sábado, octubre 20, 2007

No Need for Regulated Price Caps - II

Customers’ price caps are the key to the infrequent rational rationing of service. During a transition to EWPC that ends with every customer defining its own price cap, it is important to understand that most of the customers need to make load commitments well in advance of real time operation. They will do that by participating in hour ahead, day ahead, week ahead, and futures markets. Any system with a larger than optimal balancing, real-time market, is bound to become an unreliable market.

No Need for Regulated Price Caps - II

By José Antonio Vanderhorst-Silverio, Ph.D.

Systemic Consultant: Electricity

Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.

In response to the content of my article No Need for Regulated Price Caps - I, Mr. Len Gould wrote:


Jose Antonio: "customers themselves have negociated individually their prices caps with Second Generation Retailers." - I can see no way to assure reliability fairly without a large percentage of running reserve except if all customers participate continuously in a real-time price market. If only a few participate, e.g. through only one or two of several copmpeting retailers in a distribution region, they wind up subsidizing all the competing retailer's customers as "free-riders". Why on earth do you expect ANY retailer to go that route when they can never recover the costs because the rewards are distributed equally to all customers, including their competitors customers? So the key question is, once you have applied real-time market price metering to all customers, as necessary, what use are retailers?

Below is my response:

Dear Mr. Gould,

Thank you for your question about retailers, which is a repeat of many earlier interventions which I responded almost two years ago in the first intervention which came as a result of the Letter to Dr. Alfred E. Kahn (hit link please):

Len Gould on 12.21.05 wrote:


Jose: You're close, just not going quite far enough. You need to eliminate your "Retail marketers" by implementing intelligent software within the customer's meters which takes over the simple task of selecting either a lowest-cost supplier from among all available in a central electronic "marketplace", or alternatively choose to not purchase, and shut down some of the customer's less critical loads if the price exceeds customer-set limits.

Jose Antonio Vanderhorst-Silverio on 12.21.05 responded:

Thank you very much Len for the “lead” and a sharp comment.

Being conservative, I agree with you if there were only the short run market problem. However, there is also a long run problem for which retailers need to coordinate in the wholesale market. This is where I understand boom bust (long run risk management) power system behavior should be managed from the demand side by retail (and wholesale) marketers. Marketing service offerings need to be designed based on what will be coming up in the future.

In addition, while most price response marketplaces have been designed with real-time, day ahead, and hour ahead markets, I strongly believe there is an important week ahead market mainly (some industries would classify also) for the low end residential market, where retailers need to participate on the wholesale market to complete week-ahead unit commitments.

However, I don’t dismiss "just not going far enough," because I am over 60 years old now, having work through design, operation, planning, management, and research of vertically integrated and (faulty) deregulated power systems, which don’t let me see very well outside of the box. For those simple reasons, Len, maybe I [am] missing something really important, so please advice!

Regards,

José Antonio

The advice on how to tackle the large non-real time non balancing market segment never came.

Now think of two extremes: perfect vertical integration and perfect EWPC. In the first case, reliability requires an excessive reserve in both generation and transportation. In the second case, all customers will have their own price caps, but there will be a penetration (sufficiently small) that will result optimal in the real-time balancing market. There are other markets identified, such as day ahead, week ahead (very important when a low probability rationing is foreseen to know ahead customers price caps), and future markets, which will allow demand integration development, which is a lot of work for 2GRs.

In practice, however, there is need for a transition from today’s situation to EWPC. As there will be no incumbent retailers, 2GRs will need to carry the default service customers during the time limited transition period.

Nat Treadway, wrote in the article The Dawn of Electricity Competition: Efficient Prices and Efficient Choices that, “The design of default service (also called basic or standard service or provider of last resort) was identified as the most significant determinant of the success of retail electricity choice. A poorly designed default service undermines competition. If default service is designed to satisfy all residential consumers’ needs, or if it bundles and spreads risks among all consumers, or if it is priced below market, then it is unlikely that new retail electricity providers will enter the market. With few choices, consumers are left with only the poorly designed default service, and with limited benefit.”

During such a transition, 2GRs will have both types of customers (as there is no incumbent retailer), with increasing development of the resources of the demand side, as the default service will have essentially all the “free riders” being subsidized by peers. Hence, a systemic incentive to non-free riders will result, as they get the pressure for efficient prices and efficient choices. So, if only one or two retailers are truly competitive (2GRs), they will end up with the whole market.


No Need for Regulated Price Caps - I

Missing in the discussion under the article "Meeting Our Need for Electric Power," up to the 19th of October, 2007, are the huge coordination problems of short run unit commitment and long run system adequacy, which involve the opportunity for demand integration. Reliability First, Economic Second, is the approach to solve those problems. No longer will regulated price caps will be issued by regulators, as customers themselves have negociated individually their prices caps with Second Generation Retailers.

No Need for Regulated Price Caps - I

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

Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.

In addition of my comment on 10.15.07, about the emergence of at least 6 disruptive technologies, some of which Len and Todd want to integrate to power systems, but which Joseph think not, there is a prerequisite need of Rethinking Electricity Restructuring as EWPC, as I wrote above on 10.12.07.

"Meeting our need for electric power" has offered a very good interchange environment, mainly between Joseph on one side and Len and Todd on the other.

ToD stupid meters (for deterministic events) were used with specific ToD hours in the 90s. ToD smart meters (for probabilistic events) are to be used mainly anytime to avoid beforehand getting the system close to capacity at a given location, as peak pricing is a random variable. The idea of ToD meters is assumed to be under an Economics First, Reliability Second, approach, as it suggests US$1,250 dryer bills. That is exactly the theme of IMEUC: Unreliable Service and Price Spikes.

In addition, Joseph has discussed difficulties on the marketing and financing. EWPC is developed under a customer orientation as value migration has occurred and at least 6 disruptive technologies (some mentioned by Len and Todd) are available that will satisfy low personal intervention. Please look at Full Retail Choice Emerges, under prudential regulations to respond to Joseph opinions.

There are several market segments. Every customer should shop in the market to find the best fit for his needs, in terms of the mix of the six disruptive technologies. Some customers, for example, with high reliability need, might find out that demand side energy efficiency and distributed generation are the key investments need they have, which could be repaid in part or in full through competitive electric pricing. As the grid become unavailable at their location, the size of the DG could be fitted to an efficient load.

Missing in the above discussion are the huge coordination problems of short run unit commitment and long run system adequacy, which involve the opportunity for demand integration. Reliability First, Economic Second, is the approach to solve those problems. No longer will regulated price caps will be issued by regulators, as customers themselves have negociated individually their prices caps with Second Generation Retailers.


jueves, octubre 18, 2007

Full Retail Choice Emerges

As customer value migrates a paradigm shift of full retail choice emerges under EWPC from R&D discoveries that allows retail and wholesale competition without incumbent retailers.

Full Retail Choice Emerges

By José Antonio Vanderhorst-Silverio, Ph.D.

Systemic Consultant: Electricity

Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.

Dear Professor Ramírez Orquín,

The R&D you envisioned in your article The Structural Shortcomings of Retail Provider Choice in Distribution have resulted in my discoveries of EWPC as a paradigm shift (away from vertical integration) to where customer value has migrated.

The EWPC paradigm essence (from Synthesis Proposal Agreement of EWPC) is retail competition without incumbent retailers, demand integration (see Demand Integration Under EWPC) and ultraquality (T&D integrated) transportation.

As distribution becomes an integral part of transportation under EWPC structuring without incumbent retailers, the shortcomings disappear and full retail choice emerges as Second Generation Retailers (see Second Generation Retailer - 2GR), not the first generation retailers of your article, compete under federal prudential regulations (which should hopefully become global prudential regulations under the discipline of the WTO).

Please read The Sixth Disruptive Technology to understand 2GRs role on business model innovations and to get a feel of the paradigm shift value migration and my suggestion of WTO discipline.

Regards,

José Antonio

Reference and context: The Potential for an Effective and Timely Deregulatory Endeavor, by Alberto Ramirez Orquin, Associate Professor of Electrical Engineering, University of Puerto Rico at Mayaguez.


lunes, octubre 15, 2007

The Sense of Urgency for EWPC Restructuring

There is a strong sence of urgency for the implementation of EWPC. Professor Alberto Ramírez Orquín writes "Soaring prices together with the perception of a deteriorating service/product quality contribute to this notion. For the electric power system this trend is particularly worrisome given its vital implications to society."

The Sense of Urgency for EWPC Restructuring

By José Antonio Vanderhorst-Silverio, Ph.D.

Systemic Consultant: Electricity

Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.

Dear Professor Ramírez Orquín.

Your article is giving the proper emphasis for the sense of urgency on the right king of restructuring of the electric power industry, when you write: "Soaring prices together with the perception of a deteriorating service/product quality contribute to this notion. For the electric power system this trend is particularly worrisome given its vital implications to society."

I agree that “The current restructuring drive has not seemed, as some policy makers expected, to improve this condition and may have actually made it worse.” In 2004, The Cato Institute experts Peter Van Duren and Jerry Taylor recommended total abandonment of restructuring.

Electricity without price controls (EWPC) is a paradigm shift that makes the case for restructuring as explained in Rethinking Electricity Restructuring as EWPC. The new drive would make things better, as technological innovation are waiting to be integrated to power system planning, operation and control with at least six sets of disruptive technologies, as explained in The Sixth Disruptive Technology.

One of the main problem with restructuring was separating transmission from distribution to keep regulated retail together with distribution. In the article Give Engineers What Belongs to Engineers and its hiperlinks the “two dominant components i.e. the socio-normative and the technological ones, both…” will be “working harmonically.”

For more details see the Electricity Without Price Controls and the Grupo Millennium Hispaniola blogs.

Regards,

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

Reference and context: The Potential for an Effective and Timely Deregulatory Endeavor by Alberto Ramirez Orquin, Associate Professor of Electrical Engineering, University of Puerto Rico at Mayaguez.




sábado, octubre 13, 2007

Give Engineers What Belongs to Engineers

Engineers no longer have any possibility to take back the whole industry for themselves. EWPC is a market architecture and design breakthrough discovery that gives engineers what belongs to engineers - the reliable planning, operation and control of the machine and the transportation system - and that gives business people what belongs to them - the money (no the electrical) activities of the value chain

Give Engineers What Belongs to Engineers

By José Antonio Vanderhorst-Silverio, Ph.D.

Systemic Consultant: Electricity

Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.

In the good old days engineers didn't need mandatory standards. Today they don't need them either, especially when they are an afterthought to fix convoluted incremental extensions away from the vertically integrated utilities paradigm.

As Tracy Rolstad wrote, standards compliance by fines is misplaced. The problem is there are important systemic delays which system planners need to approach several years earlier.

However, the good all engineering days are gone forever. Engineers no longer have any possibility to take back the whole industry for themselves. EWPC is a market architecture and design breakthrough discovery that gives engineers what belongs to engineers - the reliable planning, operation and control of the machine and the transportation system - and that gives business people what belongs to them - the money (no the electrical) activities of the value chain. Please read the article Engineers Needed for Lower Prices where many important questions about a reliable and cost effective power system formulated several years ago by Jack Casazza are responded with the EWPC paradigm.

The reason why lawyers remain in control is because they control a business model of winning rate case to regulators. As the industry is opened to competition they no longer will have that power.

For more details on EWPC please read the Electricity Without Price Controls Blog in the Energy Central Network where 28 other articles are already posted.

Reference and context: NERC-CIP: 'Critical' or in 'Critical Condition'?, by Warren Causey, Vice President, and Mike Smith, Senior Vice President, Sierra Energy Group.

viernes, octubre 12, 2007

Rethinking Electricity Restructuring as EWPC

Strong EWPC market architecture and design recommendations to restructure worldwide electricity markets, superseed those proposed in 2004 by Peter Van Doren and Jerry Taylor of the Cato Institute by resolving the "previously unknown" problem created by a flawed deregulation. Those recommendations are developed to support slicing the last of the regulated monopolies with a strong sense of urgency.

Rethinking Electricity Restructuring as EWPC

By José Antonio Vanderhorst-Silverio, Ph.D.

Systemic Consultant: Electricity

Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.

Professor Ferdinand Banks suggests that H. Sterling Burnett and D. Sean Shurtleff “should read the article by Jerry Taylor and Peter Van Doren (of the Cato Institute) that was published in the Wall Street Journal, August 30, 2007…” to learn that deregulation is a malicious farce.

In the Executive Summary of the full paper, Van Doren and Taylor write: “Electricity restructuring was initiated in the 1990s to remedy the problem of relatively high electricity costs in the Northeast and California... Economist wanted reform to eliminate regulatory incentives to overbuild generating capacity and spur the introduction of real time prices." EWPC restructuring with its R1E2 (Reliability First, Economy Second) priority will remedy such problem while satisfying economist wants and enabling maximum social welfare through an open market in the generation, retail, customer value chain under prudential regulation. For details please read Free Market and Central Planning, Under R1E2 and Engineers Needed for Lower Prices.

In the conclusions of the paper, it is stated: “While restructuring does not have quite as bad a record as the anti-market factions would maintain, it has created problems previously unknown in the electricity industry. Those problems generally arose because electricity restructuring:



o Focused on generation competition and ignored the pricing and incentives issues involved managing the transmission system and its public commons characteristics.
o Grafted a relatively free wholesale market onto a heavily regulated retail market; and
o Established artificial market institutions that invited manipulation and abuse. The end result has proven far from satisfactory."

Those "previously unknown " problems arose because of the non-trivial nature of the vertically integrated utilities (VIUs) paradigm which is preserved under EWPC with R1E2, which is one of the important discoveries which I claim to have made with EWPC. Please read also Only Two Stable Paradigms.

“The poor track record stems from systemic problems inherent in the reform itself,” was the argument that led to Van Doren and Taylor to “recommend total abandonment of restructuring.” I agree with their conclusions about restructuring with E1R2 priority. As the systemic problem is solved under EWPC by R1E2 ultraquality transportation, as it gets implemented by a system engineer in charge of short run and long run systemic risks, the argument doesn’t hold as systemic issues disappear.

The paradigm shift to EWPC is a breakthough that is not resolved by extending the VIUs paradigm adding that "Smart electrical meters hold the key to lower costs, and increased reliability," as Burnett and Shurtleff wrote. As can be seen in The Sixth Disruptive Technology, the automated metering infrastructure (AMI) is just one of the disruptive technologies that need to be tightly integrated into a superior systemic solution in the coming years under the electricity without price controls (EWPC) market architecture and design. The problems Mr. Rawlingson identifies can be solved with the smart grid disruptive technologies as explained in the article Solving Smart Grid Cost Recovery.

The conclusion is that there is now a sense of urgency to introduce competition policy under EWPC in the power industry is strongly supported in the article Slicing the Last of the Regulated Monopolies.

José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant

Reference article and context: Meeting Our Need for Electric Power, by H. Sterling Burnett, Senior Fellow, and D. Sean Shurtleff, Graduate Fellow, National Center for Policy Analysis.


jueves, octubre 11, 2007

How TXU Can Take the Lead

The Texan’s Market is one of the most likely candidates to start the paradigm shift to EWPC, ending demand forever as an externality. It has been shown that the days of the obsolete VIUs paradigm are counted. A paradigm shift to EWPC is the next source of business innovations, jobs with a lot of future and increasing exports. Texas’ government can take the lead, and avoid the risks of market implementation failure by retaining high caliber professional team advice, will reap most of the benefits.

How TXU Can Take the Lead

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

Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.

This is an update of the article “Take EWPC Lead & Reap Large Benefits,” as it applies to the Texan’s market.

Mark Hall wrote a timely reality AMI based article on demand response that also touches energy efficiency issues.

Since, as the Mr. Hall writes, “The electricity delivery industry is likely to see several utilities use advanced metering infrastructure (AMI) for demand response programs on an unprecedented scale over the next five years,” AMI and demand response are getting out from the Bowling Alley and entering the Tornado of Geoffrey Moore’s Technology-Adoption Life Cycle model. To get to Main Street, however, it will be much easier and faster with a paradigm shit to EWPC. For earlier comments on Moore’s model, as it applies to demand response, see IMEUC: Unreliable Service and Price Spikes (please hit read links here and below for more details).

A key issue to make a paradigm shift to EWPC and reintegrate electric transportation in Texas is to change "The commission must review the change of ownership for Oncor, but it cannot block the buyout." Unless the authorities stop the buyout true retail and wholesale competition will not developed in Texas, as retail competition with demand integration is required to integrate the retail and wholesale markets. Since the buyout was made, it is in TXU best interest to read the following carefully.

The shift to demand response based on AMI is an incremental paradigm shift away from the existing vertically integrated utilities (VIUs) paradigm, which is itself the result of earlier unstable paradigm shifts. Mr. Hall identifies also energy efficiency based AMI incremental paradigm shift being mandated by governments, which need to be made by artificial means such as decoupling sales from profits, as the VIUs paradigm has perverse incentives on energy efficiency.

One example of sales decoupling were mandates in California that led to investments in demand side energy efficiency. As "Texans use two and one-half times the electricity of California on a per household basis," the economic case for the development of the resources of the demand side is a must.

To implement energy efficiency in Texas the remaining barriers to retail competition needs to be taken down. Second Generation Retailer - 2GR should be allowed to integrate demand to power system control, operation and planning to allow the integration of the retail and the wholesale market as explained in the EWPC blog.

The power industry traditional approach - the vertically integrated utilities (VIUs) paradigm and its incremental extensions - is centered in the development of the resources of the supply side. EWPC is a balanced approach paradigm which will concentrate initially on the development of the resources of the demand side, as the supply side is already well developed.

A transformation of the industry is required reduce the increase in demand to economic levels at the meter, while customers receive the same energy services. That means taking down the barriers against energy efficiency, which is the other side environmentalist are missing in Texas.

Warren Causey wrote that the supply side problem that "Demand for electricity is expected to rise 76 percent by 2030, almost twice as fast as U.S. demand, according to the Department of Energy." The demand side opportunity with EWPC is a strong reduction in demand well above the 2.3% mentioned for renewable sources can be implemented in a few years, once the proper market architecture and design is in place.

Every time an incremental paradigm shift occurs, constitutional rights are transferred to utilities thru a win – lose process, based on the utility business model of winning rate cases to the regulator. The result is higher than normal rates to customers and an extension of the life of the VIUs paradigm.In addition, decisions taken by regulators on demand response result in a large free riding effect that requires general rate increases discriminating to non-responding customers, without customers ever learning what's going on. Retail competition avoids that altogether.

As the decision to invest by a customer to become responsive for the short run (demand response) is contradictory to a decision to invest for the long run (energy efficiency), incremental shifts will result in a lack of coordination by customer and as a result more costly than necessary for them. How can that be avoided?

The solution is to change demand as an externality, and integrate it to power system control, operation and planning, with a real paradigm shift. Such shift away from the VIUs paradigm, can be done with EWPC, the winning market on the first phase of competition, as can be seen on the downloads, debates, reflexive dialogues and generative dialogues, under the article An Analysis of the Carbon Emissions Impact of the Senate Energy Bill.

In accordance to the issues that the Chartwell reports, about perceived shortage in future energy supplies, it is energy efficiency that will have the largest impact both in reliability increase and real demand energy reduction. This means that demand response projects incremental paradigm shifts may result from optimistic cost benefit analysis in rate cases presented by utilities. It is important to note that energy efficiency reduces demand at the meter, but does not reduce the useful effects of electricity to the end-customer. Implementing the EWPC paradigm shift can reduce demand and avoid a large percentage of the supply generation forecasted (which are not very reliable anyway) with a very clean solution of integrating demand, thereby lowering the need to build expensive generation facilities.

In the real paradigm shift under EWPC all benefits from the development of the resources of the demand side (demand response, energy efficiency, distributed generation, distributed storage, etc.) are considered at once by a 2GR under competition, and not under a monopoly by a regulator, which although intelligent and important, may no know enough to understand the non-trivial elements of the proposed solution packages. Instead of letting regulators make bets, it is the competition in the market that finds conclusive evidence of which of the technologies of the demand side is more cost effective.

As can be seen from The BIG California LIE, “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.

”The LIE has led to an inefficient regulatory compact as can be seen in The Anti-System Utility, which also explains why penetration is still low. However, knowing that EWPC is the best market solution may not even touch at all the present regulatory compact. Mr. Jack Casazza uses the analogy of a scrambled egg to explain that the regulatory compact can’t be unscrambled.

If EWPC were not to have any chance at all, I would have not been invited to Carnegie Mellon University this past march, where I presented A Generative Dialogue to Reach the End-State of the Power Industry (please hit link to download the presentation). As shown in slide 5, the conference had a supply side approach to:

Getting adequate resources of the right technologies for generation, transmission and distribution over the next three decades,” missing “the need for the emergent market architecture and design paradigm, where the development of the resources of the demand side takes a key role to reach the End-State of the power industry… Venture capitalists know that good money should not be thrown after bad. Now is a great time to shift course… The new paradigm introduces elements that should be researched and taught, on MS and PhD levels education, as well as the training of skilled blue collar workers.


Since then, EWPC has emerged, and is ready for real government leaders to consider it!In the slide # 7 of the presentation two small chance events have lead to an inferior solution path, preceded the California LIE. I wrote then that “The events were naturally pulled by strong vested interest community [of which the BIG LIE is representative], by neo-liberalization, by the debating system approach, and by the regulatory design, which [mutually] reinforced each other.” EWPC has a lot of potential right now, because of very high fuel costs, the necessary integration of demand, and the highly likely integration of the environmental externality to power system planning, operation and control. See also Utility Trends and Real Paradigm Shift.

TXU and the goverment of Texas are candidates to start the paradigm shift to EWPC, ending demand forever as an externality. It has been shown that the days of the obsolete VIUs paradigm are counted. A paradigm shift to EWPC is the next source of business innovations, jobs with a lot of future and increasing exports. Those governments that take the lead, and avoid the risks of market implementation failure by retaining high caliber professional team advice, will reap most of the benefits.

Reference and context:

AMI-enabled Demand Response in the Crosshairs of Many Utilities, by Mark Hall, Research Analyst, Chartwell Inc.

TXU Under New Leadership - Whose Star is Rising?
10/11/2007 at 09:26 AM Marty Rosenberg - From the Editor's Desk Blog

The Sky Really is Falling!
10/11/2007 at 05:58 AM Warren Causey - Reinventing the U.S. Utility Blog

TXU Jeopardizing Texas Deregulation?
10/10/2007 at 12:42 PM Joey Gimenez - A Communicator's View of the Energy Industry Blog


Only Two Stable Paradigms

There are two stable paradigms: vertically integrated utilities (VIUs) and electricity without price controls (EWPC). Both have a Reliability First, Economic Second (R1E2), as their non-trivial essential concept. After the 70s, the R1E2 concept incrementally shifted to E1R2 and investment in transmission and reliability was reduced.

A good example of the incremental shift is now seen "As one utility respondent pointed out in our survey, just piling 160 or more required regulations on top of problems utilities already know about is a matter of 'over-kill.'”

Most of the problems the utilities have can be found in the obsolete VIUs paradigm. They won't go away until a paradigm shift is made to the EWPC paradigm.

Posted earlier under the article NERC-CIP: 'Critical' or in 'Critical Condition'?, by Warren Causey, Vice President, Sierra Energy Group.


viernes, octubre 05, 2007

Financing and Developing Wind Projects

EWPC is the answer to the difficult question on how to finance and develop wind projects for all stakeholders to win. The underlying problem is found on the successive extensions of the inefficient price controls of the vertically integrated utilities paradigm that leads to simple and stupid behavior.

Financing and Developing Wind Projects

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

Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.

In the article Optimize Transmission Assets for New Wind Farms but Who Pays?, Mr. HIMADRI BANERJI brings a difficult question on how to finance and develop wind projects. The problem, however, comes from 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.”

The problem Mr. Banerji is bringing has its origin in the vertically integrated utilities (VIUs) paradigm, whose incremental extensions give rise to very complex rules and regulations that result in simple and stupid behavior. It is well known that price controls are inefficient and lack transparency. Lack of transparency is one side of a coin, the other side being corruption. So the question “Who pays?” is always answered by those that control the political process, as debates get locked, and to get them unlocked the hierarchical force of the authorities is employed. Please read Slicing the Last of the Regulated Monopolies.

Electricity Without Price Controls is a market architecture and design paradigm shift away from the VIUs paradigm based on “simple, clear purpose and principles,” as can be seen in the article Synthesis Proposal Agreement of EWPC. Under EWPC, both questions – who should pay and how to develop an optimal transportation (T&D) grid, as many wind projects are to be connected to distribution lines, are answered without getting into debates.

Optimal transportation should be the result of expansion planning where all potential wind projects (see also Wind Integration: An Emerging Paradigm) are taken into consideration at the same time for a give planning horizon. Such expansion planning is to be done in the environment suggested in the article Free Market and Central Planning, Under R1E2.

With a transportation utility that is financed by tolls the problem of “Who Pays?” is solved. A simple explanation of how to optimize the transportation system is given in the context of the article Demand Integration Under EWPC, as follows:


Generators and Second Generator Retailers interchange with the System Engineer their proposed investments and other key information to allow the System Engineer develop the transportation utility expansion plans for the long run, in order to optimize the future grid by minimizing total system costs (not just the transportation costs) in order for 2GRs to enable a potential maximum social welfare in the national economic context, and not just the financial viewpoint of the utility as the VIUs paradigm calls for.

For more details please read other articles in the Energy Central Network EWPC Blog.



lunes, octubre 01, 2007

Strategy is NOT Enough to Reach the End-State

As he is not his opinion, Dr. Stephen Lee can easily separate the objective, or strategic side of leadership, from the subjective, or culture side of leadership, as to what affect human behavior in an organization. A few stakeholders are invited to help develop such an organization to reach the End-State of the electricity industry.

Strategy is NOT Enough to Reach the End-State

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

Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.

To readers interested in the generative dialogue to help reach the End-State of the Electricity industry for quite some time. I will write the general message in a letter to Dr. Stephen Lee, as a comment to his article How Incentives Affect Human Behavior?

Dear Dr. Lee,

With all my respects to you, I think you have an opinion which you should change. I want you to help me find opinions about EWPC that I should change. For your illustration, in the post A Generative Dialogue Without Illusions Part 1, I introduced some of Adam Kahane’s ideas about generative dialogues, which I think will interest you.

You and I can change our “faulty” opinions very easily, by using the generative dialogue principle "you [I] are [am] not your [my] opinion." That is a key principle to help wholes emerge, which I have used to help emerge EWPC.

As for the opinion you should change, according to Peter Koestenbaum, in his book "Leadership: the inner side of greatness," which has help me understand and apply business philosophy, you are perpetrating a "category mistake." He claims there are two realms: objectivity and subjectivity, each with their own languages and logic. That is what differentiates strategy from culture. Please find Koestenbaum’s book and read the section "strategy is not enough," on page 95 in the first edition.

I would say you are very intelligent and important person that have gotten into a non-trivial subject, just like the eminent economist Bill Hogan, that didn’t understand the non-trivial VIUs paradigm (see 2nd Disruptive Technology Crossed Chasm for details).

To develop a culture, all we need is a critical mass of leaders, for which you are certainly a great candidate, to form an organization. EPRI could be one of the best stakeholders, as are Silicon Valley companies interested in electricity, gas and water utilities innovation and the National Association of Manufacturers, to name a few. That organization could be the recipient of the Worldwide Generative Dialogue Funding Sought, which I envisioned two month ago.

These are just hints of what should be emerging to get to the End-State of the electricity industry. As EWPC is the winner of the first phase of the competition, the generative dialogue to reach the End-State could be based on my Carnegie Mellon University Presentation (please hit the last link).

Best regards,

José Antonio Vanderhorst-Silverio, Ph.D.

Slicing the Last of the Regulated Monopolies

The sense of urgency has arrived to introduce competition with a paradigm shift to EWPC and to sliced the last of the regulated monopolies. Enough insights are now available to introduce EWPC and to understand the BIG California LIE, which for more than a decade has led to large worldwide scams.

By José Antonio Vanderhorst-Silverio, Ph.D.

Systemic Consultant: Electricity

Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.

"The wires business - the transmission and distribution of electricity - will remain regulated but will be operated by utilities or third parties, with access to the wires open to all...," that was written by Lester P. Silverman, a director of McKinsey & Company, on The New York Times of July 21st, 1996. The title of his article is being reused in this one. He added, "… the energy service business, which involves the packaging of energy and other services, is just getting started."

Mr. Silverman also wrote: "What will the electric power industry look like in about a decade? There will probably be a small number of national scale generators - perhaps a dozen or so -, supplemented by regional and niche players. Many of today’s electric utilities will be little more than regulated wires companies, but some will have grown by acquiring neighboring wires and other operations..."

The last paragraph reads: “Tough choices are ahead. Investors, who have seen electric utilities underperform the market in recent years, have the difficult task of picking winners. Policy makers must sort through the competing interest to balance demands for lower rates with the need to establish rules for effective long term competition… Perhaps the toughest decisions are faced by the utilities as they try to remake themselves. Customers should benefit from lower prices and more options, but how much they do so will depend on how astute their choices are.”

What happened to Mr. Silverman great educated vision?

As readers can see in the post A Vertical Integration Conspiracy Theory for the US Judiciary, I wrote “Fred: my goal seems quixotic to a casual observer. Time will tell. I found my purpose on what has now become the emerging EWPC. I started in 1996 telling others the aim to place the Dominican Republic in the electricity map. However, from 2003 on, I found that there was a conspiracy, not to extend the deregulation scam worldwide, which occurred, but to stop competition altogether to extend the useful life of the inefficient vertical integrated utility, which both of you defend for some unknown reasons.” This is how it goes:

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

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

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

… The origin can be traced to Bill Hogan, as … Bill Hogan is the most influential person of deregulation. See Please Blame the Deregulation and Regulation Fiascos Parte 11.

For a more recent account see The BIG California LIE and Conspiracy Theory Against Mr. X

Going back to Mr. Silverman vision, I am adding very recent EWPC articles that should finally slice the last of the regulated monopolies:

"The wires business - the transmission and distribution of electricity - will remain regulated but will be operated by utilities or third parties, with access to the wires open to all... Many of today’s electric utilities will be little more than regulated wires companies, but some will have grown by acquiring neighboring wires and other operations..." is best seen in the articles Free Market and Central Planning, Under R1E2.

“The energy service business, which involves the packaging of energy and other services,” … as it is emerging can be understood from the articles The Sixth Disruptive Technology and Demand Integration Under EWPC.

Except for “… seen electric utilities underperform the market,” the last paragraph reflects the delayed reality under EWPC:

“Tough choices are ahead. Investors … have the difficult task of picking winners. Policy makers must sort through the competing interest to balance demands for lower rates with the need to establish rules for effective long term competition… Perhaps the toughest decisions are faced by the utilities as they try to remake themselves. Customers should benefit from lower prices and more options, but how much they do so will depend on how astute their choices are.” Take a look at Engineers Needed for Lower Prices.

domingo, septiembre 30, 2007

Demand Integration Under EWPC

Fred C. Schweppe said that “The demand forecast is always wrong!” To mitigate forecasts errors and introduce stability in the power industry, EWPC integrates demand to power system planning. To integrate demand, each 2GR will concentrate their effort to develop a business model innovation, which is the Sixth Disruptive Technology of EWPC, to offer customers through the retail market a competitive portfolio of service plans, from which they can choose the one that best fits their needs for low costs, added value, or both. Each service plan integrates a mix of applications from several disruptive technologies services, such as, demand response, distributed generation & storage, AMI, energy efficiency, and the smart grid.

Demand Integration Under EWPC

By José Antonio Vanderhorst-Silverio, Ph.D.

Systemic Consultant: Electricity

Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.


The first and fourth FACTS of Mr. Blalock seem undeniable. The second and third should be the result of a paradigm shift away from the obsolete vertically integrated utilities (VIUs) paradigm, to the EWPC paradigm which increases the capacity factor of generation and transportation facilities, as well as the integration of the resources of the demand side as explained below. The fourth will give the opportunity to develop the corresponding smart grid.

I have seen many forecasts, like those, from prestigious official sources with enormous and unsustainable increases in demand for the long run. To satisfy such increases in demand, the same, other sources, or both project large increases in generation and transmission capacity. Still other are puzzled that quality of life conditions are for the worst, as they see no possibility to develop all those facilities under present and future perceived circumstances. All of this says is that intelligent and important people have theories in use, or mental models, which are based on assumptions that no longer hold and need to be questioned.

In reality, high electricity prices are already being curved by customers when a good proposition is given to them to reduce demand, such as energy efficiency investments supported by other governmental institutions. A view of the whole is in order, as an introductory application of the disciplines of system thinking and mental models.

In the long run, key electric power systems variables follow a systemic reinforcing circle, which closes a feedback loop. The loop is closed by integrating demand to long run power system planning. Before the OPEC embargo, the circle was virtuous, but after the embargo it became only virtuous at times.

The SAME simple causal loop model travels price, demand, generation capacity, sequentially, as follows, first for the virtuous, and then for the vicious circle. With other things being equal: 1) as price decreases, demand increases, generation increases, price decreases … resulting in a virtuous circle; and 2) as price increases, demand decreases, generation decreases, price increases … resulting in a vicious circle.

Under the virtuous circle before OPEC, as price was always decreasing in a stable environment, there was not a need to consider integrating demand at all. However, as an uncertain environment kicks in, where prices are sometimes decreasing, other times increasing, the need to learn how demand is behaving is crucial, especially because of the systemic time delays involved, i.e. to avoid costly boom-bust behavior, in building generating capacity.

Adding to complexity, demand growth has two main sources not necessarily correlated: one external, from economic forces, and the internal mentioned above, as a response to power price signals. Hence, power system planning needs to integrate demand in its decision making process as soon as possible, to help generators, transporters and customers invest under a more stable environment.

This means that business as usual open loop demand forecasts mental models, that project large increases in demand, like the author mentions, are no longer reliable and must be watched carefully. MIT professor and lead author of the book “Spot Pricing of Electricity,” is quoted in the dedication as “Shortly before completion of this book Fred C. Schweppe, our friend, colleague, and senior author died suddenly. Fred created spot pricing and proved, again, that “The forecast is always wrong!”

In order to extend Spot Pricing of Electricity and to mitigate the demand forecast problem, I have discovered the need to integrate demand into power system planning. That approach is the key mission of Second Generation Retailer - 2GR (please hit red link here and below) – an institution - under the EWPC paradigm, which will help increase total social welfare. 2GRs have evolved from my finding about two years ago of The Birth of the Global Electric Retailer, as the utilities enterprise solutions were bound to be replaced by competitive enterprise retailers solutions, as it will now happen with the paradigm shift to EWPC.

To increase social welfare, each 2GR will compete successfully by developing a business model innovation for a market segment, which is The Sixth Disruptive Technology of the industry. As a result, 2GRs will be in the retail market to offer customers a competitive portfolio of service plans, from which they can choose the one that best fits their needs for low costs, added value, or both. 2GRs service plans will integrate several disruptive technologies services, such as, demand response, distributed generation & storage, AMI, energy efficiency, and the smart grid. Many applications will result from the implementation of the business models. The investments commitments to be made by customers are not necessarily part of the service plans of 2GRs.

The obsolete utilities business model is unable to offer such complex integration, which should be offered directly to customers under competition and not a by incremental investments bets of regulators under a monopoly compact with utilities. As a result, customers will be able to choose, when they want, both the 2GR and the integrated service plans available in the market, instead of being imposed through several costly incremental propositions, which extend the VIUs paradigm far away from its possibilities, and that are decided when the utility wins a case to the regulator and not when the customer needs it.

Generators and Second Generator Retailers interchange with the System Engineer their proposed investments and other key information to allow the System Engineer develop the transportation utility expansion plans for the long run, in order to optimize the future grid by minimizing total system costs (not just the transportation costs) in order for 2GRs to enable a potential maximum social welfare in the national economic context, and not just the financial viewpoint of the utility as the VIUs paradigm calls for.

In sum, while generators and the transportation utility must always be prepared to design, operate and maintain their facilities, there is not conclusive evidence that a building boom in generation should be expected from the first FACT and the above analysis. However, even though transportation facilities will be operated less congested with EWPC, from the fourth FACT a most likely building boom may happened for the smart grid implementation and the replacement of old transportation structures.

I would appreciate the author's considerations and those of other readers to this rebuttal-article post.

Reference: Coming Building Boom Means Utilities Must Prepare to Design, Operate, Maintain, by Michael Blalock , Director of Business Development, Utilities, IFS North America


The Sixth Disruptive Technology

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 Sixth Disruptive Technology

By José Antonio Vanderhorst-Silverio, Ph.D.

Systemic Consultant: Electricity

Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.

Mr. Miller contribution, on the critical reality of AMI, helps further the case for Electricity Without Price Controls (EWPC), in unsuspected ways, “to do a better job of managing our dwindling energy resources,” as a set of 6 disruptive technologies emerge. 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 are tightly integrated into a systemic superior solution in the coming years.

The first three disruptive technologies are demand response, distributed generation and storage, and energy efficiency. Just like System Thinking in the Fifth Discipline contemplates the whole, the Sixth Disruptive Technology to be developed under competition by a new institution, the true competitive retailers, which I call Second Generation Retailer - 2GR (hit link here and further down to get more details) will contemplate the whole relationship with customers, by tightly integrating the other five disruptive technologies with their business model innovations. As Albert Einstein said: "Technological progress is like an axe in the hands of a pathological criminal."

My hero, the Swedish Uno Lamm and the father of HVDC, who won the Pacific Intertie Project for ASEA after facing a strong opposition by [the same] California IOUs [referred below], and later estimated to save customers more than a billion dollars a day, after negotiating a license agreement with General Electric is quoted saying something like this in an interview in 1988: “among Americans, when the heat of the combat ends and a decision has been arrived at, all the trouble disappears and the people work hard to implement the decision in the best way.” I strongly hope this will be the case of EWPC.

Mr. Len Gould has insisted against the idea of competitive retailers, ever since the beginning of downloads, debates, reflexive dialogues, and generative dialogues, that have occurred in the Energy Central Network environment. I am glad to submit to the general audience that the business model innovations that 2GR competitors should develop will be the sixth, and most important, disruptive technologies to integrate demand in power system planning, operation and control. Thanks to Mr. Gould once again for being such a great sounding board. I hope that all the trouble should disappear as the paradigm shift to EWPC gets underway.

I agree with just one exception the assessment Mr. Miller makes that reads “. . . the magnitude of the problem and the opportunity in addressing energy management requires a more expansive and advanced definition of AMI as the use of smart meters, with advanced two-way communication technologies, that enables utilities to:

0 Meet their business & operational needs for meter data collection

0 Empower all their customers to actively and frequently participate in demand response and energy conservation

0 Help move toward a smart grid

The exception is that the utility concept is obsolete. Under EWPC the commercial role utilities play is replaced 2GRs. The utility itself becomes just the wires only integrated transportation (T & D) system, which will have the center stage of the industry (I extended Dr. Richard Tabors, of MIT, idea of a center stage transmission utility). Private utilities will help avoid the inefficiencies of public officials in many jurisdictions.

The industry is poised once again to the competition virus, only this time we will know what we are doing. Instead of deregulating the industry under the principle Economy First, Reliability Second (E1R2), which led to large scams, competition will be introduced by re-regulation, under the principle of Reliability First, Economy Second (R1E2), which is the most economic for society as a whole.

My suggestion is that the open market should be under prudential regulations, with generation and retail becoming worldwide independent activities under WTO discipline, so global merger and acquisition activity won’t undermine a truly competitive industry (this is a good inside from deregulation scams).

The Economy First concept referred to above did not take into account all of the customers costs, but up to the meter, so a perverse incentive of price spikes led to low reliability, as power systems were operated close to capacity frequently. So the Economy First was good for scams. Incremental remedial action with NERC mandatory standards is insufficient and inefficient, as can be seen in NERC Compliance and Power Sector Structure.

The above difficulties are also explained in a different way by Jack A. Casazza, as the scrambled egg, that can’t be unscrambled. That would mean that The BIG California LIE was supposed to get away with a much larger scam than the Enron’s scam, as vested interests extended the obsolete VIUs paradigm well beyond its useful life, by tilting the competitive balance in an equilibria away from the best economic outcome for society. That is what is fueling a backward movement away from real retail liberation in Europe now. It is to the best equilibria that EWPC is concerned. As Einstein said; "We can't solve problems by using the same kind of thinking we used when we created them."

The Reliability First concept of EWPC, which I claimed to have discovered, preserves the aim of the regulatory compact of the VIUs, which is to plan, in this case the integrated transportation system itself, for maximum welfare of the whole. That said, the VIU that has demand as an externality, can be separated in two parts without any loss of generality, in order to improve the efficiency of the power sector as a whole by integrating demand: 1) an electric transportation system that interfaces with 2) the money system operating under an open market, with a value chain generation, retail, and customer.

The above idea, and what is to follow, has emerged, in the discussion with intelligent and important people without which it would have not result as fast and as cheaply, from the 2005 EnergyPulse [seminal] article An Alternative Business Case for Demand Response, where I wrote: “A new value chain is required in the power business for commercial activities, from generators and wholesale brokers, to competitive retailers, to end-users; while transmission and distribution monopolies are forbidden to interfere with those activities, charging a toll for their services. This is an essential element of the market design.”

To dig further into my discoveries (as you will see as leader-designer), in the same article, I also wrote:

Professor [Fred C.] Schweppe [of MIT] "envisioned a world of customer-based electrical generation and storage, "which has been happening in the Dominican Republic, for quite some time, missing only the Demand Response [DR] System and a truly competitive retail deregulation to fulfilled the dream of a country without blackouts. There is an example of the airline industry that will help explain the importance of DR. The DC-10 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, 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.

By the way, as I read the analogy of Peter Senge’s Fifth Discipline, once again, I see that I have been following unconsciously the section “Leader as Designer,” which I recommend to potential leaders in relation to what they think their role is, as Senge’s states that “it eclipses them all in importance. Yet, rarely does anyone think of it.” Well, I forgot about it, but kept thinking of it, without being fully aware! As Einstein said: "The secret to creativity is knowing how to hide your sources."

As I envisioned in my article, AMI technology is one of the key technologies to change demand as an externality forever. Demand integration will occur under a different paradigm breakthrough shift. The shift I discovered is retail competition and ultraquality transportation (see Synthesis Proposal Agreement of EWPC), which (I now articulate) should be tightly integrated by 2GRs business model innovations. Albert Einstein said: "Everything should be made as simple as possible, but not simpler" and "Any intelligent fool can make things bigger, more complex, and more violent. It takes a touch of genius -- and a lot of courage -- to move in the opposite direction."

So, a new generation of energy measurements is just one of the technologies to be integrated. The new utility will be a wires only utility in charge of transportation (T& D integrated) at every location under a federal regulatory compact, which by the way solves the federal state jurisdictional problems (see A Warning to the US Congress and the European Commission). The new Energy Policy Act of the US should definitely consider another New Deal restructuring, this time under EWPC. Europeans can do so easier, as their mandate calls for retail liberation to be implemented already.

Four days ago I wrote the article 2nd Disruptive Technology Crossed Chasm, and it should have been recognized energy efficiency as the 3rd Disruptive Technology to Cross the Chasm of Geoffrey Moore’s Technology-Adoption Life Cycle model, by decoupling sales and profits. So, we can certainly recognize from the article that AMI is a the 4th disruptive technology that have crossed the Chasm, as AMI seems to be in the process of leaving the Bowling Alley and entering the Tornado, while energy efficiency is the bowling alley at a few locations, although they are costly incremental shifts away from the VIUs paradigm.

The interface standards mentioned in the article should enable the separation of transportation and retail, which no longer will be regulated with price controls, as retail will be the subject of competition. As firmware downloads may differentiate 2GRs business plans, I am happy to recall the business case of a very low cost worldwide meter that I envisioned in my article a Dominican strategy, which was published in the May-June 2006 issue of the IEEE Power&Energy Magazine, just like they are doing for the US$100.00 laptop computer and the US$40.00 or so cellphone. Such low cost meter could be very promising for power service in the Bottom of the Pyramid.

By the way, it would be nice to know where the Smart Grid is in the Technology-Adoption Life Cycle model. I suspect it is already in the Early Market, and trying to cross the chasm. In the article Solving Smart Grid Cost Recovery are elements to help the smart grid cross it.

To get further details, readers could go the Electricity Without Price Controls Blog of the Energy Central Network, where another 22 articles already support the paradigm shift to EWPC. Even more complete is the Grupo Millennium Hispaniola blog, which already has more than 1,800 entries, and several articles, and presentations, in Spanish and English, most of which are about EWPC. All that information has been posted in the name of the progress of humanity.

To close my comments, I would like to suggest a very important activity. Next Year will be 10 years of the death of Professor Schweppe. I suggest a movement should be organized to go to MIT (readers should write letters to MIT management to make it possible) to give thanks for his great achievements in the name of humanity. As Einstein said: "Peace cannot be kept by force. It can only be achieved by understanding."

In addition, as I claim to have extended Schweppe’s regulated energy marketplace to become a competitive environment, I took the risk to write what seems to be an egotistic Conspiracy Theory Against Mr. X. I can’t deny it is egotistic, however, as those who were supposed to say that EWPC won the first phase of competition, I wrote it as a theory because I think is the fastest way to mitigate the negative influence that politicians have in the power industry. As Einstein said: "Weakness of attitude becomes weakness of character."

To further rationalize my attitude, if I didn’t make the above claim, it may happen that Lao-tzu (quoted from the Fifth Discipline) would be right once again, as “The bad leader is he who the people despise. The good leader is he who people praise. The great leader is he who the people say, “We did it ourselves.” My claim is not based on “either/or thinking.” but on the end of the “tyranny of the OR” and the embracing the “genius of the AND,” as Collins and Porras suggested in 1994. Einstein also said: "Common sense is the collection of prejudices acquired by age eighteen."

If after reading the above, you agree getting EWPC underway bypassing Casazza’s scrambled egg, and agree with the conclusion of suggesting me as a candidate for a Nobel Prize (I am told that only alive persons can be candidates) or agree with both, please by all means do so. The effect of the suggestions will send a strong message to governments across the world and especially to my loved Dominican Republic that has wasted for 11 years the opportunities to have electricity become our most precious country brand. Think of my contributions about EWPC as equations written with the input from other brilliant people, like all the thinkers quoted in my work so far and add the Einstein quote that says: "Equations are more important to me, because politics is for the present, but an equation is something for eternity."

Reference: The Critical Role of Advanced Metering Infrastructure in a World Demanding More Energy , by Eric Miller , Vice President, Itron Software Solutions.

jueves, septiembre 27, 2007

Conspiracy Theory Against Mr. X

A conspiracy theories against Mr. X being a Nobel Prize candidate is written to provide an ordered a framework to understand the chaotic events that happened or will happen in the Energy Central Network.


Conspiracy Theory Against Mx. X

By José Antonio Vanderhorst-Silverio, Ph.D.

Systemic Consultant: Electricity

Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.


At the beginning of this month I wrote A Vertical Integration Conspiracy Theory for the US Judiciary, following Eamonn Kelly’s advice that “conspiracy theories can, ironically, provide an ordered framework with which to understand chaotic events.” In what follows the author will use only comments made by the original characters, in order to try to come up with a consistent story that might explain a conspiracy. This is an attempt to place together the pieces of a very complex puzzle and at the same time look at the larger picture.

Writing this under the principle that I am not my opinion, I will develop a hypothetical “Conspiracy Theory Against Mr. X” in an effort to understand the chaotic events that took place and that may continue to take place in EnergyPulse.net and EnergyBlogs.com.

An underlying intention of the conspiracy theory is to send a strong message to investors and Wall Street, that the unstable environment of the industry is about to end, and that financial capital is set to be replaced by production capital, as the industry becomes once again very predictable with the implementation of EWPC.

The characters will be disguised to protect their identities from occasional readers. They are intelligent and important people, which may not understand certain non-trivial constructs.

As the characters that were supposed to confirm that EWPC became the winner of the first phase of competition have become silent, with this conspiracy theory we will be expecting the silence to end and start receiving feedback from the characters themselves. Maybe if the silence continuous, it is just that readers should expect to confirm that the conspiracy took place in reality.

Mr. X is the proponent and creator of the EWPC paradigm, which emerged in the energyPulse.net environment, as it evolved from his earlier 1996 visionary proposal to the Dominican government. He is the enemy of the deregulation and the vertically integrated utilities (VIUs) paradigms.

Mr. M is an old military servant whose reason of being is to be the greatest enemy of deregulation. He is absolutely correct that deregulation is a scam. The scam is produced by operating under the principle economics first, reliability second (E1R2). One of his heroes is Dr. Alfred E. Kahn. It seems he was in favor of the Vertically Integrated paradigm, but recently has kept silent as the EWPC paradigm was emerging. Now that it has emerged it would be nice to learn if he is in favor of the VIUs scams, which led to the BIG California LIE.

Mr. Y is the scientist minded fellow which appointed himself to be an arbiter between EWPC and IMEUC, after Mr. X had shown the Final: IMEUC not a Market Architecture and Design. One of his role model is Einstein.

Mr. G. is the man that never loses. He is a consultant that has been proposing the meter based IMEUC Market, but was never able to characterize it. When confirming the victory of the EWPC paradigm Mr. X wrote: “In response to the suggestion by Mr. Y about simulations, it is shown that there is not a need to look further, as a simulator already exists, and its information’s confirm the EWPC is the winner of the first phase of competition with the VIUs, as IMEUC doesn’t even qualify.”

Still today, Mr. G is denying the process as he seems to be a skeptic. It is important to understand the opinion Mr. Y has of Mr. G, which might explain why he is so stubborn, while being an important and intelligent man:


“It doesn't surprise me AT ALL that you didn't follow the link, you NEVER follow a link, because you are a textbook example of someone suffering from dissociative cognitive dissonance. You won't follow THIS link either, but everyone else will, to be amused along with me at the inside joke. The mark of the mature intellect is to overcome such dissonance with creative willpower. Hence I have NO PROBLEM reading views that conflict with my own, but keep my focus on the issue at hand, and assiduously utilize critical thinking to ensure that I'm not guzzling someone else's Kool Aid.”

Your dissonance filter is set so high, that it is virtually impossible to break through it. However, in a forum like this, others are seeing the real story come through, THEY follow the links, THEY see that 260 feet of NEW ICE formed over the airplanes and THEY have the intelligence to question how something can be shrinking and growing at the same time. THEY are the ones I am talking to, since convincing you of anything that isn't already in your world view is totally impossible.

Mr. Y sets the most important rule of the EnergyPulse media, which is not followed by some characters: “Mr. G., I was hoping this discussion would not degrade to name calling, and resent the following insinuation: ‘I find it very offensive to have fools such as these ...’ Perhaps in your world-view I am a fool, but out here in the real world I decidedly am NOT. I thought this site was intended for exactly what the banners that attracted me to it in the first place say, "Insight, Analysis and Commentary on the Global Power Industry". From various posts and article contributions here, I believed this site was populated by serious professionals endeavoring to do serious work and contribute to real world, workable solutions. If instead it is merely another mental masturbation club by all means let me know so I can reset the bookmark as porn site.

Almost two years ago, Mr. X tried to disclose non-trivial elements of a fix to deregulation, on what later emerged as the EWPC re-regulation paradigm.
Mr. M wrote to Mr. X that Dr. Kahn had said "I am worried about the uniqueness of the electricity markets. I've always been uncertain about eliminating vertical integration. It may be one industry in which it works reasonably well." Today we know that the uniqueness of electricity markets disappears with the reliability first, economy second, R1E2, concept. Electricity markets are no longer unique.

It is important to recall that as Mr. Y had appointed himself as an arbiter, who knew nothing, Mr. X researched who Mr. Y was and found a few intelligence insights. First he found Mr. M opinion of Mr. Y as “That master of misinformation, …will almost certainly be at your throat before this debate is off the airwaves.” That remark made Mr. X proceed very carefully after learning that.

In addition, Mr. Y had said “Well, Einstein is merely the most famous and recent example of a scientist who went against the popular CONSENSUS of the time, Mr. M.”

Identifying the discovery that the EWPC paradigm maximizes social welfare, based on Mr. Y statement, Mr. X wrote “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.”

Then Mr. G understood Mr. X message to Mr. Y, as being sent to himself, as Mr. Y had abandon him already by keeping silent to this day, and said “And BTW, Mr. X, I haven't heard exactly a chorus (or even any) other than yourself declaring EWPC any sort of rational strategy. From the small fragments of hard information you've so far provided, I conclude it's not either rational OR innovative. Perhaps all the self-promotion is drowning the information?”

Mr. X replied urging Mr. G “I like to read what Mr. M and Mr. Y have to say.” They have not said one word up to this moment. We expect they will come back and say “Mr. X should be awarded a Nobel Prize on the spot,” as Mr. M had written in the opening comment under this article “… Whoever comes up with the optimal solution here deserves to be awarded a Nobel Prize on the spot.”

And lo and behold, Mr. X had certainly come up the optimal solution and many other recent discoveries:

Discovery: The BIG California LIE. The BIG LIE is that retail competition is impossible in electric markets. The implementation of a competitive retail market was the center of the debate in California. Instead of cooperating to implement it, the three big California utilities, that didn't care about the end-custumers, acted very irresponsibly. EWPC is the paradigm shift to show that retail competition is not only possible, but absolutely necessary to turn the electricity industry into a vibrant value added business for all stakeholders.

Discovery: A comparison between the power industry vertical integration and electricity without price controls (EWPC) non-trivial paradigms, will show that EWPC should be adopted in the new US Energy Bill, as part of a new deal, like the one of the 1930s, to get the world power industry in a superior development path.

Discovery: 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.

Discovery: To solve the Smart Grid cost recovery dilemma requires a restructuring of the electric industry in such a way that the regulator gets the right signals. A shift from The Anti-System Utility to EWPC solves the problem, as cost recovery of AMI technologies are sent to the market with an international standard interface, which will restrict business model innovations by Second Generation Retailer - 2GR.

Discovery: Relative to the VIUs paradigm, EWPC will lead to lower costs, lower profits and lower prices after a reasonable delay. To accomplish that engineers need to take the transportation function that allow the market between supply and demand run efficiently.

Discovery : The uniqueness of electricity markets disappears with the reliability first, economy second, R1E2, concept. A structural change that separates transportation and the (generation, retail, customer) value chain and applying ultraquality transportation planning to produce maximum social welfare, the non-trivial essential elements of vertical integration are preserved in the transportation side. R1E2 is all that is needed to make the open EWPC a market architecture and design no longer unique.

Discovery : Breakthrough… going from VIUs to the new paradigm cannot be done incrementally…. “as it brings a lot of waste, by paying rates (the higher the rates, the better the scam) for each incremental feature (demand response, energy efficiency decoupling, NERC standards, etc.,) and getting many costly unneeded things in the process. There is a need for a breakthrough process, and the knowledge to get there is already available. All tinkering have already been done with deregulation. There is a great difference between tinkering and non-trivial system design, done by professionals.”


Recommendation: EWPC is a breakthrough that is poised to transform the electricity industry. As the state of Ohio is in the process to re-regulate the industry, they should make the transition to the EWPC market architecture and design, instead of a costly retrocession to vertically integrated utilities.

Recommendation: As a result of David killing Goliath, US Congress has the great opportunity to introduce EWPC to the USA. In addition, the state of Ohio has the first opportunity to reap the benefits of retail competition, by developing 2GRs and integrating active demand to power system planning, operation and control. The Dominican Republic has one of the best positions to implement EWPC, but needs to place the Very Short Electricity Law in the waste basket.

Recommendation: A paradigm shift to EWPC is urgently needed to change the status quo and start integrating distributed resources and good ideas into power sectors all over the world.

Recommendation: US Congress and the European Commission need to digest EWPC very fast. The political distortions in the power industry at the state level in the USA and at the country level in Europe can be strongly mitigated by performing a paradigm shift to EWPC.

Recommendations: The US Congress, the European Commission, the state of Ohio, and the Dominican Republic, are some the most likely candidates to start the paradigm shift to EWPC, ending demand forever as an externality. It has been shown that the days of the obsolete VIUs paradigm are counted. A paradigm shift to EWPC is the next source of business innovations, jobs with a lot of future and increasing exports. Those governments that take the lead, and avoid the risks of market implementation failure by retaining high caliber professional team advice, will reap most of the benefits.

Conclusions and recommendations:

Mr. M had written two years ago: "Electricity deregulation as it has been practiced is an illogical fad. Mr. X is completely correct about the shortcomings of linear economics, but as for finding a new paradigm to get to what he calls "true" (electricity) market deregulation, well..."

By joining the above statement, the one about the Nobel Prize and the assertion that Dr. Alfred Kahn worries about eliminating vertical integration are over, and that a true electricity market re-regulation (no deregulation) with the optimal solution to produce maximum social benefits, can Mr. M and Mr. Y conclude NOW that Mr. X deserves to be awarded a Nobel Prize on the spot?