondura del colapso, no otro que el Primer Ministro llamó la atención del país en torno a la gravedad de la situación, tensó las fuerzas nacionales señalando las posibilidades existentes y convocó al liderazgo irlandés y los sentó en una misma mesa a negociar. “Lo cierto es –cuenta Lovegrove- que fuimos terriblemente afortunados de tener a líderes visionarios. (…) Todos los que se sentaron a esa mesa eran gente de visión (…). Llegaron a un acuerdo sin precedentes en la historia del país, casi sin precedentes en el mundo. Todos los actores sacrificaron mucho y aceptaron muy poco a cambio (…).

De todo el esfuerzo visionario que se ha trasparentado en el EWPC Blog, en la Bitácora Digital del GMH y en los intensos intercambios que de tiempo en tiempo se han realizado desde el año 2005, es evidente que en un Acuerdo de Nación tenemos el potencial para hacer una verdadera transformación en el sector eléctrico, que le de solución definitiva a la crisis de electricidad y le genere amplias oportunidades de desarrollo a la Nación, al profundizar la reforma, enfrentar las trabas e impulsar una vigorosa inversión.

Como se puede comprobar, el primer sector que está preparado para aplicar el sistema de desarrollo profundo es el sector eléctrico. Apliquemos la sabiduría que Deming nos legó para amplificar el poder de nuestros cerebros de forma individual y colectiva, para ajustarnos a las nuevas circunstancias, como propuso Eamonn Kelly en su libro “Powerful Times: Rising to the Challenge of Our Uncertain World.”

Propuesta Sector Comercial en Electricidad e Hidrocarburos

Propuesta del sector comercial de la electricidad sin apagones arbitrarios. Todos los apagones serán compensados para asegurar que cada cliente pueda tener un servicio de menor costo y/o máximo valor agregado. Este se basa en una transformación integral del sector en su conjunto, con alcance interdependiente a corto, mediano y largo plazos.

A largo plazo: consolidar la transformación del sector eléctrico a uno en que, salvo contadas excepciones, todos los clientes sean clientes libres (no regulados) que puedan comprar el servicio al mejor postor con base a un amplio rango de prestaciones de calidad, seguridad, confiabilidad y disponibilidad, entre los límites del menor costo y el mayor valor agregado que le genere el máximo bienestar.

A mediano plazo: profundizar la reforma por medio de una transición para desarrollar e implantar la transformación de uno con muchos clientes regulados que están expuestos a apagones arbitrarios fruto del control de precios y pocos clientes libres (no regulados) sin apagones arbitrarios a uno en que sea cada vez más focalizado con clientes regulados sujetos a apagones arbitrarios y cada vez más clientes libres sin apagones arbitrarios.

A mediano plazo: para ofrecer un servicio sin apagones arbitrarios, separar las distribuidoras en distribución física y comercialización. Abrir comercialización a la competencia y que sean los comercializadores que asuman los riesgos de obsolescencia en la compra de los medidores.

A corto plazo: designar un experto arquitecto de sistemas, quien seleccionará un equipo de consultores, para diseñar el proyecto de la electricidad sin apagones arbitrarios que resultará en la solución definitiva de la crisis del sector eléctrico.

A corto plazo: iniciar la compensación de los apagones, definiendo una nueva categoría de Servicio Eléctrico Con Seguro que los clientes podrán elegir libremente y publicar sus tarifas en función del circuito que corresponda. A los clientes que opten por esa clase de servicio se les compensarán los apagones. La tarifa del seguro se irá reduciendo en la medida que aumenten los cobros y se reduzcan las pérdidas de los circuitos.

Agreguemos Valor a Cumbre de “Fuerzas Vivas”

Sin aún conocer los detalles más íntimos del diseño y la dinámica de la logística del sistema de trabajo, las cosas aparentan estar tomando un curso positivo. Aunque la realidad, según Peter Koestenbaum significa no hacerse ilusiones, la verdad es que con gran habilidad política en respuesta al justo reclamo de muchas organizaciones, el Presidente Fernández ha pospuesto el conocimiento a la reforma constitucional al menos hasta el 27 de febrero. Esperamos que el Poder Legislativo opere perfectamente alineado y en sincronicidad con el Poder Ejecutivo, para lograr el máximo resultado.

Si cada una de las siete Mesas de Trabajo, que participarán en la Cumbre por la Unidad Nacional Frente a la Crisis Económica Mundial, hace un trabajo eficaz que identifique no solo las metas, sino también los medios requeridos para un sistema funcione bien, y el Estado dominicano se compromete a cumplirlo y los sucesivos gobiernos lo cumplen, la República Dominicana habrá dado un paso gigante hacia el logro de los objetivos planteados.

Desde el punto sistémico, el logro podría ser mucho mayor si se comprende que en las interrelaciones entre las Mesas de Trabajo es donde se puede agregar el mayor valor. Todo esto se basa en la idea de que el valor que agrega un sistema por encima de la suma de los aportes de las partes, proviene de las interacciones entre las partes. Esa idea, es mucha más fácil aplicación al interior de las Mesas de Trabajo mismas. Si no se da el paso para definir los interfases entre las 7 mesas de trabajo, se perdería una magnifica oportunidad para el éxito de la Cumbre.

A nivel práctico, aconsejo que en cada una de las siete mesas se produzca dos documentos de interface. Uno sobre lo que le sugieren potenciales aportes a las demás 6 mesas y otro donde sugieren lo que necesitan de ellas. No es necesario que hayan seis interfases. En realidad se deben concentrar en aquellos que realmente tengan el potencial de agregar valor. Asimismo, antes de la plenaria, los equipos directivos de las Mesas de Trabajo, se reunirán para cosechar los resultados.

José Antonio Vanderhorst Silverio, Ph.D.
Consultor Sistémico
Semilla Orgánica del GMH

Just as Pogo, IOUs Found the Enemy

Just as everybody else, power industry investors win by changing their IOUs paradigm mental model. Well in agreement with the insights of three DOE’s Electricity Advisory Committee reports, a transformation to the end-state of the power industry, for quite some time, is the EWPC paradigm that allows the application of two crucial socioeconomic insights.

Just as Pogo, IOUs Found the Enemy

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

First posted in the GMH Blog, on January 26th, 2009.

Copyright © 2009 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.

This paper is a follow up of the EWPC article Will Anyone Pay for the SmartGrid?, which “… is an invitation to readers to comment about the application of two social economists’ insights about the IOUs and EWPC paradigms.” Only two very intelligent and important persons had the courage to respond to the original invitation, and it seems, that for all practical purposes, that was enough to complement all of the others persons whose questions I have responded since the end of 2005. The lessons learned could be readily applied by Dr. Steven Chu to end the debate and get the industry stakeholders agree to open and transform the power markets.

We will also benefit from the use of the timely input of Mark Goldes’ post DOE report paints bleak picture of our electric future, which summarizes John Timmer’s article with the same name. Mr. Timmer’s starts with “There's a long tradition of using Fridays to release reports you'd rather not see attract attention, and the Department of Energy [DOE] has used the last Friday of the Bush Administration to release a big one. Its Electricity Advisory Committee [EAC], composed primarily of power industry executives, has released a series of reports on the future of the US electric grid.”

In what follows, I will be using information from the three reports: 1) “Keeping the Lights On in a New World;” 2) “Smart Grid: Enabler of the New Economy;” and 3) “Bottling Electricity: Storage as a Strategic Tool for Managing Variability and Capacity Concerns in the Modern Grid.” I will refer to them as the first, the second, and the third reports, respectively. It is easy to highlight that in the titles the pairs of words “New World,” New Economy,” and “Modern Grid” suggest an emerging transformation of the whole power industry away from “magnetic forces” of the “Old World,” the “Old Economy,” and the “Not Modern” IOUs paradigm.

The first person to correspond to the invitation was David Katz, who gave us one great input about “Bright” Green Buildings (BGB). Those BGBs are waiting for the needed transformation of the power industry. In my response, I identified a void in what I now say is the presence of an anti-system. The insight is that it is no a system, as the value destruction is rampant, as will be explained soon. In addition, I responded how to take care of the void with EWPC paradigm.

This is well in agreement with the EWPC article The Anti-System Utility, which is summarized as:

Vertically integrated utilities don't operate as a system because of a monopoly mindset of incumbents’ investor owned utilities and political interference. To operate as a system, a paradigm shift to EWPC is required to offer customers competitive services and to neutralize political interference.

The insight about the rampant value destruction is confirmed on page 7 of the first EAC report, that repeats what I quoted in the GMH post U.S Power Service is Regulated as a 3rd World Country, saying that:

According to the Galvin Electricity Initiative, ‘the U.S. electric power system is designed and operated to meet a ‘3 nines’ reliability standard. This means that electric grid power is 99.97% reliable. While this sounds good in theory, in practice it translates to interruptions in the electricity supply that cost American consumers an estimated $150 billion a year.

Missing from that quote is that the Galvin Electricity Initiative also wrote that “… In other words, for every dollar spent on electricity, consumers are spending at least 50 cents on other goods and services to cover the costs of power failures,” which confirms the anti-system conclusion or, better yet, as the late W. Edwards Deming would call it “the destruction of the system.”

The second person that responded to the invitation was Mr. James Carson. I recall that at the end of 2006, he wrote: “My intention is not to convince Professor Banks. My intention is to challenge his assertions with which I disagree. Thousands of people read these forums, and I think it is a bad idea for them to get the impression that Professor Banks reflects the prevailing consensus. Frankly, I expected a more spirited clash. He merely makes pronouncements with little support and fails to respond to my rejoinders.”

While the interchanges between us are different, my respectful intention is also not to convince IOUs or Mr. Carson, but in addition to highlight something completely different. The prevailing consensus, which is the incremental extensions of the IOUs paradigm are destructive.

Even though the above explanations of the need for transformation should be sufficient, I want say that I don’t know everything about the power industry, even as I have been involved in it for more than 40 years. Nevertheless, I like to stress that I know what I am writing about when it relates to the obsolete IOUs and the emergent EWPC paradigms.

It should not, by any means, be apparent that I am writing “out of ignorance of how the North American power markets actually operate,” as Mr. Carson wants to make readers believe. As a self appointed systemic consultant on electricity, I am going further than that. I am writing about how those markets should be structured to operate well. In that light, it is important to learn that this is not the first time that Mr. Carson tries to cast doubts in the minds of readers. Just one example should suffice.

On January 3rd, 2007, after many debate and dialogue interchanges, Mr. Carson tried to show that he knew what he was talking about the power industry, when I had proposed to show how relevant institutional memory was for PJM. That interchange took place under the article Playing with Fire - The 10 Tcf/year Supply Gap -- Part I, by Andrew Weissman, Editor-in-Chief & Publisher, EnergyBusinessWatch.com. This is part of what he wrote on that day quoting me:

[José Antonio Item #2.] PJM was involved in a large blackout, I believe in 1967. That explains why they played it safe and kept their vertical integration institutional memory quite well.

James: Since New York has had more problems with blackouts than PJM, why did their institutional memory fail? Also, PJM was not a unified control area in 1967. It would not become that for thirty years. PJM as an organization had no such institutional memory.

[José Antonio Item #3.] FERC tried to used them as an institutional memory bridge with SMD, but was unsuccessful.

James: And your basis for making this claim is WHAT? Why was it only PJM that retained that memory? New York, New England and Canada have never experienced blackouts? Why is PJM different?

This is what I wrote on the following day:

Responding your second and third items, the PJM Timeline shows the long institutional history of PJM, which begin in 1927 with PA and NJ, and became PJM Interconnection in 1956. The NYISO is an outgrowth of the New York Power Pool, formed by New York’s eight largest utilities following the Northeast Blackout of 1965. The Power Pool combined the power generation and technical resources of its members to create an organization committed to the reliable, safe and efficient operation of the electric system.

Did Mr. Carson know what he was talking about? Instead of admitting he was wrong, as I would do, and as I have done earlier, he just fled the generative dialogue.

Under the EWPC article about the socioeconomic insights he keeps debating, trying to prove that a transformation of the power industry has already occurred, while I insist that the incremental changes in the industry have the IOUs paradigm alive and well and that a transformation is waiting to happen towards the emergent EWPC paradigm. This is where Mr. Timmer’s conclusion “the basic take-home is that we can't afford another 30 years of talk without a coherent plan of action” Is highly valuable. As the world can not afford it either, there is a high risk of IOUs getting well behind.

The power industry reports are in fact signaling the need for a transformation. Mr. Timmer’s interpretation of the main (first) report also helps infer that transformation has not occurred as he wrote that “overall evaluation that's badly off the administration's message: the government needs to make a significant intervention in the power market, it's completely failed to do so for the past eight years (and longer), and conservation needs to be part of anything we do.” That significant intervention requires shifting from price control regulation to prudential regulation for the end-customers.

Mr. Carson wrote “The energy markets in the United States are regulated by FERC, not the Energy Department. FERC, while administratively functioning inside DOE, Chu has no power to direct FERC to do anything. Again, you really need to learn the ropes.” While his statement may be perfectly right, under some circumstances, in practice this is what is happening. Now, we can see that the letters sent by the chair of EAC, Linda Stuntz, were to DOE from the tree reports and also to Congress only in the third report. None was sent to FERC for the development of new incremental rulemaking. As a matter of fact, I will transcribe the paragraphs of the reports all of which start with “On behalf of the members of the Electricity Advisory Committee (EAC), I am pleased to provide:

1. … the U.S. Department of Energy with this report, Keeping the Lights On in a New World. This report recommends policies that the U.S. Department of Energy should consider enacting as it addresses the substantial challenge of helping to ensure reliable supplies of electricity in the future at reasonable cost and with due regard for the environment.

2. … the U.S. Department of Energy (DOE) with this report, Smart Grid: Enabler of the New Energy Economy. This report recommends policies that the U.S. Department of Energy should adopt to ensure that a successful Smart Grid program is funded and implemented in the months ahead.

3. … Congress and the U.S. Department of Energy (DOE) with this report, Bottling Electricity: Storage as a Strategic Tool for Managing Variability and Capacity Concerns in the Modern Grid. This report recommends policies that the U.S. Department of Energy (DOE) should consider as it develops and implements an energy storage technologies program, as authorized by the Energy Independence and Security Act of 2007.

So, let’s get inside the reports. Page 35 of the second EAC report offers a key insight under the title “Size of the Demand-Side Resources Market,” it says:

Demand-side resources are typically smaller, more diverse, and geographically dispersed compared to supply-side assets. Understanding and organizing effective market-oriented approaches through these demand-side resources poses numerous challenges. A market typically favors larger, more knowledgeable participants, so the electric marketplace has been dominated by the electricity suppliers. This supplier domination leaves residential consumers, commercial businesses, and even most large energy users on the fringes of this over $300 billion market. With a very large and diverse group of constituents, demand-side resources have difficulty establishing a unifying agenda and even getting involved in the often obtuse infrastructure planning process.

The key insight is that the IOUs paradigm is unable handle retail markets as they should. This is Pogo story for IOUs: “I found the enemy and it’s us.” EWPC is the friend to actually consolidate retail markets. This is all about the second social economist’s insights: “In any resource-limited situation, the true value of a given service or product is determined by what one is willing to give up to obtain it.” That is why in the new economy customers go to the “electricity suppliers” to expend the other 50 cents of every dollar.

To establish a unifying agenda and face the challenge, the EWPC paradigm is the friend that opens up the power industry market to enable the development of the resources of the demand side to “organize an effective market-oriented approach.” While “electricity suppliers” are adding a lot of value by positioning themselves in Adrian J. Slywotzky’s (see a book with the same name) “The Profit Zone: how strategic business design will lead you to tomorrow’s profits”, the North American power industry has downgraded itself in the last 40 years to the No Profit Zone, becoming similar to any third world country.

While on page 14 of the second report, the EAC describes IOUs business model, they fail to even hint the emergent business model innovations in the making under EWPC. They ask DOE on page 2 and 17 to provide information on business models. Instead they concede “the lack of a coordinated strategy,” which the EWPC paradigm unifies.

On page 41 of the first report says that EAC:

… recommends that DOE support the following: Development of utility business models and rate-setting approaches that encourage and reward cost-effective energy efficiency and demand response / load management investments while providing a substantial majority of benefits to ratepayers…”

From such recommendation, there is no doubt that the IOUs paradigm is alive and well. That is how Pogo’s mental model needs get us to the key insight to change from Mr. Timmer’s bleak picture into great opportunities to integrate and consolidate retail markets at the federal level.

That insight also confirms Peter Senge’s quote about mental models at the beginning of the EWPC article Think Deming to Enable Much More than Just Freedom, the end of which I paraphrased here: “IOUs investors can now start to see the extraordinary opportunities for innovation that can occur when we abandon fearful, reactive mentalities. They start to realize the deep problems we face today are not a result of bad luck or a greedy few. They are the result of a way of thinking whose time has passed.”

Speaking of a new mental model, on page 39 of the first report the introduction, not the specific recommendations, is right on and says: “The United States has a long tradition of relying on the market to drive results. Often, these results are based on sound economic principles that attract market participants who endeavor to capitalize on market opportunities. It is with this mindset that the EAC provides these specific recommendations to the DOE for improving the use of demand-side resources.

Let’s now review action oriented history. As it happened with PURPA 1989, EPAct 1992 and EPAct 2005, IOUs, DOE and the Obama Administration need to consider the socioeconomic insights to ask the US Congress to invest in the electricity without price controls (EWPC) based Energy Policy Act to accomplish the needed transformation. The IOUs paradigm legislation to mandate competitive power markets that was passed in 1992 is flawed and has led to a very complex regulatory environment, that FERC has implemented with incremental trial and error mandates through a series of Orders (888, 889, 890, 2000 and the SMD White Paper). The incremental extension on “mandatory reliability standards,” enacted as part of the Energy Policy Act of 2005, is not under FERC. Market evolution under EPAct 92 is at a dead-end.

Looking at his bleak picture from a different angle, Mr. Timmer writes that “Incentives for things like fossil fuel exploration and renewable power generation have come and gone from the federal budget with regularity, changing the economic equation for any long-term project on a nearly annual basis. Environmental regulations, such as a carbon tax, have had the air of inevitability for years, but the lack of an definitive structure during that time makes planning for the actual implementation impossible… The lack of a national plan also means any infrastructure work faces a patchwork of federal and local regulations.” That is another way of telling that the U.S. and the world have been changing regulations incrementally. The EWPC paradigm shift has already emerged to change that economic equation.

This means that James Carson’s comment “Over the past ten or twenty years, utilities worldwide have already undergone a massive transformation. Wholesale deregulation is now the norm everywhere in the US and much of Canada. We can now value transmission upgrades under conditions of market discipline. When the SmartGrid has proven its value, it will be built,” has not been a real transformation at all. It has kept the IOUs paradigm alive and well. As seen next, even transmission upgrades are giving a lot of headaches.

On page 50 of the first EAC report, under the heading “Lack of Clear Cost Allocation Policies,” it says:

The difficulty in determining who should pay for transmission that benefits many users across multiple jurisdictions, for a variety of purposes and over a long time, is a serious obstacle to transmission development. As Nicholas Brown, President and Chief Executive Officer of Southwest Power Pool (SPP) said, “our industry desperately needs national leadership on allocating costs for the expansion of the bulk transmission system. We have planned regionally and interregionally for over a decade, but ideas remain on paper due to lack of needed cost allocation.

Now we know that Mr. Carson didn’t know what he was talking about when he wrote:

My point, to put it bluntly, is that the US power markets are already way ahead of you. We already have robust markets. We already have devolved the vertically integrated IOU paradigm towards a competitive one.

The fact is that the power industry has gone to DOE for policy changes and have written on page 56 of the first report that a “key driver of policies in this area and others will be the development of a comprehensive national energy policy for the nation’s electricity future.” On page 67 they add “Continued uncertainty in the energy sector about expected political or regulatory actions has slowed potential new generation projects. Federal legislators have been unable to produce a comprehensive energy plan or establish long-term energy policies.”

As Warren Causey said, on a different context, US Congress and FERC have been “rearranging the deckchairs on the Titanic,” when what’s needed is a high system leverage transformation. Rephrasing the late W. Edward Deming, “the transformation of the power industry, the aim of EWPC is not a job of reconstruction, nor is it revision. It requires a whole new structure, from foundation upward.” EWPC is not about rearranging the deckchairs on the Titanic. That is the true meaning of the EWPC market architecture and paradigm shift transformation, whose foundation is laid in more than 130 articles on the EWPC Blog.