This doesn't mean that smart metering should be ignored, but on the basis of what I have seen in Sweden, the problem is with deregulation and its very negative effect on the supply side.

It is my view that giving poiticians more breathing room to make a decision will result in no decision being made. Give a politician any excuse to NOT make a decision and that is what you will get - No decision.

North America is being fooled into believing that conservation, wind energy (and other dilute energy sources), and the "better management of existing infrastructure" is the key to our energy future.

Unfortunately this is misguided and will result in wholesale failuires both at the production level due to ageing plants being driven beyond their design life at ridiculously high capacity factors and at the grid level where ageing transformers are being loaded to theitr maximum to avoid having to build new lines.

Smart meters - although maybe well intentioned - will simply make that worse. All it will do is allow the current crop of indecisive politicians to "leave it to the next guy" when his or her term of office runs out. Blackouts of a scale we have not yet seen will be the inevitable result...and of course you will not find a single politician to blame.

They will be living the life of riley in their Gore mansions with indepent fossil fuelled generators...while the rest of us freeze or bake.

Malcolm

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."

“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.

About Mr Gore and his doings. I recently received an angry note from a colleague in the UK saying that my slandering of various anti-Gore, anti-climatel warming academics was going to get me into serious trouble. The only "slander" I launched about those ladies and gentlemen was that they probably were rotten teachers, which is one of the things that caused them to make so much noise in this climate warming thing. If they weren't rotten teachers, they would understand that no economic harm is done by believing that global warming is a serious problem, WHETHER IT'S TRUE OR NOT.

I do however apologize for calling electric deregulation a malicious farce. Actually it's a malicious scam, and I think that van Doren and Taylor should be congradulated for reversing their position.

I am sure they will not reverse their position as for the malicious scam. Sooner or later, however, they or the Cato Institute will have a new position with respect EWPC as the new electric power paradigm.

Regards,

José Antonio

Maybe your colleague in the UK made reference to the British court that ruled this week that Gore's Oscar-winning documentary on climate change contained nine errors and exaggerations and should be shown in classrooms only with appropriate warnings. Do you suppose one of those warnings will be: "...no economic harm is done by believing that global warming is a serious problem, WHETHER IT'S TRUE OR NOT."? Have no fear, no less a personage than Richard Somerville of our Scripps Institue of Oceanography is quoted in today's San Diego Union as saying, "The public has been buffeted for a long time by different views, by propaganda and disinformation, by people in denial. Now you have the imprimatur of the Nobel Prize for a group - the IPCC - which has always strictly been about science." All this in a headline-grabbing article lionizing the inventor of the internet for the Nobel his work on climate won. To be fair the Union allowed that: "In 2007, critics are reduced to arguing that the Nobel, perhaps the world's most prestigious award, has all the cachet of a Cracker Jack prize. (Or as Rush Limbaugh harrumphed yesterday, the Oslo, Norway-based Nobel committee had 'rendered themselves a pure, 100% joke.')" Top-notch entertainment!

When Murray Gell-Mann won the physics Nobel, he suggested a kind of aparteid on the stage of the 'Concerthuset' in Stockholm, where the Swedish king passes out the awards. To be precise, the economics laureates would not be allowed to sit with the 'real' scientists. He didn't say anything about the literature and peace laureates, although both of those are pretty much a joke most - though not all of the time.

As for Mr Gore, when I was working at the engineering school in Bangkok, they showed his film. Much to my surprise, the place was jammed. Such is the power of this topic. What I want is to take this power and use it to 'alter/adjust' thinking about energy: in the light of global population growth and the escalation of demand, the present arrangement/outlook is ominous. Specifically, we shouldn't allow the ignoramuses to force a nuclear retreat, and we need a viable replacement for conventional motor fuels, as well as a lot of other things that you probably know a great deal more about than I do.

Thus my conclusion that even if there is no global warming, there is no harm in saying that there is. I could probably elaborate on that, but to be frank, it seems obvious to me. For instance, I consider myself a candidate for the Nobel prize in economics, because I also believe that the Nobel committee will forget that for the last twenty years I have referred to them as charlatans. That belief makes me work a little harder. Moreover, where possible economic losses are concerned, I don't see it. New or more efficient sources of energy will mean gains rather than losses, and perhaps in the short run.

Finally, the errors and exaggerations in Mr Gore's climate warming epic. The committe that chose Gore arn't interest in errors, and wouldn't know an exaggeration from an outhouse.

Fred

Excellent concise summary of my position also, though I would also include "Though the inverse statement is NOT true. {even if there is global warming, there is no harm in saying that there is not.}" -- its simply a matter of what are you willing to have on your record when done.

Malcolm: "Smart meters - although maybe well intentioned - will simply make that worse. " This is a flat error. Smart metering implemented properly (with a genuine fair market where all generation is treated equally) will be a strong enabler to such technologies as DG and Micro-CHP. If every unit of natural gas now consumed were burned in a 35% efficient electricity generator first, then the waste heat used for the low-quality purpose now being served, you would have absolutely no need to be moaning about antique coal plants or transformers.

The thing that really gets to me relative to the climate change debate is the implied assumption that climate change that increases average global temperatures is necessarily bad. It is all the disaster talk that Mr. Gore represents that is the real disaster.

Almost concurrent with SD U-T's peace prize article, an unsolicited reprint of "Environmental Effects of Increased Atmospheric Carbon Dioxide", Journal of American Physicians and Surgeons (2007) 12, 79-90, arrived via USPS. It was accompanied by an interesting petition form that asked the U.S. government to reject Kyoto 12/97 and similar proposals. The reprint challenges laureate Gore's claims of epidemics of insect-borne diseases, extensive species extinction, Pacific island flooding catastrophes, ocean acidification, increased hurricane and tornado frequency/severity, and increased human heat deaths from a 0.5 deg C/century heat rise as inconsistent with observations. Results of increased carbon dioxide fertilization experiments are also presented as beneficial in the reprint. It appears that Kenneth is not alone in his skepticism.

But even so, I think that I'm going to continue to go with the first team on this, even though I don't mind hearing of of a proposal to reject the Kyoto circus. And incidentally, Laureate Gore in NOT on my first team.

Fred

At 0.18 degC per decade, by my arithmetic that comes to 1.8 degC per century and accelerating. You might be wiser to get your climate science elsewhere.

http://www.noaanews.noaa.gov/stories2007/s2876.htm

Look at the economics of daily life for Americans. If doing the laudry at 10 pm saves 50 cents over doing it at noon, do you really think that is an adequate incentive? People will spend $20 to buy fast food for dinner that they could prepare at home for $2, all for a savings of half an hour. Consider the electrical dollar savings in context of daily opportunity costs.

Look at marketing plans for cell phone usage. What people seem to find attractive is a bundled, no restriction plan so that they have to spend no effort on decisionmaking for cell phone use and suffer no risk of unbudgeted overruns. That is close to current residential electrical service rates today except that total consumption of kWhr is charged.

I suspect that most people will carry on with optimizing their time and activities and recognize that their electric bills have increased because of another "great idea from government" that made their lives more complicated rather than more simple. Most industrial users already have TOD rates. Expansion to commercial customers may or may not be worthwhile.

As Professor Banks noted, the real solution is more generation capacity and transmission investment that at least equals (depreciation + growth). If automated remote metering can now be installed with operational savings (and that includes savings in dog bites) exceeding capital and maintenance costs, then bring it on. Residential time of day rate schedules are attempts at unnecessary behavior modification by government to cover its own failings.

We both understand the meaning of "unsolicited", don't we?

Now, just to spin you up a little more, here's another quote from the reprint, "Since 1940, hydrocarbon use has risen 6-fold. Yet, this rise has had no effect on the temperature trends, which have continued their cycle of recovery from the Little Ice Age in close correlation with increasing solar activity."

Oddly enough, the 0.5 degC/century noted on reprint Figure 4, Annual mean surface temperatures in the contiguous United States between 1880 and 2006, is extracted from National Climatic Data Center's "Global Surface Temperature Anomalies (2007)", http://www.ncdc.noaa.gov/oa/climatic/research/anomalies/anomalies.html, and "NASA GISS", http://data.giss.nasa.gov/gistemp/graphs/Fig.D.txt. When cross-correlated with your reference, these two seem to yield noaa.gov as a common thread. The reprint authors or, perhaps, NCDC folks claim, "The slope of the least-squares trend line for this 127-year record is 0.5 degC per century." Oh yes, the reprint authors note increasing and decreasing trends for shorter intervals in the 127-year record. They find, as you did, about +1.5 degC/century between 1976 and 2006. They also find about -1.0 degC/century between 1938 and 1976 and about +2.0 degC/century between 1910 and 1938. All this, of course, sets up their argument that U.S. surface temperatures correlate nicely with solar activity between 1900 and 2000. Now given our experience with the sensitivity of trends to interval magnitudes, we should probably fall back on Fred's "...WHETHER IT'S TRUE OR NOT...", which probably applies to the certainty of arguments about systems subject to "black swans".

The whole point of the article "Rethinking Electricity Restructuring as EWPC," posted above, is that the Burnett and Shurtleff are missing that smart metering is just one of a set of at least 6 technologies that self reinforce each other to make the electric power industry reliable and cost effective in the 21st Century.

Regards,

José Antonio Vanderhorst-Silverio, Ph.D.

Insiders and politicans may think they have a better idea for arranging and pricing electric service but the customer will ultimately have a say.

Our customers have to have electricity and will demand it through political action if necessary. They have a variety of needs to be met from their electrical service. Of course price is one but reliability and low personal intervention are two other factors that they have come to expect. People don't have to think about electricity being there whenever they want or need it. They don't have to read their own meters nor ration it through time-of-day price signals.

Can anyone point to research (like marketing surveys) saying that customers will chose a high touch, high intervention, self-rationed electrical pricing model over the current forgettaboutit model? At what savings in monthly bill will they find the choices equally attractive? If 50% of the cost of service is fixed distribution and transmission and admin (rule of thumb), even if generation were free we couldn't reduce rates by more than 50%.

Frankly, I suspect that less than 5% of residential customers would be interested in switching. Those who rely on electric heat in cold climates might be interested since their current draw could be skewed off-peak but simple, specific rates might be easier and cheaper to administer.

Residential ToD metering is a push technology attractive only to economists, environmentalists, and lazy politicians (and meter salesmen). The cost effective path is investment in more nuclear power generation and better transmission.

I think you are correct. In the late 1990's I lived in AZ. We had time of day rates from APS. We installed a simple timer in our system to lock out the water heater and electric dryer during the peak period, which if I remember correcly was 10AM to 8PM Monday - Friday. By accepting the time of day rates we got about a 10% break on the rate at other times and a 20-30% penalty during the peak period. We also had a thermostat that allowed us to set the air conditioning temperature higher during those hours. It was straight forward and simple.

Ken

Your argument against the efficacy of smart metering, and those of some others, are based on applying costly smart metering in order to implement a dumb regulated flat-rate market pricing system. IMEUC is different, in that the customer ('s robot agent meter) is exposed to real prices in realtime. When the LMP market begins to approach a "Rate Cap" of typically $250 / kwh, that 5 kwh dryer run in mid-day is going to start costing that careless customer $1,250 . A somewhat different proposition regarding opportunity costs. I realize that is a rare and unlikely event, but still, even if a monthly peak goes to 1/10th of that it's a dramatically different proposition than you present.

Those that discount the DG/DR potential now remind me of those that bawked at the thought of personal computers being a better solution that centralized mainframe systems renting out connections for a healthy fee. Equally transparent motives there, I think.

So a careless housewife (or child) decides they need a dryer load done NOW. End of the month comes and the electric bill is over $1,000. Papa screams bloody murder at the idiots who allowed such a rip-off scheme. He calls his state legislators that he can't pay the electric bill AND his mortgage.

Todd wants to be able to reach into a customer's home and turn off the heat or air conditioner to meet the needs of the utility. You can kill people that way. Don't you think that might create a bit of populist pushback?

What kind of distributed generator will the average homeowner invest in? The best case I can think of would be solar panels and those only make sense as must-run generation - you don't turn off a solar panel except when the grid goes dead. Any other generator would only be allowed in California if it was fueled with natural gas. Could those dinky generators beat a CCGT's heat rate AND have lower emissions?

Advocates think they can sell ToD metering and remote demand destruction to the "authorities" but I'd bet the average American will reject this as an unnecessary and unwelcomed intrusion and a bad deal not worth the cost or savings. It will join deregulation in the list of bad ideas gone wrong. It is social engineering as a replacement for REAL engineering.

Also, you obviously have no idea of DG systems if you can't see the potential of large groups of people with dispatchable DG just waiting for the optimum price to dump their excess kwh's to the grid at. And questioning home generators' efficiency against CCGTs? Surely you can do better than that. Show me a CCGT that you can use the waste heat down to 140 degF on!

The fact is that there are no central generation techniques that compare to the potential of home systems. Home systems have more room for price reduction due to mass production than their opponents. They eliminate transmission lines and can be used to flatten grid load. (though that's a customer choice) They build homeowner equity and LOCAL economies. They may even boost the slumping housing market. At this early stage in their growth there are dozens of alternatives coming to market soon with dozens more on their heels so there will be an option for most people.

I hereby re-invoke my 'motives' comment at this time.

Please name a gas-fired distributed generation technology that can beat 7500 BTU/kWhr AND meet California emissions standards. Once you do that, please provide an installed capital cost in $/kw and provided an expected capacity factor on a real system using $10/mmBTU retail gas. Perhaps you can also tell me why I need waste heat during a 120 deg heat wave?

Consumers also use very steep discount rates for personal investments in efficiency and conservation - one year paybacks are the norm. I'll even grant your dream system a 3 year payback! Given the above, I would be DELIGHTED to find a technology that meets real customer investment requirements.

I'm willing to consider your analogy of mainframes vs PCs but first you have to show me what the competitor to central station generation looks like. So far, all I see is hope. "Potential" doesn't pay the bills or keep the lights on.

My basic issue remains marketing - I don't see customers accepting, much less welcoming, the behavior modification implied by remote ToD metering and remote demand destruction. Recent marketing developments in cell phones and cable systems are moving closer to the existing electrical flat rate pricing model. Those companies are doing so because that is what the customers prefer. Real people are moving AWAY from pricing models that are analogous to the smart metering advocated here.

Working backwards, I don't think the flat model of cell phones is necessarily applicable to electric power. It is relatively easy to increase capacity (and increase it incrementally) in this area as the user base builds up. With power, it is harder to increase capacity and the cost implications of unused capacity are more severe.

Your theoretical story of the $1000 clothes drying session is not reasonable. The consumer could have a shut-off at a very high price if desired (I would.) People with 100% power needs could negotiate a different rate. More people have already died due to existing power shortages (France) or not being able to afford their bill (Texas, Georgia, Florida, Illinois) or having their rates so high due to de-regulation (California) than have ever died due to smart metering. You need to get real here.

I think smart metering will work well with the easy stuff the consumer doesn't care about. Whatever this does to shave peak usage will (overall) reduce costs and provide more capacity. This will save lives, not take them.

I think DG would have some benefits in a market of increased use just in avoiding additional transmission infrastructure. In Northern climates, heating costs via NG or oil are often very high, much higher than one's electric bill on an annual basis. Maybe DG has more attractions for places with winters.

I get quite confused and annoyed when utility-minded types bemoan the costs of anything new but then with the same breath speak of the necessary costs (often higher) of maintaining the status quo. Yeah, all this stuff is expensive, but so are new plants, that are going to be run with coal (environmentally problematic) or nuclear (regulatory nightmare). While I do see the problems and folly of de-regulation, I can certainly see the motivation for it - the lack of innovation on the part of entities that enjoy their monopoly.

I had been concerned about the cost of time-of-day meters, but if these peak events are so costly (whether or not this is passed onto the consumer) then it would seem in the best interest of the utility to install them so as to reduce or eliminate these peak events. I think the bottom line is that there really don't care about this. They just want to sell more power. An inefficient user is a user, probably, if truth be told, a better customer than an efficient user. That's a good part of the problem we are dancing around.

GE Successfully Tests Solid Oxide Fuel Cell Prototype, Becomes First SECA Industry Team to Enter Second Phase of Program

-- The cost of GE's prototype system is estimated at $724 per kilowatt for an annual production of 50,000 units -- An efficiency of 41 percent was realized (ELECTRICAL) -- The Energy Department projects that SECA technology will save the Nation more than $50 billion by 2025 through increased efficiency and lower fuel costs.

How many kw of central generation must be obsoleted in order for the USA to SAVE $50 billion with this unit? Utilities (and investors) would be wise to be wary of new central natural gas fired generation.

Similar things exist for small solar PV, and small solar thermal CSP. Regulators MUST start setting in place the required facilities ofr these units immediately.

Hope you are pleased?

IMEUC is no longer dancing around it, as all other "market" systems do.

You also state "I had been concerned about the cost of time-of-day meters, but if these peak events are so costly (whether or not this is passed onto the consumer)" -- One thing I can guarantee you, the costs of those peaks ARE being passed on to you now, whether you are a dedicated environmentalist trying your best to minimize your peak usage or a careless hog leaving the A/C at max. and wearing two sweaters in midsummer (I've worked in offices like that). Present systems make no effort to reward / incentivize in any near relationship to true value, and it seems we all know why (reduced utility sales) but none of us care.

Of course once word gets around that one can earn e.g. $2,500 / month for running for 2 hours per month a natural gas-fired home heating / generating appliance costing say $$5,000 to install and which replaces a $500 hot water tank and a $1,500 heating unit, those prices will not last long. Which IMHO is a good thing, though utilities will not agree.

"Please name a gas-fired DG technology..." Well, first of all, you're asking the wrong question. Why do you disqualify CHP systems that generate electricity with domestic heat as a free adder? Your 7500 BTU/kwh comes to around 45% efficiency so does 90% beat that? Take a peek at Whispertech for starters. It's a NG powered generator that provides hot water and domestic heating from it's waste. It's not cheaper than grid electricity yet but they're not in production yet. I've heard that they have 300,000 systems 4 years into testing though. Other systems are but are tackling the issue from different sides. Some use an IC engine (Honda) while others use a dish to capture solar but don't do the CHP part - (Infinia) Those guys do both and their solar dish reaches 24% efficiency on 1-3 kw. Don't forget the solar powered air conditioners in development.

I have to admit that I can't fill your request for a gas fired CHP system with a 3 year payback at this time but I can tell you that there are a number of systems in the final stages of development that can. The best being a 6 year payback on a solar powered total home energy system with excess available on-demand for selling to the grid. It's hardly fair to discount them for not being on the market California yet since neither is PBR, nuclear reprocessing, CTL, CO2 sequestering, HVDC transmission lines or even nuclear waste storage. They also have had a harder time attracting investors being in the DG category since they directly compete with all the known 'experts' in their field (the utility companies). Haven't you ever wondered why the non-solution renewables are the ones being supported today? Hint - PV, wind and ethanol aren't a threat to their monopolies.

These systems are designed as part of the home (or business) and will most likely be financed in the mortgage so why not use a payback that's applicable like 15 years? After all, some of the solar ones have only emergency backup fuel costs.

And lastly, the capacity issue. All of the systems I've mentioned above except Infinia's dish and many more are designed with the reliability of today's appliances. In other words, they should last 20 years. Some will break down but that only affects that consumer and his capacity, not others on the grid. It can hardly be compared to a single point failure which can affect 1,000,000 people. A comparable question would be what's the capacity of a city's furnaces? My guess is that it's got lots of 9's in it.

This is unquestionably where the smart metering market is ultimately headed and you are right, it's moving toward a flat rate pricing plan.

Worth repeating again is Jim's statement, "An inefficient user is a user, probably, if truth be told, a better customer than an efficient user." I couldn't have said it better.

And regarding DG developers not attracting funding, Joseph, please cite me a funding source or research center that's not consulting or funded by someone in the big energy field. They even bought their way onto the board of the one less than a mile from me and now they have no interest in the "impractical" alternatives.

I will note that Todd seems to confuse "capacity" with "availability." To predict the capacity factor for a non-base load generation asset, divide the number of running hours per year that a DG investment will be profitable to operate (ie cover marginal costs) by 8760. Reliability is a function of availability.

So not only do you want to shift risk to individual consumers and to reach into their homes (DR) you also expect them to enter the generation business with their private capital and/or credit. Be realistic - it would have to be a darn sweet deal to get much market penetration. Just don't expect me to subsidize this venture with my taxpayer/ratepayer dollars.

As I've said before, any demand destruction scheme must allow for customer override as there are health and safety risks. Fatalities are the extreme case but not unprecedented. Deny that if you will.

As to the reasons why your dreams have not yet come about, I suggest applying Occam's Razor. The simplier explanation is that DG/ToD metering/DR doesn't work technically, economicly, or marketwise.

As to my innate conservatism, when it comes to real-time, essential infrastructure, the risks of failed experimentation are too great. New proposals must be intensely scruntized before implementation. The public seems to prefer some old fashioned "stick-in-the-mud-ism" based on their voting behavior - and I'm just the guy to give it to them! ;)

It would seem that you are the one that's unrealistic. Who wouldn't want to replace their furnace, water heater, electric bill and gas bill with a system that's paid off in 6 years at today's costs or rolled into their mortgage for about half the cost their currently paying? And I believe it was you that failed to say the DR systems 'must allow for customer override'. Everyone else was saying that to you.

Todd, are you suggesting that a home generator will be economical to RUN flat out 100% of the time? Even solar? That would a 100% capacity factor. A conventional home furnace may have a close to 100% availability factor but it will not be running 100% of the time. Some harsh climates might see a 50% capacity factor while here in Northern California, my furnance is unlikely to see 10%.

If you guys think that home DG is so hot, go buy and install one. I'm down with you even piggybacking on the grid as a free rider. Just don't ask me to pay for it or to force it on others.

Joseph is right about not mucking with the grid, except the grid is getting pretty creaky right now, so staying with the status quo is problematic. Embarking on some whacked-out de-regulation scheme is obviously not the right approach either.

In Jared Diamond's "Collapse", social collapses occur when something changes, and the society is unwilling or unable to adapt to the change. Maybe they don't even know that the change is occurring at all. The change element is this case is: ENERGY IS GETTING MORE EXPENSIVE. Either due to depletion or environmental issues, or whatever. It's getting more expensive.

If that's what seems to be occurring, it would seem to me a good place to look first would be addressing those inefficiencies that inconvenience the consumer the least. Like the strategy of making ice at night in office buildings for daytime cooling. I don't see what that's so radical about that or even that time of day metering would be so radical to try out. Far less radical than deregulation. Let's say 1 million meters were purchased at $100 each to evaluate time-of-day metering in a region. Even if it was a complete flop, compare this cost to the deregulation problems in California. Risk? Yes. Disastrous risk? No.

So I guess I don't share the concern that Joseph has with the overall risk. State legislatures across the country have voted on far riskier strategies, such as Renewable Portfolio Standards. I see time of day metering as one of the few ways to avoid the problems that RPS will cause to the grid.

I don't know if Len says this, but if everyone is potentially an energy producer, with the ability to sell their energy, then they will likewise use it as efficiently as possible, because what they don't use they have the ability to sell. So more DG will bring on the double benefit of both greater production and also greater efficiency. This is not a benefit to the existing regulated market as it stands now, but it seems to be for the greater social good.

I agree with Joseph's point on how much capital is needed to have significant market impact. Maybe we could start off slow, see what is needed to forestall or forego new plant builds. Worse case, if it doesn't work, you build the plant.

If we can agree that energy is getting more expensive, then the only other strategy is to tax it more, like Japan and other places do. Charge 50 cents per kw-hr. That will drive the consumers that care to be more efficient.

I think what Todd means is that since lots of NG is spent heating anyway, why not make some electricity AND heat.

My old house in Michigan sometimes has heating bills up to $300 per month. Assuming that's retail NG at $15/MMBTU, that would be about 20 MMBTUs. Let's assume 90% heating efficiency (18 MMBTUs actually used). If instead I generated electricity (20%) AND heat (60%), then I would need even more NG (30 MMBTUs or $450) but would also generate 30x292x.2 = 1752 kW-hr of electricity. If I sold it or used it myself for 10 cents per kW-hr, I would save some money (minus the cost of the CHP gadget). If I got 20 cents, I would save more money. If I got 30% out of the gadget, I would save even more money.

CHP would not be 100% capacity, but it could be activated as demanded. Since the heating is needed anyway (at least some of the time) then CHP seems to beat the high efficiency NG combined-cycle units. I think we can agree they don't make sense, given the impending scarcity of NG. (I checked and NG use for heating is not a huge drain on our resources. The problem is the other uses, which unfortunately, drive up the price.)

Joseph makes an interesting point about the Cold Civil War. Different strategies make sense in different areas. Well, in Michigan, we might shiver, but we can always water our lawns......

I am concerned that we are trying too many experiments to avoid politically tough decisions. We can restore our electric system to health without risk - just invest in better transmission and more nukes. It seems that many people are more than happy to IMPOSE solutions (and risks and costs) on others. Remote demand destruction and ToD metering are two examples of intrusive proposals.

As I said, I'm good with allowing home DG interconnection rules that are not burdensome to the system and don't shift costs to non-DG customers. That's unlike California's solar roof top experiment which is fundamentally dishonest. One sees these things on Silicon Valley McMansions but not on the homes of the middle class or the poor.

In some cases, home DG might make sense. If it did, I would think it would happen on its own.

But the concept simply is declared " some whacked-out de-regulation scheme ". That really hurts as I presume the reference is to IMEUC, it being the only "scheme" which could achieve the goal. Could you please be more specific?

I wasn't referring to IMEUC. I was referring to what happened in California and apparently, Montana.

I don't really think more nukes is the single answer. They can't track demand the way coal could. Also, if PHEVs work, they might play in the mix. I appreciate Joseph's notion of not making things complicated but the twin problems of oil depletion and global warming can make things a bit complicated.

If PHEV V2G (Vehicle-to-grid) can be made to work, then we might get lucky and kill two birds (transportation and peak shaving) with one stone. Risky to be sure, but probably worth trying.

Ken

I was at a 'seminar' at the Stockholm School of Economics last night, and was informed by an ignoramus from Oxford University with 30 years of energy prominence that nuclear energy was a lost cause. To his way of thinking it would go out of fashion in a few years, although virtually every up-market publication in the English and French languages says that that a new nuclear age is about to begin.

The thing that I found amazing was that in that seminar room, filled with engineers and executives, not one person except my poor self reacted to that remark. When my reaction was ignored I informed him that he had a lesson in economics coming. Makes me wonder: has the first law of nature gone out of style?

Fred

http://www.breitbart.com/article.php?id=D8SCEBLG0&show_article=1

"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.

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?

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

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.