Under electricity without price controls (EWPC) paradigm shift (Simple, clear purpose and principles give rise to complex and intelligent behavior), the natural monopoly concept, one system is a given area, remains. Transmission and distribution are integrated – as a simple transportation system - and planned, operated, and controlled under the imperative of ultraquality.

Please take a look at the EWPC article Financing and Developing Wind Projects, for a comprehensive solution under a paradigm shift of the power industry that exploits all the advantages of the proposal leading to the required open internal market for Europe and the world.

Clearly there is intense resistance to power line construction and there will be similar intense resistance to windmill construction when the numbers of them required become an unbearable blot on the landscape. They already have in the UK whcih is one of the reasons the UK Government changed its mind about nuclear. Even if the wind availability is there do we REALLY want to cover hundreds of square miles of countryside with windmills. I think not.

While the size of units is increasing a typical wind mill is in the range of 2 Megawatts. That means to replace 4000 MW of nuclear or coal capacitywill require a minimum of 2000 windmills assuming they both operate at 100% capacity factor.

But windmills do not operate at 100% capacity factor. While coal and nuclear plants operate in the 90-100% range routinely the best windmills can do is 20% and very often much less than that. And that is at the very best wind sites.

So you now need to build storage for the wind energy. Let's assume such storage is cheap enough and works. Now at 20% capacity factor you need five times the number of windmills...10000 windmills to replace one 4000 MW plant. If the plan outlined above (to interconnect wind sites) is deployed and the average capacity factor is doubled to 40% now you only need 5000 windmills but need to build thousands of miles of new grid interconnections (500Kv towers to avoid intolerable system losses over long distances) to make it work.

So let's add it all up. Five thousand two megawatt windmills at 40% CF, a storage system to back it all up when the wind does not oblige and a network of 500kV transmission lines and towers to connect it all together over and above what we have now.

Oh yes the good old US public will just be enthralled with that idea. I can see the class action law suits being written now

The problem with wind is not the technology of wind power - it is the wind itself!!No technology and no amount of grid interconnection can change the fact that sometimes the wind does not blow at all over huge land areas.

It should also not be forgotten that centralised power is a highly reliable, tried and tested method of power production that has served the industrialized world exceedingly well. Indeed it has become SO reliable that it is a major catastrophe when it is offline for more than a few hours let alone days. Centalised power plants have contributed in no small measure to the success of all western nations.

Replacing the existing system with a distributed range of technologies is more costly, much less efficient and will lead to a far less reliable system than we have now.

I would be very cautious about adopting these methods and throwing away what we have until we are very sure they will work as well. I see no evidence that would convince me that centralised power has had its day.

Malcolm

That there is a need for a paradigm shift to EWPC doesn’t mean that wind power is to replace central stations any time soon. The EWPC paradigm shift is about integrating all sorts of uncertain (wind, solar) generation to the power system, using even less transmission and distribution than the central station paradigm, as demand response enables enough demand elasticity.

Even without the threat of shutting down many of today’s polluting central stations (a scenario waiting to happen), it just economic to develop a balanced power system with the right mix of central station and customer owned distributed resources under competition in the open wholesale and retail markets.

A paradigm shift, where distribution is integrated with transmission, developed as a least cost expansion of the T&D transportation utility system, under a responsibility to transport at ultraquality, will enable maximum social welfare in the open market.

When I wrote on the incremental extensions of the central station paradigm, with a new transmission system which you agree is unfeasible, I meant the extremely complex environment, as a result of Open Transmission Access, NERC Mandatory Rules, and Demand Response implementation at FERC. It is the issue of Demand Response at FERC that lead to the EWPC article Demand Integration is NOT the Province of Politics, where you can see very clearly that the central station paradigm is leading to simple and stupid behavior.

The central station system has outlived its useful life and can’t be extended any further. A new system with “simple, clear purpose and principles” is needed “to give rise to complex and intelligent behavior,” as the Dee Hock quote in the EWPC article Financing and Developing Wind Projects states. Open (T&D) Transportation Access is a lot simpler that Open Transmission Access, the need for NERC Mandatory Rules and a lot of political intervention to make sure that an engineering system operates at ultraquality. So, EWPC is such a simple system with a clear purpose and principles.

Regards,

José Antonio

Fred

If it is true that they "will deliver the most inexpensive power in the world," why not let them compete in the open market. The investors should take the risks involved.

Happy new year,

José Antonio

They also didn't wait for the investors when, in the l960s, they decided to build one million housing units (i.e. mostly apartments) in a decade for a population of almost 8 million. My favorite banker - and a lot of bankers who were not my favorite - said that they shouldn't or couldn't build that many, but they did it anyway.

Personally, I dont and have never believed in socialism, and prefer free markets when possible - but not when free markets dont achieve the results that my good self believes can be achieved by responsible governments answering to voters. At the present time that means not listening to investors when they conclude that nuclear is "obsolete", to quote an ignorant former Swedish prime minister.

Fred

The good old days of vertical integration are just gone. Electric power is being transformed with the information revolution.

There you have a systemic or structural problem in which only financial capital should be apparently attracted to invest. There is a need for a paradigm shift to attract production capital. That's what EWPC is all about.

Today there is a big mess in which they have divided an elephant in half. The elephant is the transportation system and the separations of T & D and of supply and demand. Peter Senge writes on the 10th Law of the Fifth Discipline that "incidentally, sometimes people go ahead and divide an elephant in half anyway. You don't have two small elephants then; you have a mess. By a "mess," I mean a complicated problem where there is no leverage to be found because the leverage lies in interactions that cannot be seen from looking only at the piece you are holding."

The leverage comes from T&D integration and in opening the wholesale and retail markets to competition, with what I identified as Second Generation retailers to integrate demand to power system planning, operation and control. At the same time, you need to take supply out of the controlled market to meet demand in the open market to produce fully functional retail and wholesale markets.

Regards once again,

José Antonio

Now the electrical system (on the supply chain generation, transportation and end-user devices) and the money system (on the value chain wholesale, retail, customer) are whole, and interact with each other in vibrant ways as the information technology revolution impact and transform the power industry.

Fred

The deregulation that wasn’t, as McKinsey called it was flawed; the vertical integration elephant was divided so as to create a big mess. As you can see above, EWPC is about the discovery of a high leverage solution to the structural problem of the obsolete vertical integration.

As you advised about two years ago, I wrote to Dr. Alfred Kahn explaining my proposal of what has emerged as EWPC, because of what you wrote about his point of view in favor of vertical integration (see please the EWPC article Conspiracy Theory Against Mr. X). In June 2006, Dr. Kahn changed his mind as can be seen in the EWPC article Ohio Should Focus on EWPC.

Noticed also from the Ohio article how Bill Hogan, the most influential person of deregulation (see the EWPC Slicing the Last of the Regulated Monopolies), also changed his mind on retail competition, as six prominent economists “urge policymakers… [to] resist the temptation to reject competition for a return to heavy-handed regulation…” of the gone good old days that you want back. Without any doubt, all six prominent economists agree to “transform the power industry.”

Who knows, maybe my letter to Kahn, my critical comment on Hogan’s misunderstanding of Schweepe’s et al research, our discussions on energypulse.net, and the emergence of EWPC, had some influence in their resolve to write the Open Letter to Policymakers, also signed by Paul L. Joskow, Peter Cramtom, Howard J. Axelrod and Vernon L. Smith.

Best regards,

José Antonio

As for Vernon Smith, his book 'Investment and Production' is a must, but his views on deregulation are loony-tune. In case you haven't heard, he was one of the brains behind the failed electric derivatives market in New South Wales (Australia). His belief was/is that any trading beats no trading. By the way, his work on laboratory type experiments in economics that got him a Nobel Prize is definitely on my 'DO NOT TOUCH' list, and probably doesn't pass the smell test.

As for Bill Hogan, I recognize his very high competence, BUT ON ELECTRIC DEREGULATION HE WAS AND PROBABLY IS WRONG, WRONG AND WRONG. I remember how at the start of that crazy business he expressed surprise that there had not been more investment in generating capacity in the UK. He must have been temporarily off his cork to be surprised about that.

Len, I live in a SOCIAL-DEMOCRATIC household. By that I mean that my wife is a (Swedish) social democrat, and I have NEVER heard her use the word socialist to describe her politics. What we believe in is a mixed economy with an intelligent and responsible government doing things that the market cannot or will not do.

Fred

If you didn’t notice, my post concentrated on Dr. Alfred Kahn, so I will refresh your mind on what you written earlier before drawing another set of conclusions.

On 12.8.05 you wrote “Professor Alfred Kahn, who is probably the most important deregulation scholar in modern times, puts it this way: "I am worried about the uniqueness of the electricity markets. I've always been uncertain about eliminating vertical integration. It may be one industry in which it works reasonably well." And so on and so forth.”

On 4.25.06 you rewrote the above idea writing that “As Alfred Kahn pointed out, electricity is different, and the sooner this is accepted the better.”

On 4.26.06 you wrote also “As for Alfred Kahn, whom Sean [Casten] called the grand old man of deregulation, he specifically and publically said that the electric industry was different, and regulation made sense.”

On 8.29.07 you wrote “Next month there will be a conference in Stockholm (sponsored by SNS) on the lovely subject of electric deregulation. A small group of know-nothings will retail a large collection of lies and half truths to a passive group of chumps, most of whom are familiar with the early chapters of their economics textbooks, but did not get a chance to read the later chapters which explain why electric deregulation cannot work, as Professor Kahn suggested. And there we have the bottom line of electric deregulation: in theory it can't work, and in reality it doesn't work.”

Well, Dr. Kahn, who you said “is probably the leading researcher on this topic in the 20th Century,” is not longer uncertain about eliminating vertical integration and its associated heavy-handed regulation, because it isn't needed anymore. Kahn and the other five economists agree that regulation doesn’t make sense anymore.”

As you wondered, there is a magic deregulation formula to fix deregulation: [system] reliability first, economy second. That formula shrinks the whole vertical integrated utility to a transportation utility preserving the ultraquality imperative of the first paradigm into the second EWPC paradigm. So, a controlled (T&D) transportation market operating at ultraquality remains that gets away the worry of its uniqueness as the non-trivial aspects of electricity was discovered.

The planning, operation and control of the WHOLE POWER SYSTEM is done by the system engineer, even though generators, retailers, and customers are able to freely invest in the WHOLE MONEY SYSTEM value chain without price controls but under prudential regulations, as the two whole systems – POWER and MONEY – develop interdependently. EWPC fixes deregulation, but it is not total deregulation, as the whole transportation system remains regulated.

I also recognize Bill Hogan competence in economics, but he didn't understand those true and non-trivial aspects of electricity. It seems from what you write that Vernon Smith didn't understand those aspects either. But the point is that they are not their old opinions and maybe they understand already the existence of such non-trivial aspects. It seems to me, that the new “specifically and publicly” joined opinion of six prominent economists written to policymakers counts a lot. Electricity under EWPC is NOT “different, and the sooner this is accepted the better.”

One of the most important lessons of economic history is that the technological revolutions lead to creative destruction. Vertical integration heavy-handed regulation time is gone. EWPC has emerged with high leverage to replace it. As you wrote: "Keep that in mind good people. Latch on to the lessons of economic history and you can't go wrong."

Despite the way it seems, EWPC doesn't belong in the last bracket. It belongs in the S&M. I got in on this deregulation thing in Hong Kong, where I was put in position to study every aspect of the topic, and believe me - given the structure or mechanics of the electric market - regulation is the only thing that makes sense for consumers, and the people who dont believe that dont believe it because they expect to PERSONALLY get something out of it - i.e. MONEY. The problem is that when given the opportunity the consumers made chumps of themselves by accepting a change because high fliers like Hogan and Smith told them that it was best for them, and they still accept it because guys like you come along and tell them that things will be OK after all because of screwy concepts like EWPC.

Well, count me out. It wouldn't make any difference to me who believes in EWPC, I aint havin' any!

Fred

As you are a very intelligent an important person, this comment is not personal. It is written for the people who think like you: which I believe are laggards, which according to Geoffrey Moore, are "people that simply don't want to do anything with new technology, for any variety of reasons, some personal and some economic." I don’t need to know your reasons.

With a lot of respect, to all laggards, the "good people" will surely count them out as they read responses like yours, finding, for example, a phrase like “screwy concepts like EWPC,” as not only rather offensive, but as a clear evidence of having run out of logical, proper and decent arguments.

As for lack of arguments, for the second time, I didn’t see a response about Dr. Kahn, sending a very clear signal for “good people” to “keep in mind.”

Again, Happy New Year!

José Antonio

I recognize and respect the importance of "personal and economic" reasons, to use the terminology of Geoffrey Moore - whoever the ___ he is.

But that doesn't apply to me, and never has. As certain people often say, 'I act first and think afterward'. This occasionally leads to mistakes, but not where the topic under discussion is concerned. In the US electric deregulation started with a lie, which is that returns to scale in generation no longer existed, and the TV audience still hasn't caught on.

"Intelligent and important". Well, I think that I can get hundreds if not thousands of students to testify to my intelligence - at least before they get their exam results; but as for important - are you sure that you dont have me confused with some other Fred or Ferdinand, or are we dealing with irony here?

Fred...and let's make this a good year!

You are both intelligent and important and to be responsive I will concentrate on the latter. One example, if hits on articles are taken as a measure of importance, you are one of the most important writers on EnergyPulse. Another example, if the measure of importance is that of leadership in comments, you certainly are one of the most important leaders. However, just as Bill Hogan and Vernon Smith are certainly very intelligent and important economists, you and they may or may not understand the non-trivial aspects of power system engineering.

For that last reason, I humbly disagree that just one simple cause and effect linear explanation is the culprit. That is a special case of “right answers” vs. “wrong answers” of the prevailing system of management (see below for a suggestion), where diverging (systemic) problems are discounted, preventing new paradigms to emerge.

The explanation is systemic. Customers are served by a system and not by one of its parts - generators. Generators don't have the level of reliability of the power system. As explained in another post above, there is a need for a high leverage restructuring of the power sector (a larger system in which the power system is one of its parts) and that is where the emergent EWPC paradigm fits.

One of the reasons - of many – explained above for deregulation failure was that of dividing the power sector elephant in half and creating a big mess, where there is no leverage to be found. Two years ago I wrote to you that the origin of that failure was a mistake by Bill Hogan, but now, with the mess explanation, I take that back. The reason is that many other intelligent and important people, especially engineers, under the prevailing system of management, were also responsible for the mess. We were all prisoners of that system.

Hence, is it Time to Transform the Prevailing System of Management? A positive answer may make 2008 a very good year.

José Antonio

Thank you once again for helping clarify EWPC.

As I wrote to Fred, “I humbly disagree that just one simple cause and effect linear explanation [like “returns to scale in generation no longer existed] is the culprit. That is a special case of “right answers” vs. “wrong answers” of the prevailing system of management …, where diverging (systemic) problems are discounted, preventing new paradigms to emerge… The explanation is systemic.” However, I will add the following:

My old response to your inquiry is already in the EWPC article Extra, Extra… Goliath is Defeated Once Again!, which has been and still is open to finding whatever flaw (be my guess!) it may have, since the goal is no to win the argument, but to find the best argument. We may find the best argument by trying to come up with a generative learning, in this case where there is a systemic problem, by bringing for example into the open old assumptions that no longer hold.

Please review many of the other comments that can be found under the article An Analysis of the Carbon Emissions Impact of the Senate Energy Bill to which you contributed earlier.

I recall that you wrote that “Sam Insull, at the end of the 19th century and during the first part of the 20th century discovered vertically-integrated electric systems provided such economies” of scale. From your statement it seems very clear that the economies of scale were of the property of the whole (the electric power system), no of the parts (generating units) in particular.

Electric power system prices decreased up to late 1960’s and have been increasing since then. If prices had kept decreasing, as they were, we will not be interacting with the issue of customer prices. The assumption of decreasing prices under vertical integration no longer holds.

For that reason, it does not matter at all whether or not, “returns to scale in generation no longer exist.” What might matter is that returns to scale in power system exist in order to develop the system at least costs. I suggest that to be done only for the controlled transportation market, while liberating generation and retail to have customer get the best deals under competition in the open market.

To find the best argument on the expected results (not the means), I suggest a balance advocacy and inquiry leading to a generative dialogue based on the EWPC article Engineers Needed for Lower Prices, whose summary says:

The paradigm shift from the vertically integrated utilities to the electricity without price control paradigm will lead to lower costs, lower profits and lower prices after a reasonable delay. To accomplish that engineers need to take the transportation function that allow the market between supply and demand run efficiently.

Best regards,

José Antonio

The reason that I haven’t include IMEUC in my writings, for quite a while, is in the article IMEUC: Unreliable Service and Price Spikes.

As I said, I am not trying to win the argument; I hope you are not either. We should try to find the best argument in a situation of a diverging (systemic) problem. That is the reason to concentrate in a generative dialogue, instead of a debate in which there is a right answer and a wrong answer, based on old assumptions that no longer hold.

So, by all means go ahead and find out the mistakes in Jason Black’s Ph.D. thesis, or in my interpretation of said thesis, which lead to the conclusions that there is a guarantee of reliable service and no price spikes under IMEUC.

Best regards,

José Antonio

This is a solid datum in favor of economies of scale still being present in electrical generation.

Apparently, California birds learn slowly. The Altamont Pass wind farm can be looked at as "cleansing the avian gene pool". CA will end up with smarter birds, on average, in the long run. Survival of the fittest has been the evolutionary driving force throughout history. If salmon can learn to climb ladders, surely birds can learn to avoid turbine blades. If not, the problem will resolve itself before millions of future wind turbines enter service. :-)

Ed

"The R1E2 criterion prevent the possibility of price spikes occurring under EWPC, but which will occur under IMEUC, making it just another faulty deregulation experiment candidate.:"

If THAT is the sort of proofs on which you have founded whatever it is you are calling EWPC, I suggest in may be time for you to actually think this industry through and stop making such nonsense posts as the above.

I still maintain the position that RETAILERS ADD 15% TO THE COST OF ELECTRICITY IN ALL DEREGULATION SCHEMES SO FAR ATTEMPTED, AND ADD NOTHING ELSE. Perhaps you might attempt to explain why you think EWPC retailers might be different? And skip the flowery verbiage.

Assuming 35% availability, 25% capacity factor and sufficient locational diversity, 90% reliability of supply of the capacity of one wind turbine requires the installation of 8 wind turbines in 8 carefully chosen locations. However, if capacity factor drops to 4%, as it did in CA in 1996, all bets are off.

The professors' scheme then requires 8 transmission feeder lines, each with capacity equal to the rated capacity of one wind turbine times the number of wind turbines in each field. These transmission feeders must then connect to a main transmission line with the capacity to move the combined output of all 8 wind farms, unless you are willing to "shed" generation when adequate wind is available.

Possible? Yes. Feasible? Perhaps. Practical? Unlikely. Economically competitive? Not in my lifetime.

Ed

Will this happen? I don't know - this is not a prediction, it is a thought experiment designed to illuminate an assumption that virtually everyone these days seems to make - that electricity has to be 100% available both for North America to function and for the electricity to be useful. Many parts of the world don't have 100% availability. Even in NA we have had blackouts, rolling blackouts, ice storms, etc.

Basically I am talking about load shedding in a significant way. Design buildings with windows for light (and ventilation), have people use laptops whose batteries can carry them over for a few hours...

I wonder what the relationships would be between price, reliability, and demand?

Randy

I know that you are a very intelligent and important person, which may or may not, understand, or have experienced, the non-trivial aspects of power system planning, operation and control, such as system security.

Using the text of the 3rd and 5th paragraph of the EWPC article IMEUC: Unreliable Service and Price Spikes, I have written the following two paragraphs to clarify the meaning of “The R1E2 criterion prevent the possibility of price spikes occurring under EWPC, but which will occur under IMEUC, making it just another faulty deregulation experiment candidate” in its proper context.

Under EWPC, the policy of making system reliability (the R1 part of R1E2) the first and foremost priority (and relegating economy as a second priority - the R2 part) is to satisfy the criterion that "considers the engineering requirements for controlling, operating and planning an electric power system," so that capacity reserve margins are set at the committed levels anytime at anyplace.

So the conclusion of Jason Black’s the Ph.D. thesis which I quoted as “pernicious effect from… increase price volatility due to reductions in generation capacity reserve margins” is certainly true for IMEUC, while being false under EWPC. In effect, the “reduction in generation capacity reserve margins” is exactly the meaning of unreliable service.

Similar to what I said to Fred, with a lot of respect… the "good people" will surely count out the part of your response, finding, for example, unnecessary offensive phrases like “crushing response," “nonsense posts,” “flowery verbiage.”

Best regards,

José Antonio

I repeat that “One of the reasons - of many – explained above for deregulation failure was that of dividing the power sector elephant in half and creating a big mess, where there is no leverage to be found. Two years ago I wrote to you that the origin of that failure was a mistake by Bill Hogan, but now, with the mess explanation, I take that back. The reason is that many other intelligent and important people, especially engineers, under the prevailing system of management, were also responsible for the mess. We were all prisoners of that system.”

The leverage of EWPC is to be found in the job of Second Generation Retailers. EWPC is a real paradigm shift away from first generation retailers (1GRs) that Lens mentions. Second generation retailers (2GRs) are key to integrate retail and wholesale markets by developing the resources of demand side. 2GRs compete in retail markets for end-customer businesses and also in the wholesale market among themselves and with generators. As they compete for the whole US and/or Europe and/or the world, they have large economies of scale and the opportunity to develop business model innovations that add value to the whole value chain.

Systemic delays need to managed at the proper time to operate a power system at ultraquality. No when it s too late.

Please read Jason Black's Ph.D. thesis.

Regards,

José Antonio

Joseph and Ed seem to be writing with a deterministic supply side mind set as a result of the old paradigm. One rule of thumb being used under probabilistic (not deterministic) supply side mindset is that a penetration of 20% of uncertain generation is acceptable, given the reserves that result from system security (probabilistic) operation planning.

Both supply side mindsets concentrate their attention only on the development of the resources of the supply side. Even solar and wind developments are thought under a supply side orientation, different from the example given in the EWPC article Nanosolar Breakthrough and the Old Paradigm.

It has been known for quite some time that such development leads, for example, to systemic issues such as boom bust behavior – excessive capacity in some periods and interruptions in other periods. Such systemic behavior becomes even more uncertain as long term demand forecasting gets to be unreliable as it has been happening for quite some time.

It was precisely the large capacity investment and the end of power system economy of scale that led to the restructuring efforts. We all know that the restructuring efforts were mistaken as they divided the power sector elephant in two and created the big mess we have now. As shown above, EWPC is a paradigm shift to introduce the necessary leverage by also developing the resources of the demand side.

EWPC can also be seen as a probabilistic and (balanced supply side- demand side) customer oriented mindset rational rationing system based on the development of the demand side – that is to introduce demand elasticity – and to engineer (no rules of thumb anymore) the levels of admissible penetration of uncertain generation, given customer investments in the resources of the demand side. See for example the EWPC article Storage is Ready to Cross the Chasm.

Any discussion of wind, solar, and any new technology penetration by themselves is mistaken. What is needed is to consider all of the combined resources of the demand side, and that is one of the jobs of Second Generation Retailers. Please read The Sixth Disruptive Technology.

Randy’s worst case scenario stresses the importance of rational rationing. However, EWPC is robust enough to operate in all likely scenarios, having central stations sales go to the competitive market, and part of central station generation being displaced to the demand side, while boom bust system volatility gets mitigated by increasing demand elasticity.

Please read JB's thesis!

Why not just use the existing grid and link the generators financially through the Regional Transmission Operator's market for power?

As I understand the system, wouldn't you end up with a block of energy that commands a higher price because there is higher probability of actually delivering the agreed to energy at the agreed to price? There is always the risk of betting wrong but that's the risk independent generating plants always take.

I suspect there might be a need to modify the mechanism for rolling up the transaction, but that has to be cheaper than building transmission lines.

Mike Keller

The seller of electricity is supposed to serve the buyer in exchange for payment. You're turning this around. And with government-imposed renewable mandates, the government and the wind generators get together to screw the customer!

As to time-of-day or real-time pricing, I suggest you watch what is happening in cell phone service. All the providers are advertising "any time minutes" with NO restrictions on usage. I think they are doing this because that is what the customers want, which is what they have with their electric service - a flat rate based on monthly usage, not instanteous pricing.

Developing a second transmission system (called a centralized transmission line) is what I meant in the first post under this article simple and stupid behavior. Actually many wind sites in Europe are connected to distribution systems, actually unloading the transmission infrastructure under normal conditions.

However, under abnormal conditions, like those of the Nov. 2006 blackout in Western Europe, the "Regional" Transmission Operator went nuts. The message being that uncertain generation is a key element of keeping T&D integrated as is called for under EWPC.

The comparison of gasoline and electricity models are much closer than those of cell phones. But, even gasoline model doesn't apply to the electricity model.

Please be advised that my comments separate you from IMEUC. As I may recall, you and I should not consider ourselves as our opinions. That is a principle of a generative dialogue.

Further to my post that started with “The reason that I haven’t included IMEUC in my writings,” I would like to be more specific about what I meant today by “systemic delays” and add the need to consider also stocks (like capacity reserves). This is in line with what Prof. Banks writes about the illusion of using supply and demand simplifications of the first chapters of microeconomics book which don’t apply to real life socioeconomic systems.

A more specific and up to date explanation of Prof. Banks idea is what Nathaniel J. Mass wrote in 1980: “The distinction between stocks and flows is well known . . . Yet economic theories still revolve primarily around flow concepts of supply and demand . . . [S]tock-variable concepts of supply and demand must be incorporated explicitly in economic models in order to capture the rich disequilibrium behavior characteristics of real socioeconomic systems.” (See John Sterman, Business Dynamics’ book – Dr. Sterman was the Systems Dynamics Ph.D. thesis advisor of Dr. Jason Black).

Jay Forrester, the Father of System Dynamics explains the same idea as follows “… supply and demand are not balanced by prices alone, as is commonly done in economic models. Inventories, backlogs, and delivery delays are the primary short-term balancing forces. Prices then change as a result of over or under supply of product” as in the case of gasoline.

But as it happens, electricity must be very closed in balanced before real-time operation, to avoid unintended blackouts, so most of the resources that produce electricity must be committed beforehand (today those resources are generation “stock” reserves previously committed).

Under EWPC, both supply reserves and demand reductions “stock reserves” at wholesale are to be negotiated and committed by retailers and generators. It is just not feasible to do that at the retail level with all customers participating under the simplistic demand supply microeconomic model of IMEUC, which then will lead to price spikes and unreliable service. The idea is that unplanned deviations at real-time operation should be minimal and under the control of the system operator.

As for prudential regulations, the basic idea is like the banking and insurance regulations to protect the customers from failing retailers going broke and also to watch for generators market power.

Best regards,

José Antonio

I think you'd better hurry up and find those resources because the longer you make unsupported assertions like: " It was precisely the large capacity investment and the end of power system economy of scale that led to the restructuring efforts." and "However, EWPC is robust enough to operate in all likely scenarios, having central stations sales go to the competitive market, and part of central station generation being displaced to the demand side, while boom bust system volatility gets mitigated by increasing demand elasticity.", the longer Fred's identification of “screwy concepts like EWPC” seems appropriate. Remember there are those of us that think restructuring efforts and new market paradigms arose from the desire to help certain generation technologies compete before they were competitive. And the chaos wrought therefrom seemed to discourage investment in any capacity, let alone large.

The normal fate of the "Not Ready for Primetine Players".

We should heed the motto of Ernest and Julio Gallo: "We sell no wine before its time."

This crappy system of pseudo-deregulation-under-retailers which has been implemented eg. in Ontario etc. needs to be declared as failed as EWPC would surely be, torn down, and (if not IMEUC or its like then) do a return to VIU where at LEAST we knew whom to blame for the messes (regulators and politicians) and we had at least some access for complaint about problems, issues and futures.

Thanks Don, Ed and Len for your views, which I respect, except for that unnecessarily disrespectful “screwy concepts like EWPC.”

The assertion "It was precisely the large capacity investment and the end of power system economy of scale that led to the restructuring efforts" is supported by the Cato Institute 2004 report statements. Van Duren and Taylor statement was “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." (Please see Rethinking Electricity Restructuring as EWPC).

The assertion "However, EWPC is robust enough to operate in all likely scenarios, having central stations sales go to the competitive market, and part of central station generation being displaced to the demand side, while boom bust system volatility gets mitigated by increasing demand elasticity" is an extension of Schweppe et al research. The extension from the regulated energy marketplace to the competitive marketplace needs is what needs to be simulated.

To defend the idea of EWPC being robust enough, the argument is that in a period of high uncertainty as to the future of different generating technologies, the investments in information technologies to develop the resources of the demand side to reduce as much as possible “overbuild generating [and transportation] capacity and spur the introduction of [close to] real time prices,” to increase the efficiency of the power system is in my view a most. How do readers see that strategic argument?

In the above sense, I like to understand where Don and Ed stand today. The VIU paradigm has suffered incremental shifts that started in the 80's. Today, there is a big mess, as can be seen from FERC modifications to NERC mandatory requirements to implement demand response (see Demand Integration is NOT the Province of Politics for the details). Are both of you calling for a return to the original VIU paradigm? Please explain!

As for IMEUC, Len please explain: How and Why my interpretation of Fred’s message on a market model that is based on introductory microeconomics doesn't apply? Fred’s input is expected here.

It seems that Len's view "I can certainly happily accept that the electrical system may not be "ready" for any alternative to the VIU paradigm, if that's the case then so be it" can be interpreted as saying that if IMEUC is not ready, EWPC shouldn’t either. It is acceptable behavior in a debate, but totally unacceptable in the generative dialogue, which I understood he engaged in. Am I mistaken and jumping to a false conclusion?

Len adds a note: "IMEUC has been deliberately designed to suffer price spikes, and pass those on to customers. That in itself is not a shortcoming, it is a benefit." This note seems to mean that Len admits that IMEUC is unreliable, but that price spikes are not a problem. However, price spikes are a signal of lack of sufficient reserves and thus a risk of power system failure, as explained earlier.

If hope that the funds to do a simulation on an extension of Jason Black Ph.D. theses become available soon.

Are there any other suggestions to find the best argument?

Regards,

José Antonio

But I dont see what that has to do with electricity, nor more important with the history of electric deregulation. It seems to me that what is happening here is that something that is 'completely and totally' simple has been made complicated. Electric deregulation is a loser, and its status is not going to be changed by a PhD thesis from MIT or anywhere else. As I have said hundreds of times, I was at that seminar in Portugal where Fred Schweppes proved the efficacy of 'full' competition (i.e. deregulation) in the electric market, only he didn't prove it to me because I knew too much economics (and I know even more now). Fred had been 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 the electric industry makes a lot of sense.

What about sending your heros from MIT here to Uppsala to discuss this matter in what is known as an open forum. Well, what they would hear over and over is that dozens of deregulation experiments have been carried out, and as far as I know, the evidence from them is clear. Need I say what that evidence is, or do you or anyone else still have any illusions about that?

Fred (Banks)

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 Spot Pricing of Electricity, 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.

That criterion I discovered as 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. 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 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 result.

As it cost a lot of money, instead of sending my heros to Upsala, I am sending through you this post. 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.

I sincerely hope you can see now how stocks and flows have to do with electricity. Behind the true and non-trivial ultraquality criterion we have hidden stock and flows of planning, operating and controlling electric power systems. Maybe through system dynamics the complexity will become simplicity.

Best regards,

José Antonio

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.

Thanks for kindly taking Prof. Banks advice on IMEUC.

The VIU paradigm has a controlled (supply and transportation) market and an open (demand) market that operate interdependently. The EWPC has also a controlled (transportation) market and an open (supply and demand) market that operate interdependently. A much simpler and familiar arrangement, as transportation is a true natural monopoly. EWPC is about re-regulation, not deregulation. Full deregulation doesn’t work yet; maybe in 30 to 50 more years to replace EWPC.

Yes it is full regulation of transportation under an obligation to transport, to be developed at least costs and to enable maximum value in the open market. EWPC is about different rules than we know today – i.e. a paradigm shift - where potential shortages are to be managed by demand elasticity development on the resources of the demand side.

The devil is in the details! But maybe a system dynamic simulation will help to get the details you are expecting. Please support the effort you started with the post Opening discussion as a follow up to Jeff Presley suggestion.

Best regards,

José Antonio

My comments in this thread have dealt strictly with issues related to the article on which we are commenting. I will leave you and Len to "duke it out" over the relative merits of EWPC and IMEUC. I have no stake in that discussion, except as an electricity user.

My concerns lie primarily with availability and reliability. I have no interest in a service offering which requires that I get off line if the wind is not blowing, or the sun is not shining. I believe it will be very difficult for whomever is responsible for reliability in the "Brave New World" to provide high reliability or "ultraquality" service if the generating capacity represented by intermittent sources of power is required by RPS and regulation to exceed the conventional and reliable non-conventional capacity reserve margin in a market. I believe this will be true regardless of who owns and operates the various generation resources.

I have a strong philosophical bias against being assigned responsibility for something over which I have no control. This would be the case, for example, for a distribution utility which was required to achieve some specific level of reliability of service, and to do so with "x" percent renewable supply, in a market in which capacity reserve margin is low, and, with no authority to build additional generation of any kind to to "fill in the voids". That is an invitation to disaster.

Fortunately, this situation now appears most likely to occur on the left coast first; and, Tam Hunt will be responsible for explaining why, not I.

This is the exact meaning: "From what you [Fred] 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 above and below] the electric industry makes a lot of sense.”

Ed,

EWPC is a different paradigm than what is occurring on the left coast or anywhere else. Your mental model, as the large majority of people, is biased towards today's paradigms. I will give you a general explanation based on EWPC, but I remain open for your and other readers’ inputs to enhanced it.

1) I respect your views as a customer. Every customer has their own perceptions and they differ widely among customers, just like they differ in other settings. For example, some customers will invest in distributed resources to be able to respond when the wind is not blowing or the sun is not shining. The customer aim is to have the least costs and/or the highest value proposition from the market.

2) The transportation T&D (wires only) utility is responsible for the operation of the whole system to operate at ultraquality. The system engineer is responsible for long and short run planning to invest in a transportation that results in minimum cost expansion of the whole system. They have a responsibility to transport.

3) Generation, retail and customers investments are in the open market. For example, no RPS distortions should be included. In the open market it is the customers who are responsible to enter the contracts with retailers. Many customers will enter long term contracts. There is no longer a general responsibility to serve, but the specific contractual responsibility. It might be an invitation of disaster under today's paradigm, but not under EWPC.

4) Prudential regulation is to be developed to make sure there is no “need to fill in the voids.”

5) As a result, no one is being assigned a responsibility over which they have no control.

Please read once again my post that starts "Joseph and Ed seem to be writing with a deterministic supply side mind set as a result of the old paradigm...." after reading all with the customer orientation of the new paradigm. Don't forget to read the linked articles.

Thanks,

José Antonio

By the way, knowing your distaste for history before 1921, with deference to biblical allegories, of course, you might want to refer to what some rather astute individuals at RAND Corporation came up with in the 1950's. To wit, an optimal policy has the property that whatever the initial state and the initial decision are, the remaining decisions must constitute an optimal policy with regard to the state resulting from the first decision. This might explain why many here have tried to help you with the idea "... of economies of scale still being present in electrical generation." The principal of optimality, I'm told, with a little care, applies to non-deterministic systems. One wonders, of course, just how non-deterministic "rational rationing" might be. Particularly, when one has your demonstrated aversion to looking at probablistic models of the electric power system demand side. Speaking of probabilities, the opinions you seem to share with some members of the Cato Institute again remind me that the totality of probabilities in opinion space is unity. Even if yours is a bit too far out on the left tail for my tastes.

Don is a very important and intelligent person. He has opinions about EWPC that differ from my opinions. When I first wrote to Don under this article I said “…since the goal is no to win the argument, but to find the best argument. We may find the best argument by trying to come up with a generative learning, in this case where there is a systemic problem, by bringing for example into the open old assumptions that no longer hold.”

From his last response, I get the impression he is not trying to come up with a generative learning. So, since I may be biased, readers should compare Don’s opinions in the last Post with the two opinions he posted earlier which follows:

First post: Gee, Jose, as Ed would say, many enquiring minds are still waiting for your logical, proper and decent argument that returns to scale in generation no longer exist. Such has been MIA both qualitatively and quantitatively for a long time now. Maybe in 2008.....?

Second post: Jose, .... I think you'd better hurry up and find those resources because the longer you make unsupported assertions like: " It was precisely the large capacity investment and the end of power system economy of scale that led to the restructuring efforts." and "However, EWPC is robust enough to operate in all likely scenarios, having central stations sales go to the competitive market, and part of central station generation being displaced to the demand side, while boom bust system volatility gets mitigated by increasing demand elasticity.", the longer Fred's identification of “screwy concepts like EWPC” seems appropriate. Remember there are those of us that think restructuring efforts and new market paradigms arose from the desire to help certain generation technologies compete before they were competitive. And the chaos wrought therefrom seemed to discourage investment in any capacity, let alone large.

Now readers who care should go back and see both of my responses. To help you in the conclusions, I have written a few questions below:

1) Why the big difference between the first two posts and the last?

2) Do readers agree or disagree with my opinions in the responses? What seems unclear? I am open to change them to further the best argument.

3) What else would readers add or what would they delete?

4) Were my assumptions unsupported?

5) Should Don change his opinion to admit that my posts were very responsive as part of a generative dialogue?

6) Should Don state explicitly his opinion to show that he has the best argument?

7) Is Don trying to win the argument by debating?

Thanks,

José Antonio

Is that a threat?

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

The summary is: 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.

Hard to see best way to fix problems with wind is more transmission. One could argue that more storage would address problem as well. Transmission is a resource as well, so how does one size transmission appropriately for wind farms that may be outputting at 110% rated capacity one moment and 0% the next?

You are right, when you say it is "hard to see..." and "one could argue..."

The essential argument of the article of increasing "the odds that some of them will be performing at any given time," has been used in Germany to design and expand wind generation and the power system. In fact, just to support that said argument isn’t new, and nothing else, they were writing about in IEEE Spectrum web only article as follows:

14 May 2005-Germany would seem to be caught between conflicting environmental policies: the country plans to both phase out its nuclear reactors and reduce its greenhouse gas emissions, which cannot be done without also reducing coal emissions. The Social Democrat-Green Party governing coalition is pushing wind power as a way to keep the lights on. But can enough wind energy be tapped to make up the difference between a growing demand for electricity and decreased supply from big central generating plants? And even if there is enough wind power available, can Germany's power grid handle a much larger fraction of intermittent power-power that cannot be simply dispatched on demand?

The answer to both questions is a resounding yes, at least for the next decade, according to the Berlin-based German Energy Agency (Deutsche Energie Agentur, or DENA). Established to implement Germany's renewable energy policies, DENA is a consortium of German grid operators, transmission companies such as E.ON AG (in Dosseldorf), and wind power interests. In a 514-page study released this February, it concludes that by 2015-when Germany hopes to have shut down 7300 megawatts' worth of nuclear power-the country can more than double its wind capacity to 36 000 MW, from 16 600 MW in 2004.

I wrote "just to support that said argument isn’t new, and nothing else,..." However, I like that Germany wants competition among energy sources. EWPC is a mean to provide such competition under an open market value chain.

Achieving 90% reliability of 7,300 MW with wind generators of 35% availability and 25% capacity factor requires the installation of ~60,000 MW of wind turbines in 8 carefully selected and matched locations, unless the storage issue is resolved. Sounds like Germany will begin having reliability problems prior to 2015, since they would be about 40,000 MW short.

DENA predicts that total power-generation capacity will rise by more than 20 000 MW over the next decade, accommodating a 7.3-terawatthour increase in average yearly demand. In addition to the policy-mandated rise in wind capacity and drop in nuclear power, DENA predicts the addition of over 9000 MW from natural gas turbines and about 7000 MW from additional renewable sources such as geothermal and biomass installations.

Possibly "rational rationing" will handle the shortage. Or maybe French nukes....

A claim that one can shut down more nukes, build more wind, and REDUCE spinning or standby reserve is contraintuitive. (There are other words that are more accurate that refer to the ground under bovine males.)

The trajectory for coal and oil-fired power depend on what, if any, carbon penalties the German government imposes on new power plants. With no carbon penalty, coal power would drop by 500 MW, from about 48 500 MW at present; with penalties rising to euro 12.5 a ton by 2015, coal generation would plummet by 12 700 MW. With the tax, oil, because of its smaller carbon intensity per unit of energy produced, displaces more than 7000 MW from coal; but without the tax its role actually decreases. Depending on the scenario, annual carbon dioxide emissions from power production are predicted either to remain flat at the current level (279 million tons in 2003) or to drop, with the carbon tax, to as little as 228 million tons.

Grid upgrades, plus federal incentives to encourage the wind developments, would add no more than euro 15 (US $20) to the average household's annual electric bill. The government has declared victory, calling this a small price to pay for clean energy. German opposition parties point out that, according to the DENA study, cutting CO2 emissions by using wind power will cost more than euro 40 per ton of carbon, making it less cost-efficient than many energy conservation options. Germany's utility association agrees: "The DENA study shows that the programs for the promotion of renewable energies need to be revised," says Eberhard Meller, general executive manager of the German Electricity Association, in Berlin.

However, if Joseph was referring to the European November 2006 blackout, wind farms were certainly part of the failure, but not the root cause of Nuclear shutdowns. The root cause is in the flaws of the market architecture and design, such as the Open Transmission Access rules. Wind farms in Germany connected to distribution systems were not under control of the system operator. That is why transmission and distribution need to be integrated to be operated by the system operator as transportation to get the system to operate at ultraquality.

Thanks for cooperating in the generative dialogue.

Regards,

José Antonio

Granted it perpetuates the existing physical grid design model, but the critical argument about wind power is that it is unreliable 24/7, has many orders of magnitude smaller output capacity than large central stations, so large wind farms are needed that often must be located in remote areas far from the end users. Large central transmission lines in the grid are there for two reasons remember - to handle high power flow from large central stations, and they are also the most efficient way to transport power over long distances (i.e. higher voltages at lower current and less line losses).

Malcolm Rawlingson is right though - building many large wind farms everywhere are far too unpalatable. Locating single wind turbines close to the end users and patching them into the grid like any other local generation is much more palatable though. This is happening now in Ontario to foster more local generation sources and become less dependent on the fuel sources that the big central stations depend on. In other words a combined grid of large nukes and lots of small local generators is the preferred way.

Len: I read your IMEUC articles on this website, very impressive. Your proposed system of deregulation could theoretically realize more competition and lower costs, for consumers especially.

What I note is that it hinges heavily on the design and ownership of the AMI smart meters, and most importantly the ability to download changes to its software by consumers or others. This is crucial to your proposed system, and the other crucial point is that utility companies would be divorced from the commodity revenue stream.

While I am not disputing the potential benefits of it, the reader comments from Edward A. Reid point out the huge barriers out there.

The last thing our utility companies want is to have less means of generating revenue, and access to the commodity revenue stream for part of their income is critical to them.

The problem with electrical energy use is that the consumer spends a much bigger portion of their bills on energy to generators then they do to the utility companies. So naturally the generator companies want meters on every consumer, and they don’t want anyone to have the ability to corrupt the information it gathers for billing purposes, accidentally or not. As you know here in Canada we have the Measurement Canada federal government agency that must approve any electricity billing meter first before it can be deployed, in part to guarantee accurate billing, and for security by placing their seal on it that discourages attempts by consumers to alter meter data and falsify their bills. I know from experience that meter manufacturers are actually prevented from commercializing the emerging AMI smart meters in Canada with any capability to remotely change the meter’s software – just because of the security risks.

In the telecom industry the reverse it true - the content carried over telephone wires is digital information which is generated (almost) freely, and most of the cost that the consumer bears in their monthly bills is to pay for the distribution network service and home equipment. In this case it doesn’t matter that there is no meter on the information carried over their wires – with some exceptions of course when the information volume is very large like for some internet services.

I suppose if there was a way to identify which generator your energy is coming from at any given moment in time, generators could market their energy competitively against each other directly to consumers. But obviously this is completely ridiculous because there is no physical way to identify given our interwoven power grid designs. However distributed local generation just perhaps might have this potential, since the generators will be much closer to the end users. In the case of consumers buying gasoline, there is an identifiable source of the fuel since it is temporarily stored. For electrical energy there is not.

I don't want to discourage your scheme though, there may be something I have overlooked in your proposal that alleviates this problem, or perhaps others may have some ideas.

Bob Amorosi, Resident of Ontario Canada

As I promissed on the article where I stress the need to arrive at a shared vision of the universal (global) electricity service, I will respond later to your timely contribution to the generative dialogue.

Best regards,

José Antonio

1) I think you mistake IMEUC's proposal to allow downloading of energy management parameter data and control algorithms to the meter (which IMEUC encourages) for downloading actual metering measurement and recording programs (which IMEUC does not allow, see auditor requirements). The difference is comparable to a personal computer user being allowed to upload a new application or data like an MP3 player or music files to a public network web server computer, but not being allowed to upload and implement any changes to the actual web server's operating software. The restriction is fairly easily provably implemented and enforced, as any of hundreds of thousands of network administrator software engineers could show you.

2) On "who's electricity am I buying", it makes no difference. The electricity on the grid is understood to be indistinguishable under IMEUC, but billings are based on calculations of theoretical input, transmission and outtake contracts pre-established in nightly negotiations between meters and the market of generators and adjusted during the day based on actual deliveries and consumption. It's exactly the same theory as is now used in de-regulated wholesale standard market design. IMEUC simply provides the means to includes every customer in the current market instead of appointing usless retailer middlemen as current de-regulation and EWPC do.

So, all IMEUC does is physically shrink the home personal computer and physically package it into the meter enclosure, most likely as a completely physically separate and isolated circuit board with separate data storage etc., simply sharing the same communications pathway as the metering electronics. Easily implemented with complete isolation security on the communications path with electronics prices these days.

And, guess what. There is in fact one meter technology that is assimilating to what you are describing - that is a smart meter that is designed to have two separate hardware boards in it; one for the metrology electronics that is approved by agencies like Measurement Canada, and a second that is used for AMI communications and data storage. Hydro One and Milton Hydro have embarked on using it as part of the Ontario smart meter initiative, and have deployed tens maybe even a few hundred of thousands already.

What's even more interesting is that the California company producing the board for AMI communications and data storage does not produce the meter itself or the meter's metrology hardware. They market their AMI communication boards as an "open standard" to any meter manufacturer wanting to implement their AMI communication network, effectively touted as "meter agnostic". Utility companies can ideally then choose from a variety of meter manufacturers that use their same AMI communications technology.

These AMI communications boards have a fairly powerful processor and memory on it in addition to a radio for AMI networking, so picture what you are saying - that this board evolve into the shrunken PC you're suggesting.

It's a technical possibility, indeed. But the concept is not being discussed by anyone that I am aware of yet because it's a much more advanced concept for AMI than anyone has developed yet, let alone marketed. I have learned (the hard way) that adding more computational power to smart meter hardware or more memory capacity translates to higher smart meter cost to utilities. And historically every penny matters to these people.

Great to have learned something about these ideas on this website.

How does one distinguish between "rational rationing" and irrational rationing? Is it like the difference between a recession and a depression: when my neighbor loses his job, it's a recession; when I lose my job, it's a depression?

Ed

No Need for Regulated Price Caps - II Customers’ price caps are the key to the infrequent rational rationing of service. During a transition to EWPC that ends with every customer defining its own price cap, it is important to understand that most of the customers need to ...

Engineers Needed for Lower Prices

Customer reliability after R1E2 is one of the most important elements that 2GRs use to develop business model innovations, and as a result produce rational rationing when needed. Under the VIUs paradigm rationing is irrational. ...

A Paradigm Shift to EWPC

EWPC is about rational rationing in those very costly moments when required. Vertically integrated systems were designed for a 24 hour loss of load probability in 10 years. The system planner and engineer is the responsible for short ...

Somewhere along the line, I got the impression that Jose was going to show "rational rationing" was optimal w.r.t. "social welfare". Coming from a fellow who seems to be encouraged by taxation of competitive generation to stimulate generation that isn't, it ought to be an interesting demonstration. He may yet find a way to put one retiree into recession and another into depression.

"The problem with electrical energy use is that the consumer spends a much bigger portion of their bills on energy to generators then they do to the utility companies." This is an interesting concept. Here in the land of "open standard" AMI communication boards, about 33% of total electric charges are for electric energy, presumably paid to the generators, and about 41% of total electric charges are for T & D, presumably paid to the utility company. What happens with the remaining 26% is but another example of what goofy non-IOU, central planning can bring the beknighted ratepayer. Certainly, the latter is not the result of what Fred has described as "... an intelligent and responsible government doing things that the market cannot or will not do." One wonders, too, what the magnitudes and percentages for generation and T & D might have been had the antithesis of Fred's description not forced generation divestiture on the IOUs.

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.

I am glad to be able to say what I intended in my first post. 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 solutions should be left for company vs. company competition.

Arggg... I guess there's no way of training someone who's determined to misunderstand. As the posts are basically the same, I wrote also under the article "Continental Grid Vision Needed" :

Len,

Why do you have a different response here from the one under the Grooming Wind article?

Please advise, before I respond?

Thanks Len for contributing to the generative dialogue with the aim to produce an alternative of a global-universal electric service without retailers.

Retail competition without retailers... enforced completely automated demand integration. Who is supposed to do long term planning demand integration? Do customers have a wide range of risk aversion or risk taking characteristics? Who is going to pay to educate the customers? Will they know all the details of the rules of the wholesale (I am sorry, maybe it is retail) market or only the generators and the market manager need to know them?

Competitive transmission, regulated distribution. Is the regulated distribution the utility? Is the problem of lack of investment in transmission going to be solved by the incremental extensions of Open Transmission Access of NERC mandatory requirements?

What will the Cato Institute recommend when they find out that IMEUC ignored the pricing and incentives issues involved managing the transmission system and its public commons characteristics that are solved by the EWPC controlled market with transportation ultraquality? Please don’t forget to respond on this Cato Institute issue, which is the key to the non-trivial aspects of electricity markets, which in turns are not solved by the supply – demand models on Econ 101 chapters of economic books.

As worldwide mergers and acquisitions develop, how is IMEUC going to handle the protection from abuse of the retail customers? Will there be the need for artificial market institutions that invites manipulation and abuse when generators decide not to invest?

Does the market manager or the distribution utility handle all the retail revenue streams? How large will be retail departments of the generation companies? Will those departments be called retailers or wholesalers? Will those departments be allowed to innovate and market innovative products for retail customer?

Is the IMEUC model open to innovations under competition?

“Competition vs. competition” is the second stage that develops when the first “market vs. market” competition stage ends. The point is that comments about hardware/software solutions are not for this first stage.

...benighted ratepayer...or maybe we should confer knighthood on same.

Also Fred, 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. The missing link for these products to become successful in the consumer market is connecting them to our utility companies. They are salivating at the prospect of marketing it to consumers even if it means marketing it throught the utility industry. The AMI and smart grids appearing in the electric industry are viewed as the way to enable it.

Part regulation and part capitalism has happened successfully I might add in other sectors, like our telephone and telecommunication industries. They profit from using new technologies for their networks but also by selling consumer gadgets to their customers like cell-phones and modems etc. Part government regulation keeps their networks reasonably reliable, while capitalism benefits consumers and the telephone companies in what was once a heavily regulated sector long ago. In Canada it is still partly regulated today.

How does IMEUC satisfies the missing link [on Bbo post]?

Apparently, under the "new paradigm" I flip the switch, the lights may or may not come on, the meter may or may not turn, and multiple people will send me a bill.

Why does this not seem like progress? What am I missing? Seems like lots of "dialogue" and not lots of "generative" activity! I think I prefer power-full silence!

Under the true old paradigm to get flip the switch service, whether you like it or not, you are paying for insurance to keep generating reserves, say in the order of 30%, to satisfy the most demanding customers which are some commercial and industrial customers. That used to be about 99.99% reliability on transmission and 99.9% on distribution.

If you are a risk averse retail customer, under EWPC you make an agreement with a Second generation Retailer and you get to flip the switch and pay for the bill which includes the corresponding insurance to have the lights on all the time the most demanding retail customers have their lights on.

Up to the 70s transaction costs to differentiate retail services were prohibited. Today, they are not. Energy costs are increasing, information costs decreasing.

Depending on the risks you are willing to face, you could have a lower monthly bill if you don't want to pay for the whole reserves in the order of 30% like industry need (maybe 99% reliability is fine with you as a residential customer). When we sum up all of the customers requirements we might end up with reserves of 20% on the supply side and 10% on the demand side. So we will no need that much central generation (and its fuel consumption) and the corresponding transportation (and its losses), while satisfying all of the customers PERCEIVED needs.

Only your 2GR will send you a bill under EWPC. I think that under IMEUC you will have several bills, just look at the two IMEUC papers to confirm it.

To make things simple, please consider that I meant that you have a supply side mental model, as opposed to a budget customer mental model for who every pennie counts.

Any system that is designed for high reliability always comes at a cost. Having the excess peak demand capacity in the electric industry is how this has traditionally been accomplished, and heavy market regulation with a monopolistic utility industyr has kept it this way.

It's my interpretation, and I am not an expert, that rising fuel costs and the rising maintainence / replacement costs of the continuously expanding infrastructure including generators has made the extra costs of reliability unpalatable over the last decade. The point is what do you change to make it palatable, and without infrastructure changes and / or market design changes, the only other option left is for everyone to continue to pay more

On the Energy Central Topics page in the Jan. 11th article "The Destiny of Intelligent Infrastructure" author Mark Gabriel concludes:

"It will require taking some chances in an industry that is not known for taking a gamble."

I think this statement says it all. My comment to it is reprinted below....

One of the barriers to taking chances in this industry is that it is heavily regulated. Unlike most other free market sectors in a capitalistic economy, the utility industry does not normally experience competition as seen in other industries. Worse, they are not usually motivated to attempt to diversify their businesses to develop or find other products or services to offer that could generate more revenue from their customers.

I'm not suggesting deregulation is the whole answer to change this. There are several other authors on this website that understand the industry much better than I do and could make much better educated proposals to do so.

I suggest that one way to foster more risk taking by utility companies is to allow / encourage / deregulate them sufficiently enough to find ways to grow their sources of income like any other private enterprise.

The opportunity to engage the consumer much more with smart grids and smart meters might just permit this. If the utility industry became involved in commercializing other technology to consumers they could potentially profit from it. Granted utility companies are not technology developers, but this is routine for their technology providers like meter manufacturers and other parties.

Think of utility companies like your telephone companies - they routinely have high-technology suppliers not only develop equipment for their networks but also the gadgets like cell-phones and modems to resell to the consumer. For utility companies, the gadgets could be in-home automation networks for demand response systems, retrofit devices to enable existing appliances to become smart appliances, real-time in-home energy monitoring devices, and smart communicating thermostats.

Is this wishful thinking on my part ? Perhaps. But in the electronics industry, there are many big players salivating as I write these words, waiting to commercialize their new technologies, in some cases already developed, by eventually marketing them through the utility industry to consumers.

Bob Amorosi, Resident of Ontario Canada

I don't think the battery life of my laptop is long enough to assure that it would receive the message that I could "turn the lights on and do my laundry now".

I agree that a ~40% load factor is less than perfect. Would you agree that a ~100% load factor is less than plausible; and, perhaps, less than possible?

I am not prepared to live my life around "when the hot wind blows". However, I am glad I do not live in southern California, where (when it is really hot), the "hot wind" doesn't blow at all.

My concept of "demand-side management" is: when I "demand" power by flipping the switch, someone has "managed" to have power available. I am willing to moderate my demand if the power is sufficiently expensive and I KNOW that it is sufficiently expensive. I am also willing to establish a set of decision rules which are automatically invoked when power costs are sufficiently high. That way I get to decide how to count every penny. I am not willing to trust you (or anyone else) to write and invoke the decision rules.

Strikes me that we should let the marketplace do what it does best. In the overall context of the delivery of power, the reliability of wind energy is a problem and as such should be reflected in the price that a generator receives. If the wind generators can come up with ways to overcome that problem (vice financial subterfuge that passes the burden on to the consumer) then they should do so. Otherwise, stay out of the kitchen.

" Is the problem of lack of investment in transmission going to be solved by the incremental extensions of Open Transmission Access of NERC mandatory requirements? " -- Transmission being the responsibility of the producer, I fail to see the point of your question.. There could only be a lack of transmission if there is a lack of generation, which is discussed in the posted document (and for which EWPC provides no defined protection except by waving some sort of ultraquality wand, for which I've asked the details of in the past without response. Absolute regulation I presume, but how enforced on free-enterprise generation? If someone decides to build a huge windfarm in west Texas and market the power in Florida, is the taxpayer on the hook for the "ultraquality" transmission required? If not, then whom?). Also, how could EWPC guarantee "ultraquality", eg. zero interruptions, if the free markets decides not to build sufficient generation? Very fuzzy.

All the rest the same.

You still have a supply side mindset. There is no point in trying to convince you otherwise. Readers should become aware of his Old Paradigm vision. What he explains as "demand side management" is a term developed by the supply industry. My term that goes beyond that is the development of the resources of the demand side under an open architecture to provide incentives of business model innovations, one of which might be "I am willing to moderate my demand if the power is sufficiently expensive and I KNOW that it is sufficiently expensive. I am also willing to establish a set of decision rules which are automatically invoked when power costs are sufficiently high."

Today I just listened to Jeremy Rifkin talk in the First International Energy Week, here in Santo Domingo. He states that the central generating station, even Nukes, have (as I interpret) their years counted, as it happened to mainframe computers. To me that is as likely a scenario as any other as this point in time. The question is: How far is Rifkin in making his vision a shared vision? More on the next post.

Len Gould wrote on 8.31.07. “My problem with EWPC are myriad eg. it's precisely identical to every existing failed attempt at de-regulation in N. America. And it's promoter flatly refuses to answer any difficult questions about it. Questions which I have posed before, such as: ...” Each one of the questions he mentioned was answered, as you can see in the post A Paradigm Shift to EWPC.

I think that Len quote apply perfectly to IMEUC instead of EWPC. Can anyone infer that he abandoned because I posed difficult questions? What else can you conclude of his behavior?

The only three things wrote, before concluding “all the rest the same.”:

1) He confirmed is that IMEUC is a closed, monopoly architecture. EWPC is an open architecture that evolves as 2GRs develop business model innovations under competition to integrate demand. 2) As an example of all the rest the same, Is it so difficult to respond “Does the market manager or the distribution utility handle all the retail revenue streams? There I repeated the idea of a distribution utility, which now he tells me “call it whatever you wish.” 3) Under IMEUC he writes that “Transmission being the responsibility of the producer, I fail to see the point of your question.. There could only be a lack of transmission if there is a lack of generation, …” This means he doesn’t understand what the Cato Institute wrote: “ignored the pricing and incentives issues involved managing the transmission system and its public commons characteristics.”

As disruptive technologies, like solar generation, wind generation, batteries or its alternative storage technologies get better and better, and cheaper and cheaper, as disruptive technologies do, under competition, business models “will evolve as soon as the retail market start to respond.”

At some point we may not need even nukes. One such scenario is that of Jeremy Rifkin in his article "Leading the way to the Third Industrial Revolution." If I understood correctly, Rifkin vision is already becoming a shared vision among European governments, as he was advising the president of the European Union, serving also as the senior advisor to the European Parliament Leadership group.

Rifkin writes that “Twenty-three states [of the U.S.] have begun the journey toward a Third Industrial Revolution by mandating that between 10 to 25 percent of their electricity be generated by renewable sources by 2020.” He adds, “Nuclear power could also be utilized, but that would vastly increase the amount of dangerous radioactive waste, significantly increase the use of available fresh water to cool reactors, pose serious security threats in an age of terrorism, and greatly increase the cost of taxpayers and consumers that have to pay for their energy.”

To me every effort to try to solve the systemic crisis by resorting to a generative dialogue should be seen as positive.

Best regards,

José Antonio

Riftkin calls nukes and all fossil fuels elite energies. In addition, Rifkin says: “the shift from elite fossil fuels and uranium based energies to distributed renewable energies, takes the world out of the geopolitics that characterized the 20th century and into the biosphere politics of the 21st century…”

So Rifkin should not be called anti-nuclear, but anti-Old Paradigm. I take his vision as a very likely scenario to which EWPC can not only evolve to, but help by mutually reinforcing effects of three pillars of the Third Industrial Revolution: renewable energy, storage technology and the smart power grid. Maybe EWPC is a missing fourth pillar or at least a transition market architecture and design paradigm.

I say maybe a fourth pillar since to enable the smart grid the perverse incentives of keeping the “native load” (utility grid and the utility enterprise together) are removed. By enabling retail (and wholesale) competition among enterprises, without “native load” interference, renewable energy as part of the development of the demand side can get integrated together with demand response and energy efficiency into power system planning, operation and control faster under business model innovations.

I say a transition paradigm, because it can support any can of mix of central stations and renewable energy, while eliminating the “native load” barrier that obstructs progress for a shared vision of a universal or global electric service.

Rifkin quotes the EPRI "Perspective on the Future" as to how distributed generation is going to unfold. "In much the same way the computer industry has evolve. Large mainframe computers have given way to small, geographically dispersed destop and laptop machines that are interconnected into fully integrated, extremely flexible networks. In our industry, central station plans will continue to play an important role, of course [for quite some time]. But, we're increasingly going to need smaller, cleaner, widely distributed generation... all supported by energy storage technologies. A basic requirement for such a system will be the advanced electronic controls: these will be absolutely essential for handling the tremendous traffic of information and power that such a complicated interconnection will bring."

There's no ideal generation plant or market design because they all have apparent advantages and disadvantages. In my limited knowledge of the industry I would place my bets on a combined "hybrid" grid of big central stations dominated over time probably by nukes, and many smaller distributed local generators like wind and solar to handle peak loads. Distributed storage for distributed smaller stations may soon become practical too, driven by the intense battery technology developments underway for automotive electric vehicle applications.

Our legacy grid and market designs out there now cannot be torn down and rebuilt overnight into a hybrid, since we must live with the legacy stuff to keep the lights on in the meantime. It would have to happen gradually, and, significant time to change it could be made available if demand growth was curtailed, by simultaneously enabling much greater energy efficiencies and promote more energy conservation with consumers.

Unfortunately the latter point of efficiencies and conservation are too often left up to consumers themselves to adopt. Their massive purchasing power in theory could be used to foster changes on a large scale and over short time horizons if only the energy industry and governments made it economically attractive for consumers to do so over a short time frame.

Bob Amorosi, Resident of Ontario Canada.

which, it should be noted, are currently unavailable and expected to be uneconomic for the forseeable future.

The challenge, as always, is to install and start-up a complete system which will pay for itself, including maintenance and repair costs, before the system components begin failing or lose sufficient capacity to limit their usefulness. A clean, renewable system based on either solar or wind, would require the installation of ~4-5 kW of generation capacity (based on a 25% capacity factor)plus 100-125 kWh of storage capacity per kW of average peak season demand to assure reasonable reliability. Both the generation capacity and the storage capacity would have to experience minimal performance deterioration during the payback period; or, the generation and storage components would have to be oversized sufficiently at installation to assure adequate capacity as they aged.

Also, as a reminder, nothing will kill a new technology faster or more finally than selling it to customers before it is "ready for prime time".

Government incentives can be used to offset higher initial investment requirements; however, they must (and will) diminish over time and the system installed costs must decrease as the incentives decrease if the technology is to survive in the marketplace. The solar industry is rife with examples of what happens when the technology does not advance faster than the incentives decline, or the equipment does not survive the payback period; and, too many people know where the bodies are buried.

Today’s storage technologies have already the opportunity to get into the mix of demand side. The reasoning is very simple: peak load central generation with high marginal costs - the source of price spikes when missing - can be easily replaced, being part of demand responsiveness.

As batteries and other storage technologies under research and development get cheaper and better, the penetration will increase. Breakthroughs on renewable energy and energy storage will wipe out central generation. If that happen, Rifkin scenario will lead to the Third Industrial Revolution. If it doesn't happen, another breakthrough might happen which we don't know yet. A worst case scenario is the collapse of our species as an industrial society.

A home with a 1 kW average demand would consume 24 kWh per day. A solar system rated at 1 kW will produce that capacity for approximately 6-8 hours per day on a design day, or a total of 6-8 kWh per day. Thus, it takes 3-4 kW of capacity on a design day to produce 24 kWh. Greater generation and storage capacity provides some assurance of power availability on other than design days. I have ignored losses for simplicity.

Solar thermal is the same: you must collect at a rate 4x average usage during 25% of the hours to use at the average rate for 24 hours. Again, more collection and storage provides greater assurance of thermal availability on other than design days. It is also important to remember that the design day in Phoenix is different from the design day in Buffalo.

For wind, the situation is similar, although it's availability may not be quite as certain as the daily appearance of the sun.

In the event of less conservative design, or periods of cloudiness or low wind velocity, "rational rationing" is still available to deal with the situation.