Value Creation for the Customers

To end value destruction at the interface between the utility grid and the utility enterprise and at the interface between transmission and distribution, a shift from financial to production capital can be enabled by a restructuring of the power industry, to enable value creation at the customer interface under competition and by expediting the smart grid.

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

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

As can be seen in the EWPC article Innovation and Risk Taking in the Power Industry, value destruction occurs at the interface of the utility grid with the utility enterprise, as well as the interface of transmission and distribution. Value creation requires competition at the federal level among entities (see the GMH article Second Generation Retailer - 2GR) that replace the state utility enterprises and the reintegration of transmission and distribution leading to the smart grid. That is how the EWPC market architecture and design paradigm shift creates value for the customers. See also the EWPC article Full Retail Choice Emerges .

This is what has been happening in the larger economic environment. The communication (systems and information technology) paradigm can be understood to be installed since the dot.com bubble exploded. Now, after that turning point, the communication paradigm is modernizing the whole productive structure of the economy and raising the general level of productivity and quality to a higher plateau, as Dr. Carlota Perez suggested.

Fred Schweppe’s et al Spot Pricing of Electricity 1988 book and research was about the transformation of the power industry by a shift under the communication paradigm to create value for the customers under a regulated energy marketplace, which no longer applies as EWPC re-regulation emerged on the Energy Central Network by extending that research work.

I am sorry to say, that the 1992 power industry restructuring has led the U.S. and the world into incredible value destruction, as the fight between the old and the new paradigms played out so far (see the EWPC article Creative Destruction of the Old Electric Paradigm). Such destruction has its early origin in an Open Transmission Access that separated transmission from distribution as financial capital replaced incumbent production capital.

To create value for the customers in the power industry, innovative and disruptive (see the EWPC article The Sixth Disruptive Technology) production capital long term interest must be allowed to replace financial capital short term interest, by government intervention to restructure the global power industry as suggested in the EWPC article Global Electric Service Shared Vision. I think that as vested interest seems to be very strong in the U.S. and Europe, any of the BRIC countries may take their leadership away.

7 Notas sobre Cooperativas de Comercialización

Estas son varias notas publicadas anteriormente sobre Cooperativas de Comercialización que pueden ayudar a desarrollar una visión compartida de la actividad.

1. EDESUR Cuestiona Factibilidad Cooperativa Eléctrica
13 Aug 2007 La estructura tarifaria diseñada bajo los preceptos de la Ley General de Electricidad 125-01 pone “en veremos” el éxito de la Cooperativa Eléctrica Fronteriza (CEF), que un grupo de comunidades impulsa con miras a ser independientes y ...

2. Cooperativas y ESCP
11 Jul 2007 Creo que la iniciativa de Cooperativas es muy sana y compatible con la ESCP de manera un tanto distinta a lo que ocurrió en los Estados Unidos en el pasado, cuando los costos de transacción eran prohibitivos. En efecto, bajo la ESCP las ...

3. Orsini Sugiere Cooperativas Eléctricas
11 Jul 2007 Resultado: tener el país mas electrificados del mundo con 6000 (ahora, en su momento fueron 13000) cooperativas electivas. El problema no radica en los Contratos de Madrid, ni en la transmisión, ni en la francachela de los generadores, ...

4. Cooperativas Eléctricas, Normas Prudenciales y Fondos de Pensión
11 Jul 2007 Mi contesta anterior sugería que las cooperativas de comercialización se desarrollaran en una segunda etapa, luego de que las empresas detallistas regulares hubiesen desarrollados sus modelos de negocio innovadores. ...

5. Cooperativas Eléctricas con Fondos de Pensión
11 Jul 2007 He propuesto la formación de cooperativas en las zonas rurales y diversidad de distribuidoras en las zonas eléctricas, todo esto como complemento de tu electricidad sin control de precio. Ahora bien, de los grandes problemas por ...

6. Mensaje a NRECA: Integremos el Mercado y Hagamos Competitiva la ...
10 Sep 2005 Dicen que para cada tipo de sectores hay soluciones de distribución. Eso contradice la propuesta de desarrollar soluciones divisionista tal como comenté en Cooperativas de NRECA y la Comercialización al Detalle: Una Carta a Danilo. ...

7. Cooperativas de NRECA y la Comercialización al Detalle: Una Carta ...
4 Jul 2005 Este es el inicio de una serie sobre las cooperativas que NRECA está desarrollando en el país. Luego de asistir a uno de los talleres que desarrolló la CNE en el 2003, conversé con Danilo Carranza de NRECA y me dijo que en El Salvador ...

El Hurto NO es el Problema Parte 2

Recibí un comentario al artículo El Hurto NO es el Problema (pueden verlo pulsando el enlace al final del artículo) que respondo a continuación:

Estimado Rodrigo,

Mira todos los periódicos y encontraras a Freddy Beras Goico en una campaña contra el robo.

El robo si estuvo en la SEIDE. La Cámara Británica de Comercio trajo a un expositor Inglés, John Heath, de la consultora Adam Smith International, cuya presentación fue "Energía para el Desarrollo Económico y Social, ¿ Quién Paga ?,"

En una de sus láminas aparece titulada como "Energía para el Pueblo – más verdades desafortunadas" la detalla así:

-- Los costos reales de la Electricidad gratuita – robada o subsidiada – son …
---- Baja calidad en el servicio – apagones para todos
---- Reducción del bienestar económico
---- Uso ineficiente de los fondos del Estado
-- --Desperdicio e ineficiencia de uso
---- Abuso del marco de acción del subsidio – los ‘colmados’ (beer shops) PRA
-- Alguien tiene que pagar por la energía robada o no cobrada
---- Los fieles clientes, el Gobierno o los propietarios de las distribuidoras

Fue precisamente esa presentación la que motivó una pregunta mia al Sr. Heath relativa al problema fundamental y a este artículo. Asimismo, en un panel de los pocos que asisití, los inversionistas en parques eólicos argumentaron enfáticamente contra el robo.

Como podrás ver, estoy de acuerdo contigo de que es una verdad que se ha querido ocultar. A principio de los años 80, siendo encargado de la División de Diseño de la CDE di la voz de alarma de que el robo, como tú también le llamas, era un grave problema para la CDE. La administración de la CDE contrató unos consultores canadienses para resolver el problema.

Con base al informe de esos consultores, el USAID financió el Proyecto de Mejoramiento de Ingresos que se diseño e implementó cuando era Director de Ingeniería de la CDE y que empezó a reducir grandemente el robo. No obstante, el "sistema" prevaleciente logró desarmar el esfuerzo. Más tarde la banca multilateral, el BID y el BM financiaron proyectos de distribución para enfrentar también los robos.

En 1996, también con fondos de USAID, me contrataron para proponer una solución al problema eléctrico del país. El resultado fue plasmado en el documento Necesidad de una Politica Integral de Electricidad para la República Dominicana. En la página 14 del mismo escribí:

Estrategias para la transformación. Afortunadamente, los problemas del sector eléctrico dominicano son tan generalizados, que habrá mucho trabajo para transformar el sector. No hay experiencia regulatoria, no hay experiencia en despacho económico, hay un grave problema de robo de electricidad, la confiabilidad de las plantas de CDE es baja. Además, excepto los relacionados con los proyectos turísticos, no hay grandes intereses creados todavía en la distribución. Esos proyectos en zonas turísticas pueden y deben mantener sus derechos hasta el cumplimiento de sus contratos. Junto a la necesidad imperativa de resolver los problemas del robo de electricidad y de los cobros, la competencia entre empresas públicas y privadas también es una fuente potencial de problemas.

Asimismo, en la página 16 dije:

Expansión de la generación. La próxima urgencia es concluir el proceso de licitación de las dos plantas de 125 MW. Como veremos más adelante es imperioso aumentar el nivel de reservas del sistema, exigiendo la expansión de capacidad, bajo el supuesto de una solución al problema de riesgo financiero a causa del robo de electricidad.

Hasta aquí debe quedar bien claro que he sabido desde hace mucho tiempo y sé que el robo es un problema que necesita ser resuelto, pero no es EL PROBLEMA. Es solamente un síntoma más. De resolverse sin cambiar el "sistema" para garantizar calidad traerá otros efectos secundarios.

En realidad, ya hay un efecto secundario muy visible: el gobierno ha pospuesto la aplicación porque teme un efecto negativo en la votación de las próximas elecciones. Para los inversionistas privados del sector eléctrico puede que el hurto sea EL PROBLEMA, pero no para la nación dominicana. La solución del hurto por sí sola es una intervención que es muy seguro resulte en un bajo apalancamiento.

Mi conclusión en la presentación en la SEIDE fue:

-- La Electricidad Sin Control de Precios es un paradigma emergente de arquitectura y diseño de mercado que contribuye a una solución viable y de bajo impacto ambiental a los problemas eléctricos, convirtiéndolos en grandes oportunidades.

-- EL SERVICIO ES DE MÍNIMO COSTO Y/O MÁXIMO VALOR AL CLIENTE INDIVIDUAL

Esa solución de EL PROBLEMA es un cambio estructural para introducir la competencia plena, resolviendo más fácilmente el hurto y logrando un elevado nivel de apalancamiento por las grandes oportunidades.

Al introducir la competencia plena generaremos crecimiento y desarrollo para el país y el mundo, con nuevos negocios, nuevos empleos, y hasta transformar la electricidad en nuestra marca-país.

Con la nota Modelo Dinámico, lo invito a leer y estudiar lo que significa un cambio estructural.

Para más informaciones lo invito a indagar más en esta Bitacora Digital del GMH.

Saludos,

José Antonio Vanderhorst Silverio, Ph.D.
Consultor Sistémico: Electricidad

Innovation and Risk Taking in the Power Industry

Open Transmission Access was a great mistake made at the outset of restructuring to preserve utilities rights. To introduce innovation, risk taking and create value for the customers, transmission must be integrated with distribution to enable a future smart grid transportation utility, while the existing utility retail enterprise is open to retail competition at the federal and global levels.

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

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

Kevin and Bob,

Kevin’s article is a welcome contribution on the future of the electricity industry. Bob comment reflects the difficulties of utility monopolies to innovate and for regulators unable to take on technology risks. My comment will show a necessary shift on the utility of the future to become just a transportation utility. As can be seen, I am taking the opportunity to integrate a few of EWPC articles to show how to create value by introducing innovations and risk taking to the electricity industry after making a necessary paradigm shift.

In order to create value in the electricity industry, it is first necessary to restructure the industry with a high leverage intervention (please see Creative Destruction of the Old Electric Paradigm). Today’s utilities join together the grid and the enterprise under Open Transmission Access, which has resulted in a low leverage intervention of the old vertically integrated utility (VIU) paradigm that involved the industry in a looming systemic crisis. Please read The Anti-System Utility to get a feel of the value destruction under today’s utilities and The End of Electric Monopoly Retail to understand a reality that is long overdue.

Further value destruction comes from the separation of transmission and distribution (please read The Natural Monopoly Transportation System). When demand is inactive, distribution is also inactive, and the interface between transmission and distribution can be assumed to be simple and dependent. When demand is active, in time and space, distribution is very active, and the interface between transmission and distribution becomes highly interdependent and complex, under power system planning, operation and control. Transmission and distribution integration is a must to reap the value creation of the smart grid transportation (T&D) utility.

EWPC is a high leverage proposition that opens the industry to value creation at the customer interface with the development of business model innovations. EWPC restructuring separates the old utility grid (please see Disintegrating the Grid and Retail Worlds) and reintegrates to transmission and distribution to become the new utility smart grid transportation utility, opening all state utility enterprises to federal and global competition by Second Generation Retailers. Please read The Sixth Disruptive Technology which is the business model innovation of 2GRs. See also K2007 Retailers’ Enterprise Solutions to learn about an alternative to the electric industry intelligent enterprise.

Regards,

José Antonio

Reference and context: Creating Value is the Key for the Utility of the Future, by Kevin Walsh, Industry Principal, Utilities, SAP Americas, Inc.

The End of Electric Monopoly Retail

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

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

The EWPC article PCT One of Many Business Model Innovations reveals a very important precedent for any potential business model innovation of utility retail service: they should be voluntary. As electric utilities monopoly retail discriminates against customers that don’t require the full system reliability needed by the most demanding customers, regulators are no longer able to ensure compliance of fair rates and prevent free riding. As customers reliability needs can be differentiated, believe it or not, this is finally the beginning of the overdue end of electric monopoly retail.

Once again, California takes the leadership in the U.S. in a very important issue. This time the decision on the proposal for "Programmable Communicating Thermostats" (PCT) should have wider implications on electricity retail. According to Claudia Chandler, assistant executive director of the commission, PCT “will be written to ensure it is completely voluntary… It is not going to be required . . . It will always be used in a voluntary mode, if it's used at all." This precedent can apply to other potential retail business model innovations.

Joseph Somsel article “Who Will Control Your Thermostat?” was apparently instrumental in the decision, by pointing out the discrimination behind the proposed mandate which I summarized with his statements “Your desires and needs can and will be overridden by the state of California through its public and private utility organizations. All this is for the common good, of course . . . But the discomfort of compliance will fail unevenly across the state. Come the next heat wave, the elites might be comfortably lolling in La Jolla’s oceans breezes or basking in Berkeley by the Bay, while the Central Valley’s poor peons are baking in Bakersfield and frying in Fresno. California’s coastal climate, where the elites live, seldom requires air conditioning . . . How will the state ensure compliance and prevent free riders? . . . Sweating for the common good is for the chumps.”

From there on, Somsel was on to defend the vertically integrated industry and nuclear power using as evidence of reality his own 2003 EnergyPulse article Deregulation and Nuclear Power. The article is already obsolete as a lot of progress has developed since then, especially on EWPC.

But, how a regulator ensures compliance and prevents free riders under yesterday and today’s utilities, when every customer is forced to pay for the same ideal reliable service. Regulators don’t; they have been unable to do so since reliability needs of customers have become widely spread everywhere in the world.

It is a fact that every customer, like Central Valley’s, or any third world country, poor peons have a level of reliability that is optimal for him or her. However, the power system needs to offer high enough reliability to satisfy the most demanding customers, a limit which is no longer able to do and the basis for the need to develop a smart grid. But anyway, let’s assume the power system can operate at 99.99 percent reliability. In this case all customers whose optimal level of reliability is below 99.99 percent are subsidizing the rest and thus being discriminated upon by the utility and the regulator. Also, every customer that needs 99.99 percent or more reliability is thus free riding.

Since rates are designed for neat customers’ classes, and all customers are supposed to receive the same reliable service, many customers are forced to pay for investments they don’t need. Hence, utilities the world over have been unfair with many customer by discriminating them for quite some time. This is the end of monopoly retail and the beginning of retail competition of several business model innovations.

BM ve sector eléctrico requiere US$165,000 MM

Original del Listín Diario:
DESAFÍO MUNDIAL
BM ve sector eléctrico requiere US$165,000 MM


Según un reporte del Banco Mundial, más de 2,500 millones de personas siguen usando leña o biomasa para cocer sus alimentos y para la calefacción.

En el informe sobre el desafío mundial de la energía el organismo multilateral señala los efectos negativos que implica usar leña como combustible, por la deforestación y por la contaminación del aire en lugares cerrados, que, según la Organización Mundial de la Salud, origina 1.5 millones de muertes al año (más que el paludismo y la tuberculosis juntos).

Según pronósticos del Organismo Internacional de Energía, de mantenerse la tendencia actual, en 2030, alrededor de 1,400 millones de personas seguirán careciendo de acceso a la electricidad y 2,600 millones usarán combustibles de biomasa. Se espera un aumento de la demanda de energía en países pobres, de aquí a 2050, por lo que durante esta década se necesitarían destinar al sector de la energía US$165,000 millones al año, pero se calcula que en la actualidad el financiamiento equivale a la mitad de esa cifra.

A menos que se encuentren maneras de reducir este déficit, las tasas de acceso a la electricidad seguirán siendo bajas en los países más pobres y el suministro será poco confiable y de mala calidad, lo que provocará cortes de energía y bajas de tensión, frenará el crecimiento económico y provocará la degradación del medio ambiente. www.bancomundial. org

PCT One of Many Business Model Innovation

California panel removes proposed mandate for utility-controlled thermostats (NOTE: This article link expires on: 02/17/2008) - Bowing to public pressure, the California Energy Commission has removed its proposed mandate for utility-controlled thermostats from its 2008 energy efficiency building code. A hearing on that code is set for Jan. 30.

Under EWPC, PCT qualifies as one great business model innovation. As such, it should be open to competition with others business models in the making or that will emerge worldwide as the market evolves. The point is that PCT should not be allowed as a monopoly business model.

Customer choice should be enabled to a new level by introducing federal competition at the retail level. The remotion of the mandate by the Califonia panel is a strong signal of the end of the utility monopoly as we know it. Today's utilities have two main components: the grid and the enterprise. The enterprise as a state retail monopoly should be replaced by retail competition at the federal level of the U.S.

The grid is evolving to the smart grid utility to offer ultraquality transportation only electricity services, but the monopoly enterprice is acting as a restraing force on its progress.

Open Transmission Access is to evolve to Open Transportation (integrated transmission and distribution) to be developed at least costs under a controlled smart grid market to enable maximum welfare in the open retail and wholesale markets, as envisioned under EWPC market architecture and design.

Joseph Somsel, a former utility engineer who opposes the [original PCT] plan, said he was pleased to hear of the official change of heart at the commission.

"I'd call this a victory in the first battle since they've shifted venues in strategic retreat -- but a victory nonetheless," said Somsel, who raised awareness of the plan's mandatory nature in the Jan. 4 issue of the American Thinker, an online magazine.

However, Michael Shames, executive director of San Diego's Utility Consumers' Action Network, a critic of the plan's mandatory nature, wasn't impressed with the energy commission's statement.

"Most of the announcement is garbage," Shames wrote in an e-mail. "For us, the most important part of the announcement was the last line: 'Technology can be a powerful tool in managing our energy use. However, it is of utmost importance that consumers make their own energy decisions.'

"It is my plan to use this sentence again in the future when the next CEC or some other agency attempts to use good (remote energy services) for evil (non-overridable remote commands)," Shames wrote.

"Emerging advanced energy services will only be embraced by consumers if they have confidence that these technologies will not be used against them. It appears as though the CEC got that message this time around. We'll see if the message sticks," he wrote.

Cambio de Paradigma en la Industria Eléctrica

En ocasión de la Primera Semana Internacional de la Energía, organizada por la Comisión Nacional de Energía de la República Dominicana, en esta fecha ofrecí la presentación "Cambio de Paradigma en la Industria Eléctrica: Servicio sin control de precios al mínimo costo al cliente individual."

Una impresión en formato PDF de la presentación puede ser descargada de la margen izquierda de esta Bitácora debajo del renglón "Evolución Electricidad Sin Control de Precios (ESCP)."

Se invita a los lectores a convertir esta visión personal en una visión compartida, integrando dicha visión a sus propias visiones personales. Esto puede ser realizado en un grupo de interés, en su empresa, en una asociación, en un estado o provincia, en un país, o en una unión de países.

Como se puede deducir de la presentación, todos los habitantes del planeta que tienen acceso a la electricidad somos parte de la industria eléctrica. Es decir, que no solamente las empresas eléctricas y los sectores públicos forman parte de la industria. Por lo tanto es muy importate transformar esa vision personal en una visión compartida a fin de iniciar un proceso de opinión pública internacional sobre el servicio de electricidad universal.

Es muy probable que ese servicio universal derive en la Tercera Revolución Industrial como la concibe el Dr. Jeremy Rifkin. El Dr. Rifkin ofreció una estupenda conferencia el primer dia de la Semana Internacional.

Si tienen algún comentario público favor de colocarlo en el enlace que aparece a seguidas.

Creative Destruction of the Old Electric Paradigm

The economic theory of creative destruction is the key force to the destruction of the vertically integrated industry and the emergence of a new paradigm of global or universal electric service. Companies, states and countries need to develop shared vision initiatives of the new paradigm.

Creative Destruction of the Old Electric Paradigm

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

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

The new shared vision of the electricity industry is about universal or global electricity service as described in the EWPC article Global Electric Service Shared Vision. This is a follow up from the EWPC article Vertical Integration/Deregulation Debate vs. EWPC Generative Dialogue, which suggests once again ending the old debate to concentrate on a much needed generative dialogue as exemplified in the GMH article Solving the Tough Electric Power Market Problem to face the looming (systemic) crisis.

Such systemic crisis on electricity is the basis for the emergent markets, different from the vertical integration and total deregulation markets, as the system and information technology revolutions are making their inroads. In economics this is about creative destruction waiting to happen to the “Old Paradigm” of vertical integration.

For example, as Bob Amorosi explained in the reference, “there are many big players in the electronics industry that are developing or already have developed home automation technologies, smart appliances, real-time in-home energy monitors, and smart communicating thermostats, to name a few. They are viewed as consumer products that consumers will generally be willing to buy if it helps them to become more energy efficient and practice more energy conservation.” Those new technologies are now available to develop the resources of the demand side.

Those technologies are in effect waiting to destruct all vestiges of the vertical integrated utilities (the Old) paradigm by allowing integrating demand to power system planning, operation and control, thus changing the Old Paradigm centered only on the development of the resources of the supply side. Power system planners and operators will be able to plan and operate the power system by changing generation “stocks” and now also demand “stocks” after the processes of long term planning and of security constraint unit (supply and demand) commitment. For more details read the EWPC article Power System Operation Stocks and Flows.

As most readers learned from Professor Banks, that is not based on the first chapters of Econ 101, but taking into account inventories of generating capacity and inventories of customers demand response (from agreements made with 2GRs) available to plan (assuring long run system adequacy) and available to operate (assuring short run system security) the power system reliably.

Any company, state or country that wishes to develop a shared vision of the power industry is able to get a head start with rich information available in the GMH Blog, the EWPC Blog or the many comments under EnergyPulse articles.

Reference and context: Continental Grid Vision Needed, by Martin Rosenberg, Editor-in-Chief, EnergyBiz Magazine.

Vertical Integration/Deregulation Debate vs. EWPC Generative Dialogue

Thanks Bob,

I know that I will not be able to convince anyone that has its own agenda. That is not my intention. I will only respond to clarify what I meant.

Adding only that EWPC is about one controlled market and one open market that operate interdependently, to offer reliable service while opening the industry to business model innovations, I am glad to be able to say what I intended in my first post under Grooming Wind, where the same response was posted to your partially repeated comment. Please read it like this: “…extending incrementally the old central station paradigm (with very complex rules and regulations that lead to simple and stupid behavior) is alive and well, allowing that in a given area there might be two transmission systems so the natural monopoly concept is changed.”

The pure and original vertically integrated utility (which is what I meant by the “old central station”) paradigm and EWPC have both very simple rules and regulations that lead to complex and intelligent behavior. This is what the generative dialogue should be about to come up with the emerging market.

As you know, my interest is about the market vs. market competition and not the company vs. company competition. All the public debate has been on market vs. market competition centered on only two paradigms: the pure vertically integrated utilities paradigm (VIU), witch now has many incremental extensions towards wholesale and full deregulation. The Cato Institute “recommend total abandonment of restructuring,” meaning going back to the pure Old Paradigm.

The incremental extensions occurred first under PURPA; then under EPAct 1992 that enabled FERC to order wholesale competition and Open Transmission Access, implemented with FERC orders 888 and 889, and 2000. In addition, several events have impacted the progress and the debate of deregulation, the meltdown of California, FERCs SMD, and the Northeast Blackout. Those events led to 2005 Energy Bill, which resulted in NERC mandatory requirements and the introduction of Demand Response.

Two systems architecting heuristics says that “the most dangerous assumptions are the unstated ones” and “that all serious mistakes are made on the first day.” The assumption that the separation of federal and state jurisdictions does not have a distorting impact on electric markets restructuring needs to be reviewed. Under that assumption transmission and distribution seem to be two separate entities. A generative dialogue aiming to find the best argument should consider this item as the first. So, maybe in other places, like the BRIC countries which don’t have those unnecessary restrictions EWPC snared vision will have a better opportunity to emerge first.

As you all know, in the past two years, EWPC emerged as the third market under a generative dialogue, which is very simple market architecture and design: retail [and wholesale] competition, demand integration and ultraquality transportation. The first two are implemented by Second Generation Retailers (that handle all revenue streams from retail customers) as part of a value chain generation, retail, and customer. Ultraquality transportation is the result of demand integration to power system planning, operation and control, by Second Generation Retailers. The only utility company remaining is the transportation utility.

If I understand correctly, IMEUC is about wholesale competition, without retailers, without demand integration and without ultraquality transportation, leaving intact the incremental extensions of the Old Paradigm, which is exactly what the Cato Institute recommended to abandon. New hardware[/software] solutions should be left for company vs. company competition.

Reference and context: Continental Grid Vision Needed, by Martin Rosenberg, Editor-in-Chief, EnergyBiz Magazine

Global Electric Service Shared Vision

By extending the suggestion of Martin Rosenberg, Editor-in-Chief, EnergyBiz Magazine, a global electric service shared vision is needed. Such shared vision is open to gain a foothold for company vs. company competition in a state of the U.S., a country of Europe, or any of the BRIC countries.

Global Electric Service Shared Vision

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

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

In the Fifth Discipline there is quote by Robert Fritz that says “In the presence of greatness, pettiness disappears.” Peter Senge rephrases it as: “In the absence of a great dream, pettiness prevails.” Senge adds: “Shared visions foster risk taking and experimentation. When people are immersed in a vision, they often don’t know how to do it. They run experiments. They change direction and run another experiment. Everything is an experiment, but there is not ambiguity. It’s perfectly clear why they are doing what they are doing. People aren’t saying ‘Give me a guarantee that it will work.’ Everybody knows that there is no guarantee. But the people are committed nonetheless.”

Earlier in my interventions, I followed the suggestion of Geoffrey Moore to divide competition in two stages: 1) market vs. market competition and 2) company vs. company competition. Since my interest on EWPC is concentrated in the first stage, I now feel very comfortable to keep working towards a shared vision as if pettiness has disappeared.

So, the opportunities towards as to how EWPC will evolve a shared vision of universal electricity service might be initiated in a state of the US, in a country of Europe, or maybe with a higher likelihood in one of the BRIC countries, as I suggested in the EWPC article A Global Standard Market Architecture and Design.

For those reasons, I respect Professor Ferdinand E Banks decision not to participate in a generative dialogue. Many of his inputs, that seem to be intended to oppose EWPC, have been very useful to the generative dialogue insights that have emerged. Obviously, every person has the same right. However, more money is to taken out of the pockets with today’s experiments in Sweden and elsewhere because of all the ambiguity as they lack a clear vision (see more below about NERC and FERC).

I recall from a whitepaper I wrote in 1996, to propose the vision that has evolved as EWPC, that I quoted Odgers Olsen Jr. of Ernst & Young as saying something like this “In the discussions that we had with people in the power industry some visions are clearly defined, others are quite clouded. For those that are clouded, some say: ‘let’s go forward and refine the vision as we go; we need to have certain flexibility.’ Others don’t understand that the vision itself is clouded. Those people will start, and restart, again and again, until they are behind in the game.”

There are many people that will not be convinced that going for a shared vision is correct. There are many people that don't believe that there is a looming (systemic) crisis that is long overdue. Those people should be left behind as it is a waste of precious time trying to convince them, when they are not open to dialogue or to have the courage to be open to be convinced. Peter Senge said that “… I find that I spend very little time trying to convince people of my view, and I can honestly say that it makes life a lot easier and more fun.”

Time is better expended working with the many others that are open to be convinced that going for a shared vision is correct and believe that there is a looming (systemic) crisis that is long overdue. In addition they have the freedom to have their personal visions which they wish to become shared visions of an emergent solution to the systemic crisis.

My vision is NOT about deregulation, but re-regulation. The Old Paradigm of the power industry has stocks of capacity (provided under regulation under a responsibility to serve) which are under the control of the system operator as the mean to provide ultraquality service for the whole system. But that ultraquality only results by overbuilding transmission and generating capacity.

The New Paradigm of the power industry (wide open to be enhanced to become a shared vision) gives the system operator (under a responsibility to transport) the control the stocks of capacity (provided from the open market under prudential regulations), in addition to the control of stocks of demand, in accordance with the commitments that customer make in the open market under contractual relationships with Second Generation Retailers (also under prudential regulations) to provide ultraquality service for the whole system. Under EWPC the long run investments expansion plans in transportation (integrated transmission and distribution) will be at least costs. Generation investments of base load power plants in the open market will lead to the development of a futures market.

As the incremental extensions (symptomatic solutions) to the Old Paradigm like Open Transmission Access that have later required the introduction of NERC mandatory rules (to give the incentives to invest in transmission, which will not be at least costs) in response to very costly blackout and as FERC is implementing Demand Response by introducing modifications to NERC rules, excessive investments in unnecessary transmission and bureaucracy will lead to more costs that in the end will have to be paid by the end-customer. Each ambiguous and unclear symptomatic solution has generated its own stranded costs that now involve “massive investments.”

The resulting shared vision of universal (global) electricity service is a more efficient power sector leading to fewer costs for the whole and for individual customers after a while. EWPC is open to gain a foothold for company vs. company competition in a state of the U.S., a country of Europe, or any of the BRIC countries, to implement such certainly needed vision.

Reference and context: Continental Grid Vision Needed, by Martin Rosenberg, Editor-in-Chief, EnergyBiz Magazine

A Global Standard Market Architecture and Design

One of the BRIC countries (Brazil, Russia, India or China) is poised to be the enabler of a global Standard Market Architecture and Design, if U.S. companies decide to stay behind by keeping in place several inefficient statewide incremental extensions of the Vertically Integrated Utilities paradigm, none of which is able to become a U.S. standard, let alone a global standard. The EWPC standard will enable important global economies of scale.

A Global Standard Market Architecture and Design

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. 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 last two comments that I posted, yesterday under the post Oil Prices Torching from Marty Rosenberg, which is a good introduction to the second which I posted today under the reference cited below. A development of the optimal mix of resources that satisfy the needs of end-customers, will come from the demand side and from the supply side.

While developed countries will have initially very high percentages of resources from the supply side, developing countries will be able for the first time to provide commercial quality reliable service (almost no unintended blackouts) with lower percentages of resources from the supply side, as EWPC becomes a global Standard Market Architecture and Design.

Marty’s article concludes with “…BIG NEWS with huge implications for consumers, the energy industry, the American and world economy, global politics, global terrorism... You name it. So when you read about high oil prices, don't agonize. It may be just the birth pangs of a much better world. And a new era of human enterprise,” as he wrote. This is my first comment:

Hello Mr. Rosenberg,

Happy New Year,

The key sentence on the quotes of Arthur Kressner, director fo R&D for Consolidated Edison, is "If properly integrated with the grid, we could do this in a very effective manner benefiting the environment, consumer and the company." Readers are advised to take a look at the EWPC article Demand Integration is NOT the Province of Politics (please the link … to read it).

Under EWPC the utilities become just wires only T&D transportation utilities under an obligation to transport at ultraquality. Centralized and distributed resources should go to the open market with competition at wholesale and retail. The integration of demand should be done through a new institution that I call Second Generation Retailers. For more information, please go to the EWPC Blog . . .

The second comment says:

Dear Don,

California and other states of the U.S. seem to have foregone a great opportunity by locking in their power sectors in an increasingly inefficient development path. Other states that are in a wait and see attitude should consider EWPC, as an emergent worldwide standard market architecture and design.

The reality that FERC SMD ended in failure can't be taken as an assumption that a single worldwide standard is impossible. Important economies of scale are the best incentives that the standard will provide.

If just one BRIC country undertakes the development of EWPC, it will extend very fast towards many other developing countries under reinforcing feedback. The resulting convergence will comeback to find states and countries and their companies locked with non-compatible rules losing business later on in the game.

¡El que ríe último, ríe mejor!

Best regards,

José Antonio

Reference and context of the second post: Grooming Wind, by Ken Silverstein, Editor-in-Chief, EnergyBiz Insider.

No Te Lo Van a Publicar

El viernes 4 Diario Libre publicó DL: Ed. - Energía. El sábado 5 agregó DL: Espejo de papel. - Palabras. Ambos son críticas que se resumen en la concentración en soluciones sintomáticas a expensas de las soluciones fundamentales del sector energía y muy en particlar el sector eléctrico.

Desde el 15 de mayo del 2005 he venido publicando en esta Bitácora Digital del Grupo Millennium Hispaniola una solución que inicié en 1996 y que ha pisado los periódicos muy brevemente. Es una solución fundamental al problema eléctrico.

Una posible razón por la que no llega al a prensa es porque los métodos de la dictadura trujillista siguen campantes. Para entender esos métodos dictatoriales que corrompen al Cuarto Poder vale la pena escuchar la entrevista que hizo ARISTEGUI al autor del libro "La Otra Guerra Secreta," en el siguiente enlace. Me impactó la expresión No Te Lo Van a Publicar, pero sí se lo publicaron.

En la contraportada del libro aparece lo siguiente:

Cuánto costaba el silencio en México?
¿Quién decidía lo que se decía durante los sexenios del PRI?
¿Qué hicieron los dueños de los medios cuando el gobierno silenciaba a los opositores?
¿Dónde estuvieron los líderes de opinión, los columnistas, los reporteros?
¿Quién protestó?
¿Desde qué dependencia se callaba a los periodistas?
¿Los callaron a todos o hubo quienes prefirieron callar por voluntad propia?

En La otra guerra secreta el lector encontrará muchas de las respuestas que hacían falta. Un país que se busca a sí mismo, que trata de hacer las paces con su pasado y con su historia, necesita desnudarse para encontrar la verdad. En este libro, a partir de fuentes primarias del Archivo General de la Nación #de los fondos correspondientes a los órganos de inteligencia de la Secretaría de Gobernación: Dirección Federal de Seguridad y Dirección de Investigaciones Políticas y Sociales#, se desvelan los modos y las estrategias del gobierno, así como las posiciones y predilecciones de los comunicadores y dueños. No queda sin tratar ningún asunto, ningún #particular#. La mayoría de los reporteros, periodistas, líderes de opinión y dueños de medios #demuestra Jacinto Rodríguez Munguía# callaron por voluntad propia. Fueron los tiempos de la guerra sucia, una guerra clandestina y soterrada, una guerra implacable. Los tiempos en que los medios de comunicación fueron el aliado fundamental de las botas, las torturas y las eliminaciones extrajudiciales. Fue ésta la otra guerra, la guerra secreta, la de la alianza de los medios y el poder, la de la complicidad y las canonjías.

DL: Ed. - Energía

Ed. - Energía
Diario Libre: Opinión, 3 de Enero del 2008

Hasta ahora el Gobierno se ha mostrado muy tímido frente a las alzas del petróleo. El Presidente le habló al país, se están instalando semáforos inteligentes y se dice que se incautarán los vehículos oficiales que circulen sin necesidad los fines de semana.

Esas son curitas contra una hemorragia.

Lo importante es lo que se pueda hacer en las grandes políticas públicas, como es la energía renovable, que avanza a paso de tortuga dormida; como es el análisis serio de los costos en nuestro sistema eléctrico, que está lleno de grasa y de desperdicio por la gran cantidad de energía que se pierde o no se cobra.

Al Gobierno le ha faltado energía para atacar el problema de la energía, pues ni siquiera los proyectos a los que apostó, las plantas de carbón, ha podido iniciarlos

DL: Espejo de papel. - Palabras

El presidente Fernández afirmó que el problema eléctrico es el gran reto para la Nación. La idea, aunque cierta, sorprende. Leonel no se ha mostrado enérgico ante el problema energético. Los apagones son tanto de luz como de ideas. La verdad es que esta administración, como las anteriores, no acierta a definir una política eficaz para solucionar el problema. El Gobierno prefiere paliar que resolver, por eso pone toda su fe en los subsidios al sector. Los subsidios sólo sirven para mantener prendidos los bombillos, pero apagan las finanzas públicas y oscurecen el camino de las soluciones definitivas. ¡Palabras, palabras!

hfigueroa@diariolibre.com

Power System Operation Stocks and Flows

An important discovery about the non-trivial aspects of power system planning, operation and control is in the making, under a generative dialogue. Resources are needed to develop an update of Jason Black's PH.D. M.I.T thesis to simulate the EWPC architecture and design paradigm shift of the power industry.

Power System Operation Stocks and Flows

Thank you Fred,

Your post is very good, as you engage the generative dialogue as I asked.

From what you wrote, I infer that you confirm that Len “. . . is seduced by the early chapters in his econ 101 textbook, and so he didn't bother to read the later chapters, where he might have been informed that regulating [and re-regulating under EWPC as explained below] the electric industry makes a lot of sense.”

You are probably right that Prof. Schweppe didn’t take explicitly into account stocks and flows into his regulated (not deregulated) energy marketplace, but he included the criterion “Utility Control, Operation and Planning: Consider the engineering requirements for controlling, operating and planning an electric power system," which suffices to me to extend the regulated marketplace to a re-regulated one.

That criterion is the ultraquality imperative which is a true and non-trivial essential characteristic of vertical integration that also belongs to EWPC, but is missing from IMEUC. So, thanks to you, maybe we are discovering something new. This is what I see about introducing stocks and flows to the power industry, which necessarily is in draft form and thus wide open to enhancements.

The vertically integrated utilities (VIU) paradigm developed under the assumption of demand as an externality. Under the VIU paradigm, the job of the power system dispatcher is to accumulate generating capacity “stock” by interconnecting (and disconnecting) generating units to the power system according to a process called “security constraint unit commitment” to find out the proper places and the proper rates thereby operating the power system at ultraquality to satisfy the accumulated external load “stock” at each time and location. It is a tough job that involves important delays that result in the disequilibrium dynamics of the power system.

Under EWPC, demand is integrated to power system planning, operation and control with the aim of ultraqualty service, under the tough job to be planned (long run and short run) by 2GRs to aggregate “dispatchable” load stock in the wholesale market, by making contractual agreements with customers at the retail market.

It is in those agreements that most of the leverage is to be found to increase the efficiency of power sectors (i.e. avoidance of excesive capacity). Such agreements are already being executed in several states of the U.S. by demand response aggregators. However, the lack of a proper market architecture and design is the source of the FERC action on NERC mandatory requirements mentioned in the above post under today’s mess.

The lack of long run and short run planning of stocks (i.e. inventories) of customer demand response in the California debacle was one important missing item that let the incredible price spikes and costly rotating blackouts result.

As it cost a lot of money, instead of sending my heros to Upsala, I am sending through you this post to get their feedback. With regard to money, my priority now is to find the funds to develop the stock and flow diagram of power system planning, operation and control for EWPC to update the system dynamic model of Jason Black’s M.I.T. Ph.D. theses.

Best regards,

José Antonio

Reference and context: Grooming Wind, by Ken Silverstein, Editor-in-Chief, EnergyBiz Insider.

A.M. - Un pueblo adulto

Los políticos no quieren que el pueblo dominicano se haga adulto. Siempre están tratando de "protegerlo" de todos los males que le afligen y no lo dejan aprender de sus errores y ganarse la adultez como lo hemos hecho todos, levantándonos de nuestras caídas.

Hipólito, por ejemplo, justificó una vez la entrega tardía de la regalía pascual, en que había que evitar que lo gastaran todo antes de la Navidad. Franklyn Almeyda, justifica la veda de los fuegos artificiales para evitar accidentes lamentables por el mal manejo de los mismos.

Hay que establecer las medidas más absurdas porque la gente no sabe cuidarse a sí misma y los políticos tienen la "sagrada misión" de proteger a sus súbditos.

Debe ser por eso entonces que no nos dan educación de calidad ni buen servicio de salud, para que crezcamos mendigando desnutridos por la ayuda oficial.

Por ese camino nos hemos convertido en un país de pordioseros (limosnero es el que da limosnas), que tiene que esperarlo todo de la mano de los políticos que, de paso, se hacen multimillonarios. (Pero ese es un detalle insignificante, que no vale la pena mencionar)

Nos han castrado tanto que tenemos personas refugiadas en barrancones desde hace casi 30 años que todavía "esperan" por la ayuda del Gobierno. ¿Cómo es posible que alguien pueda pasarse 30 años esperando por una ayuda que no llega y seguir viviendo en las peores condiciones de existencia?

Eso sólo es posible porque nos han castrado. Nos dicen hasta qué hora podemos beber, las cosas que podemos hacer y las que no. Somos un pueblo enano, porque ya tenemos mayoría de edad, pero no nos dejan crecer, porque ese es el gran negocio.

atejada@diariolibre.com

Original publicado por Diario Libre el 23 de Diciembre del 2007, 9:34 PM

Solar and Micro-Wind Breakthroughts?

In Solar and micro wind tax credits, jmaximus9 wrote on 12/13/2007:

I have a better idea, go back to a Carter era style subsides [http://www.dsireusa.org/ ] for installing solar and micro wind and other energy conserving device in the home and small biz sectors... Solar panels should be as common as decks or swimming pools in the southwest [http://renu.citizenre.com/index.php ]. Microwind should be the same way in the great plains [ http://www.windterra.com/ ]... None of these things need major breakthroughs, they are ready to use now... Power to people!

My response is as follows: That solar and micro-wind don’t “need major breakthroughs, they are ready to use now...” seems to be a very good point. However, it is a policy that leads to high inefficiencies under today’s power sector paradigms designed for demand as an externality, resulting in a total lack of coordination with the interconnected power system . EWPC is a paradigm shift which aim to increase total social welfare, by increasing power system coordination and economics while integrating demand.

The major breakthrough required is for those potential “disruptive technologies” to be integrated into power system planning, operation, and control. The glue to integrate them (demand integration) is the development of information technology (intensive) business model innovations by Second Generation Retailers - 2GRs.

To enable such integration, the most important issue is to shift the paradigm from the energy-making business to the energy-moving business (read please the article Nanosolar Breakthrough and the Old Paradigm, which was posted under the piece "Big Solar News: Nanosolar is shipping printed solar cells," also by Kevin Bullis). Solar, micro wind and other renewable investments should compete with in the process to integrate demand to the power system.

Any tax credits should be available to develop all the resources of the demand side, including those of information technology. The resources of the supply side which are energy intensive are already highly developed.

Nanosolar Breakthrough and the Old Paradigm

Nanosolar has made great progress as it has faced and apparently surpassed many barriers so far. However, they are still facing the most important barrier, which is the old electric power paradigm centered on central generating station.

Nanosolar’s product is in essence a distributed generation product, but as there is a strong barrier against the development of the resources of the demand side its first applications are supply side applications.

Michael Power writes a clear message to characterize the old business and the new business we are entering in the fifth technological revolution: "Electricity consumers becoming part-time producers – “pro-sumers” – and utilities shifting from “energy-making business” to “energy-moving business”…

There is a new paradigm that has emerged in the past two years, as an extension of research work done originally at MIT, where utilities shift to become just transportation utilities that do the actual movement for generators and customers (not just consumers anymore). Under the new paradigm a set of Second Generation Retailer - 2GR do the actual business transactions under competition. That paradigm is electricity without price controls (EWPC). To break down the barrier faced by Nanosolar and many innovative companies, the main mission of 2GRs is the development of the resources of the demand side.

For more details, please take a look at the EWPC article Demand Integration is NOT the Province of Politics. Under the article there is a set of comments which were posted under another Kevin Bullis TR Editors’ blog, explaining the EWPC market architecture and design paradigm shift paradigm and also responding davel’s questions “why is it important to slash energy use” to additional questions posed by frankellim.

This comment was posted as Old vs. New Paradigm under Technology Review Editors blog, post "Big Solar News: Nanosolar is shipping printed solar cells," by Kevin Bullis.

Making Electricity a Commodity

To make electricity a commodity, a proper market architecture and design has emerged in the last two years, as the electricity without price controls (EWPC) paradigm. The structural flaws in the current incremental extensions of the vertical integration paradigm will not go away by implementing NERC mandatory requirements, as it prevents the necessary coordination leading to maximum social welfare.

Making Electricity a Commodity

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. 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.

Electricity is not a regular commodity like gasoline, unless it meets the requirement to properly managed systemic risk of system failure. To explain how to make electricity a commodity, I will try to convey the information which might be non-trivial on the EWPC articles Demand Integration is NOT the Province of Politics, To BE or NOT to BE Smart Metering and Market Research Doesn’t Work Yet for Demand Integration, and their respective hyperlinks, in another way.

As far as I know, only the original vertical integration and the EWPC paradigms are designed to satisfy such requirement. As you can see in the GMH article NERC Compliance and Power Sector Structure, NERC mandatory requirements are just a set of costly afterthoughts, which “will no fix the structural flaws remaining.”

Missing in the afterthoughts is that systemic risk of system failure requirement under vertical integration aimed to provide maximum social welfare by developing the power system infrastructure under least costs expansion plans. Under EWPC the transportation infrastructure is to be developed under similar least costs to enable maximum welfare in the open market. Coordination is brought about by EWPC market architecture and design paradigm. When customers take their decisions independently the results can be way off the social welfare optimal as lack of coordination will lead to a lot of value destruction.

As the work of FERC is correctly showing, demand response (and thus energy efficiency) investment and service plan procedures information is required beforehand to determine the price of electricity when demand gets integrated into power system planning, operation and control. EWPC dual markets design provide how customers will interact in supplying the needed information while selecting 2GRs’ service plans, which under competition will become business model innovations.

The transition from vertical integration to EWPC should proceed in a reasonable time frame in which supply side risk management gets reduced by increasing demand side risk management of system failure, as the customers’ education process continues.

The alternative is to go back to vertical integration to keep receiving a monthly bill and using costly generating reserves to manage systemic risk of system failure, which in turn lead to very costly electricity.

¿Mi Regalo de Navidad?: Productividad con Cambio Paradigma Educativo

¿Mi Regalo de Navidad?: Productividad con Cambio Paradigma Educativo

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

Los elementos esenciales de un cambio de paradigma educativo nacen del impacto de la 5ta revolución tecnológica que está transformando a todos los sectores. El sector educativo es uno de los que más serán impactos por los cambios tecnológicos, afectando grandemente la productividad de los distintos egresados y de los sectores productivos.

Siguiendo un ejemplo de la venta de sillas de madera, David McWilliam, MD at Cognos SA, escribe que de acuerdo a la consultora McKinsey existen tres formas primarias de trabajo y actividades de negocios:

• Trabajo transformacional: extracción de materias primas y/o conversión a productos terminados (tomar madera y hacer una silla.)

• Trabajo transaccional: interacciones que se desdoblan de forma basadas en reglas y que pueden ser escritas o automatizadas. (Tomar madera pre-cortada y construir sillas en una línea de ensamblaje.)

• Trabajo tácito: interacciones más complicadas requiriendo un nivel superior de juicio y envolviendo ambigüedad y extrayendo conocimiento tácito o experimental. (Administrando las ventas de sillas para una región específica.)

Con un amplio progreso en las zonas francas y el turismo, los dominicanos hemos demostrados que podemos realizar el trabajo transaccional con alta productividad. El sistema educativo dominicano parece estar bien orientado a esa clase de trabajo.

Según McWilliam, de acuerdo a McKinsey el trabajo tácito ha aumentado en los últimos 9 años a más del 70% de los nuevos trabajos en los Estados Unidos, llegando al 40% del empleo total. No obstante, informa que hay un gran desfase porque se han invertido seis veces más en tecnología para trabajo transaccional que en trabajo tácito. Como el trabajo transaccional es fácil de duplicar, la ventaja competitiva depende cada vez más de la productividad del trabajo tácito.

Todo luce indicar que las quejas de los sectores productivos dominicanos pueden radicar en el desconocimiento de ese tipo de trabajo y de ese desfase. Si es así, ese es el regalo de Navidad que les ofrezco a aquellos que no lo habían entendido todavía. Lo que requieren es personal que sea capaz de realizar trabajo tácito, pero el sector educativo no esta preparado para suplirlo en las cantidades necesarias. Estamos en frente de un nuevo renacimiento, pero no solo para las elites.

Se necesita entonces transformar el sistema educativo dominicano vía un cambio de paradigma que permita suplir la demanda de empleados capaces de realizar trabajo tácito. Los educadores y los estudiantes deben entender que el trabajo transaccional es un trabajo que puede ser y es reemplazado por las máquinas y los sistemas de información.

En el nuevo renacimiento, la educación liberal necesita ser enfatizada más que nunca en el sistema educativo para poder realizar “interacciones más complicadas requiriendo un nivel superior de juicio y envolviendo ambigüedad y extrayendo conocimiento tácito o experimental.”

La escuela-fábrica de producción de trabajadores para el mercado masivo debe ser cuestionada y en su lugar dar paso a, por ejemplo, un nuevo modelo para el mercado de educación casi a la medida. La interacción de los sectores productivos con el sector educativo puede ayudar a facilitar el ambiente necesario aprovechando los sistemas de redes de información. Las aulas pueden entonces que se muevan de sitio para los niveles superiores.

En tal sentido, y con base a la nota Política de Educación para un Desarrollo Humano Inclusivo y Renovado, se podría pensar en grandes profesores que ni siquiera estén ubicados en el país y cooperando con excelentes asistentes ubicados en los sectores productivos o en escuelas especializadas y no en la escuela-fábrica. Es así como podría ser el nuevo paradigma educación superior.

Espero que estas ideas puedan ayudar a reorientar el debate en cuanto a la necesidad de desarrollar líderes a todos los niveles, pues son los líderes los que están preparados para realizar el trabajo tácito.

Market Research Doesn’t Work Yet for Demand Integration

Demand integration is a discontinuous innovation and the reason why the responses of customers are way off with respect to the non-trivial concept of demand response. Politics should NOT continue to play major interventions in regard to betting on outcomes in alternative energy and demand response, as the installation of AMI is developed by 2GRs under competition. Great opportunities are waiting “that promises much more value creation over time” under the EWPC paradigm shift.

Market Research Doesn’t Work Yet for Demand Integration

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. This article is an unedited, an uncorrected, draft material of The EWPC Textbook. Please write to javs@ieee.org to contact the author for any kind of engagement.

In the article Demand Integration is NOT the Province of Politics it is very clear that there are non-trivial aspects of electricity and that there is a need for a paradigm shift of the power industry as a consequence of demand integration. The non-trivial aspects of vertical integration make possible to plan, operate and control by risk management on the supply side without demand integration. It is also clear from the article that according to FERC demand response, the basic element of demand integration also includes demand side energy efficiency.

It is important to see that the old whole power industry paradigm had two separate interdependent markets, the so called vertical integration controlled market up to the customers meters and the demand open market of customer devices beyond the meter that transform electricity into useful energy services (see below a quote of Jamie Wimberly, CEO, EcoAlign, on those services).

The EWPC paradigm restructuring discovery separates the same whole power industry in a different way into two interdependent markets, with also one open, and the other controlled. The controlled transportation utility market retains the non-trivial aspects of the vertical integration controlled market as demand response is executed to bridge the retail and wholesale open markets to produce ultraquality transportation. Those controlled markets are the machines that should be ran by engineers, no politicians, if we want to enable the maximum social welfare from electricity. For more details, please see the articles Free Market and Central Planning, Under R1E2 and Engineers Needed for Lower Prices.

The whole point is that under EWPC it is possible to plan, operate and control by a mix of supply side and demand side risk management to offer high service system (not customers) reliability even without storage. Those concepts are explained in the article An Alternative Business Case for Demand Response that I wrote as a rebuttal to The Business Case for Demand Response, which Jamie co-authored with Thomas Brunetto, Managing Director, Distributed Energy Financial Group. By the way, the analogy with gasoline doesn’t hold because electricity is produced and consumed at the same instant and demand response requires planning with customer supplied information.

Regarding another key view of the paradigm shift, in response to my comments to the article The Future Utility Customer Service Model, Jamie wrote “At my firm, the Distributed Energy Financial Group LLC, we believe the changing utility customer service model is simply one manifestation of a technological revolution akin to the industrial revolution that promises much more value creation over time.” That revolution is precisely fueling the paradigm shift of the power industry by enabling demand integration that “promises much more value creation over time.” Making bets on AMI investments should be avoided and left to competitive customer service model as the utility is restricted to transport the electricity.

Looking at the “green gap” from another angle, in that same article, Jamie wrote “And what do customers want? Most customers are not buying ‘alternative’ or ‘green,’ but are more interested in cheap, reliable energy sources. In fact, I would argue that they are not even buying energy per se, but rather comfort, convenience, light, entertainment, mobility, etc. Greater levels of efficiency allowing for greater levels of consumption of what people desire have the virtuous impact of being ‘cleaner and greener.’ One must be careful to not confuse cause and effect.”

So, educating customers without “greater levels of efficiency” will not necessarily support customers’ efforts and investments in new technology like those suggested by Bob Amorisi. In fact, differentiation in customers’ (not system) reliability is akin to comfort and convenience energy service differentiation that leads to affordable prices for a large segment of any population that can do without full ultraquality transportation.

Such paradigm shift is the reason why market research doesn’t work in this particular initial situation. When disruptive technologies (discontinuous innovations) occur people just don’t have a clue of what is going on. One of the examples given was somehow the very small number of computers that IBM forecasted initially by market research. Another example is that of Henry Ford famous quote “If I had asked people what they wanted, they would have said faster horses.”

That explains why the responses of customers are way off with respect to the non-trivial concept of demand response and not so with the apparently familiar energy efficiency concept. What happens is that customers will discover the value of the technology later on fueling 2GRs business model innovations.

As for who should pay for AMI, under EWPC it is 2GRs that are responsible for their respective (Retailers’) Enterprise Solutions (see K2007 Retailers’ Enterprise Solutions). In addition, Nat Treadway, Managing Partner, Distributed Energy Financial Group, LLC, in the article The Dawn of Electricity Competition: Efficient Prices and Efficient Choices, whose theme is “regulated pricing inhibits efficiency,’ explains how to develop and implement a default service transition, which I suggest makes very easy to implement a complete AMI transformation by 2GRs.

The possibility of such an organized transition gets me back to the article To BE or NOT to BE Smart Metering. From the viewpoint of the individual customer, and not from the political regulator, the Ontario Electricity Coalition seems to understand that installing “smart meters in all homes in the province” is wrong. Since Bob wrote “As far as EWPC, I am very much in favour of less price regulation if it promotes free markets for consumers,” during the transition, customers will be able to freely choose whether or no to stay in default service. The most conservative, like the Ontario Electricity Coalition, will stay on default service waiting for the best deals under competition.

So the job of the politicians at this stage is to adopt very clear market structure and rules. EWPC is such a market architecture and design. As the controlled utility market guarantees ultraquality transportation, the open market becomes a true commodity market of electricity without price controls and under prudential regulations.

Reference and context: The Green Gap in Communications and Messaging, by Jamie Wimberly, CEO, EcoAlign and Andrea Fabbri, COO and Chief Marketing Officer, EcoAlign

To BE or NOT to BE Smart Metering

The lack of a consistent market architecture and design paradigm shift creates a Babel Tower in Ontario. There is a need to consider the whole power industry and not isolated incremental shifts making like risky bets of installing “smart meters in all homes in the province.”

To BE or NOT to BE Smart Metering

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. 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.

One case in point about a green gap is in today’s Energy Central Daily news. Ontario should get smart, follow Hydro Quebec decision to abandon time-of-use meters, electricity coalition says. "The Ontario government would be doing consumers a favour if it were to follow the example of Hydro Quebec and abandon its plan to install so-called smart meters in all homes in the province, says the Ontario Electricity Coalition."

“… Hydro Quebec has decided that the expense of installing the meters would be borne by consumers through higher electricity rates…”

"Time-of-use meters are less about energy conservation and more about raising the cost of electricity to pay for private power generation,"

"There is little evidence that smart meters will reduce electricity consumption and plenty of evidence that prices will increase. The cost of installation alone in Ontario is more than $2 billion," he said. "There really is nothing smart about basing an energy plan on time-use-meters in Ontario homes… That money would be better spent on an effective energy conservation plan."

The lack of a consistent market architecture and design paradigm shift creates such a Babel Tower. There is a need to consider the whole power industry and not isolated incremental shifts like installing “smart meters in all homes in the province.”

Under EWPC, demand integration (as explained in the above post) is about both energy conservation and reducing the cost of electricity by developing demand elasticity with efficient pricing.

There is a great risk that the smart meters bet made by regulators and utilities will result in a price increase for customers. Those risks are better handled through the market by competitive 2GRs service plans that combine interdependent decisions on investments by customers. In addition, instead of installing meters in all homes, it is more efficient to do it during a transition period under competition.

Demand Integration is NOT the Province of Politics.

Demand integration and system reliability are not the provinces of politics, but of engineering systems and competition. FERC’s demand response staff assessment begs the question of a properly restructured electricity market. The highly complex paradigm inherent on its market structure will become even more complex if FERC’s correct instructions are implemented. A paradigm shift to the EWPC market structure and design is expected to avoid getting the developed countries’ power industry into that of third world service.

Demand Integration is NOT the Province of Politics.

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. 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.

As described in the "2007 Assessment of Demand Response and Advanced Metering," the Federal Energy Regulatory Commission (FERC) has issued the incorporation of demand response to transmission planning; the revision of NERC mandatory requirements to incorporate demand response; and the proposal to add demand response enhancements to competition in wholesale markets. As can be seen below, those three correct instructions beg the need for properly restructured electricity markets.

Looking very carefully at the instructions, those signals highlight the increasing complexity of the open transmission access incremental extension of the vertically integrated utilities (VIUs) paradigm. It is now very clear that those begging signals justify the need for the paradigm shift to the electricity without price controls (EWPC) paradigm in order to follow the design mantra “simplify, simplify, simplify.”

EWPC is the only properly restructured electricity markets available, where complexity is reduced by the discovery of two simplified interdependent markets: one is the controlled transportation (T&D) utility market and the other is the open commercial market. See Free Market and Central Planning, Under R1E2 (please hit link here and further down to get more details).

Second Generation Retailers Required

While utilities and third parties have the responsibility to integrate retail demand to wholesale markets, under EWPC the institution of Second Generation Retailer - 2GR is the sole responsible, like it used to be under the original VIUs paradigm. So instead of customers facing two institutions they will be able to have the whole relationship with the customers. As competition between utilities and third parties depends on the political process, on a state by state basis, innovation and progress is being delayed.

In addition, to further justify EWPC, in FERC’s assessment demand response is being extended to include energy efficiency. A simple explanation is that the latter can be understood as a long run demand response. This insight is very important because it recognizes that customers’ investments in short run demand response are interdependent with investments in long run demand response.

Interdependency is one key element to justify the need for retail competition and thus retailers. See The Sixth Disruptive Technology for more details on the other interdependent investments to be made by customers and retailers. It is now clear that 2GRs will tightly integrate the other five disruptive technologies with their business model innovations.

System Reliability is Non-Trivial and Not the Province of Politics

The vertically integrated utilities (VIUs) true and non-trivial paradigm led to a highly reliable electric service for many jurisdictions that understood and applied the paradigm. At many other locations that didn’t understand the non-trivial paradigm, usually known as third world electric service, unreliable service was offered. The knowledge accumulated behind of the true and non-trivial VIUs controlled market paradigm (for example by PJM) was based on the development of the theory and practice of physical risk management for an industry without energy storage that considered reliability and demand as externalities.

The result is a highly developed long run and short run supply side physical system risk management body of knowledge to offer commercial reliable service even without electricity storage, which is known under the terms system adequacy, supply security constrained economic dispatch, contingency analysis, loss of load probability studies, etc.

As the electric industry has develop its own risk management methodologies, which are true and non-trivial, it seems much more complex for other intelligent and important people, just as “Paul Samuelson said that a doctrine is non-trivial when ‘it is attested by thousands of important and intelligent men who have never been able to grasp the doctrine for themselves or to believe it after it was explained to them.’ The EWPC doctrine is logically true, coherent and non-trivial. Reform should be based on knowledge and facts, not only on the political processes. See EWPC is a True and Non-Trivial Doctrine.

Today the responsibility for system reliability is divided into federal and state regulators, NERC, and RTO/ISO under a political process. However, under EWPC it is just the transportation institution that is responsible, like it used to be under the original VIUs paradigm. That institution is the controlled transportation (transmission and distribution) utility market, being responsible for transportation ultraquality. By doing so, those institutions are way into the true and non-trivial aspects of electric power systems, which are not the province of politics, but of engineering systems.

Transportation Ultraquality is the Province of Engineers Not Politics

The ultraquality imperative, was explained as follows in EWPC: People Coordinating and Cooperating with Electrons Part 2:

Eberhart Rechtin and Mark Maier, in their book “The Art of System Architecting,” explain that “social system quality… is less a foundation than a case-by-case trade-off; that is, the quality desired depends on the system to be provided. In nuclear power generation, modern manufacturing, and manned space flight, ultraquality is an imperative. But in public health, pollution control, and safety, the level of acceptable quality is only one of many economic, social, political, and technical factors to be accommodated.”

In the first case, the experts are the engineers. For the center stage, controlled market, system engineer institution to assures that electrons and people have the same purpose, as I mentioned on 12.30.06, ultraquality is an imperative to manage short run and long run systemic risk, with both supply side and demand side resources.

In the second case, according to Rechtin and Maier, the accommodation is done by the architect with “a professional response to the public needs and perceptions.” It is such unjustified perceptions that fueled the decade long debate. Bill Hogan mistake was that he didn’t understand what Fred Schweppe meant by the fourth criterion: “consider the engineering requirements for controlling, operating and planning an electric power system,” which can only be met by ultraquality. As time has advanced and new digital technology market share becomes larger, electricity demand for quality is only increasing. A professional response is needed, however, for the remaining, non real-time, free market activities of retail and generation. EWPC for the customers is such a response.

Demand Integration is the Province of Competition Not Politics

FERC’s assessment states “In November of 2006, the Commission and the National Association of Regulatory Utility Commissioners began a demand response collaborative effort, co-chaired by Commissioner Jon Wellinghoff, to coordinate the efforts of the state and federal electric regulators to integrate demand response into retail and wholesale markets and planning." Demand response integration by 2GRs under competition and open transportation access make both retail and wholesale competition a lot simpler.

Such political collaborative to integrate demand is apparently needed because of the present system structure. The “Increased activity by third parties to aggregate retail demand response,” reported by FERC, identifies an activity that should be performed by the 2GR customer facing institution. Under EWPC the integration of demand response to wholesale market is to be performed by 2GRs.

Reference and context: FERC Assesses Advanced Metering Programs by Bill Opalka, Editor-in-Chief, Topic Centers, Energy Central