There were two major limitations to competitive electric retail markets, one was conceptual, the other political. We didn’t really understand electric retail markets. As a result, after the California debacle, new retail competition development was practically stopped by political decision making all over the world.
We are now ready for a competitive electric retail market revolution by addressing the political limitation, as a complete understanding of electric retail markets has been available for quite some time. That political limitation is fully addressed in the blog post Law of the Situation: the utilities did not understand.
To address the conceptual understanding, please first take a look at the post The Electric Power Industry is Missing a Vibrant Retail Market, which follows the idea that "New technologies are missing many things, but especially their markets." That second post can serve as introduction to supersede the conceptual limitation, based on the following stories:
… the late M.I.T. Professor Fred C. Schweppe... " envisioned a world of customer-based electrical generation and storage"The death of Fred Schweppe in1988 and a misunderstanding by William Hogan in 1992 of Schweppe’s work on the energy marketplace were "small chance events early in the history of' deregulation that "tilt[ed] the competitive balance," to an inferior solution path, as W. Brian Arthur explained in general in his Scientific American, February 1990, article "Positive Feedbacks in the Economy.”The events, were naturally pulled by strong vested interest community, by neo-liberalization, by the debating system approach, and by the regulatory design, which self reinforced each other.
To enable a superior solution path, the stories end in the post States that Implement a Heterogeneous Grid are Poised to be the Winners, whose summary is as follows:
States legislatures need to empower state regulators to do the innovative job to satisfy the need for their constituencies that a homogeneous grid is no longer able to provide. To consider a heterogeneous grid, legislatures can take a look at the now closed debate between Mr. James Carson and I, under the EWPC article The Electricity Without Price Controls Architecture Framework (EWPC-AF).”
As it is now very clear that both limitations no longer hold, any government of the world is now able to move forward. In fact, state governments have now the opportunity to open the power industry to business model competitions that will lead to maximum social welfare.
But there is more. In response to the first blog post, a private message from a consultant in California said:
I'm not sure that this blog post will lead to California (or any other state) opening itself to a retail model like Texas. There's a lot of residual fear based on the market manipulations by companies like Enron. I do think that some of the CA utilities are trying to be responsive to consumer concerns while others are less disposed to that.I confess I don't know what it will take to get utilities to change their behavior. Some days I feel like I'm banging my head against a wall.
This is an updated version of the response:
A retail model like that of Texas or the United Kingdom is not being proposed. Both violated the warnings made by the late M.I.T. researcher Fred C. Schweppe and his team in the book “Spot Pricing of Electricity (Kluwer, 1988)” that said:
- "We believe the deregulation which considers only the supply side of the supply-demand equation is dangerous and could have very negative results."
- “A second major difference between this chapter and most of the rest of deregulation literature lies in our concern that the economics and physical security of the power systems not be destroyed or compromised.”
Instead, what’s being proposed is in the post The New California Capitalist Model to Initiate the Transformation of the Global Power Industry.
