EWPC is the answer to the difficult question on how to finance and develop wind projects for all stakeholders to win. The underlying problem is found on the successive extensions of the inefficient price controls of the vertically integrated utilities paradigm that leads to simple and stupid behavior.
Financing and Developing Wind Projects
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.
In the article Optimize Transmission Assets for New Wind Farms but Who Pays?, Mr. HIMADRI BANERJI brings a difficult question on how to finance and develop wind projects. The problem, however, comes from the lesson that Dee Hock, CEO Emeritus VISA International, gave us: “Simple, clear purpose and principles give rise to complex and intelligent behavior. Complex rules and regulations give rise to simple and stupid behavior.”
The problem Mr. Banerji is bringing has its origin in the vertically integrated utilities (VIUs) paradigm, whose incremental extensions give rise to very complex rules and regulations that result in simple and stupid behavior. It is well known that price controls are inefficient and lack transparency. Lack of transparency is one side of a coin, the other side being corruption. So the question “Who pays?” is always answered by those that control the political process, as debates get locked, and to get them unlocked the hierarchical force of the authorities is employed. Please read Slicing the Last of the Regulated Monopolies.
Electricity Without Price Controls is a market architecture and design paradigm shift away from the VIUs paradigm based on “simple, clear purpose and principles,” as can be seen in the article Synthesis Proposal Agreement of EWPC. Under EWPC, both questions – who should pay and how to develop an optimal transportation (T&D) grid, as many wind projects are to be connected to distribution lines, are answered without getting into debates.
Optimal transportation should be the result of expansion planning where all potential wind projects (see also Wind Integration: An Emerging Paradigm) are taken into consideration at the same time for a give planning horizon. Such expansion planning is to be done in the environment suggested in the article Free Market and Central Planning, Under R1E2.
With a transportation utility that is financed by tolls the problem of “Who Pays?” is solved. A simple explanation of how to optimize the transportation system is given in the context of the article Demand Integration Under EWPC, as follows:
Generators and Second Generator Retailers interchange with the System Engineer their proposed investments and other key information to allow the System Engineer develop the transportation utility expansion plans for the long run, in order to optimize the future grid by minimizing total system costs (not just the transportation costs) in order for 2GRs to enable a potential maximum social welfare in the national economic context, and not just the financial viewpoint of the utility as the VIUs paradigm calls for.
For more details please read other articles in the Energy Central Network EWPC Blog.
The following, "...other key information to allow the System Engineer develop the transportation utility expansion plans for the long run, in order to optimize the future grid by minimizing total system costs..." , extracted from your assertions on wind generation and EWPC uses all the right words. However, have you found anything but zero for the wind generation component of the minimum total system cost solution vector? If so, the total system cost function and the constraints on the solution vector must be quantum jumps from the present... Perhaps "future" is the operative word in your argument.
Wind generation investments are not a thing of the future, but a reality not to be dismissed. Under EWPC transportation expansion plans of electric power systems must include all expected costs - investments, operation, maintenace, and outages costs, for all generation sources (not just wind) and transportation (transmission and distribution) for the long run. The result should be a robust transportation grid that is of the least expected cost, instead of an overbuild grid that does not takes into account demand elasticity as the VIUs paradigm calls for.
Best regards,
José Antonio
best, Joey Gimenez
joeygimenez@gmail.com
Wind generation is not all or nothing proposition. The wind generation component as part of the generation mix is most likely to be non-zero at many jurisdictions with the right wind conditions. At the end of the day, it will be risk taking (no PURPA like long run contracts) private sector wind generation investments that will define the penetration based on efficient pricing. Some experts expect a 20% percent penetration, but it will be generation competition that will have the final word. All of that will be real, not imaginary, as EWPC market architecture and design gets implemented.
Joey,
I have been blogging since May 2005, at the Grupo Millennium Hispaniola blog, which is not a corporate site. I am leading EWPC paradigm shift of the industry to replace the obsolete Integrated Vertically Utilities paradigm. The industry is ripe for the paradigm shift to introduce a vibrant, robust, and fully functional competition.
Regards,
José Antonio
I stress that the optimization mentioned in my article is about the transportation grid, to enable maximum social welfare. The free market activities by generators and 2GRs will actually accomplish such welfare with R1E2.
"...optimize the future grid by minimizing total system costs..." is certainly an interesting concept. Would Bellman have called such Inverse Dynamic Programming? Try Electric Load Forecasting in the October 2007 IEEE Control Systems Magazine for some folks who are trying to understand the demand side. Might be a good place to start if one hopes to manage same.
I browsed the article and found that the authors are using an "... application of a nonlineal system identification technique to the problem of short term load forecasting." They are taking time series at the transmission side of the transmission distribution transportation interface under the assumption of flip the switch inactive loads of the VIUs paradigm.
Under EWPC paradigm the artificial and mistaken separation of transmission and distribution disappears, letting the trasnportation company learn what is happening at the end-customer level with the help of several Second Generation Retailers (hit link http://grupomillenium.blogspot.com/2007/07/second-...). In adition, there are big changes to be expected and less sophistication will give not only better values, but committed values to be used for load and generation, day and/or week ahead, unit commitment. That is part of demand integration where the data will be taken from AMI customers values and with applications of business model innovations produce forecasts which reduce the risks on wholesale economic transactions.
Best regards,
José Antonio
There will be no 2GRs nor transportation company jet. The transmission company will still be in control and operating in a backward looking, with strong barriers to innovation, in the obsolete, inefficient, and ultra expensive VIUs paradigm for the long run.
However, 2GRs will develop business model innovations that will make demand active when the EWPC market architecture and design is implemented.
Best regards,
José Antonio
Flip the switch service for all customers simply start to disappears as EWPC evolves, as cost conscious customers increase based on the development work of 2GRs to integrate demand.
Regards again,
José Antonio