This is my synthesis of the EWPC paradigm shift that maximizes social welfare. Although it is a non-trivial subject, it seems that many intelligent and important readers of earlier posts may just understand it. Maybe, I could get a prize for it, as it goes against the politically correct and the popular consensus of our time.
Free Market and Central Planning, Under R1E2
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.
Dr. Stephen Lee has written the timely article Free Market or Central Planning?
My answer to his question is both: free markets and central planning, but with the added condition of electric system reliability first, money system economy second (R1E2).
The Vertically Integrated Utilities paradigm became obsolete in the 70s. The obvious elements had to do with the excesive capacity required and corresponding high rates and the change in the range of customers supply security needs. After that, many incremental paradigm shifts have occurr.
It is necessary that the industry should undergo a real paradigm shift. The electric system and the money system should be functionally separated. As the money system has supply and demand, and generation and retail are fully competitive activities, the functional separation has good cohesion.
The natural monopoly transportation system is what remains as the electrical system. To optimize the transportation system, it is required to consider total social (demand, transport, supply) welfare needs, and not just the optimization of transmission, distribution, or both, by themself.
By applying the reliability first, economy second, criterion, the development of the smart grid can proceed and as each competitive retailer develops, with business model innovations, the resources of the demand side, to integrate demand into power system planning, operation and control, a robust, vibrant, and fully functional, electrical and market, power sector can evolve.
Transmission open access and the native load requirement by IOUs are an incremental step and a strong barrier to competition, respectively. The case for reintegration of T&D is clear. The case for optimization of distribution and regulated retail under a business model of IUOs winning rate case to the regulators is dead wrong, as it is a win-lose proposition.
Those are some of the concept that have emerged on what is now electricity without price controls (EWPC) that I have developed since 1996.
Thanks once again to all that have serve as a sounding board, without whose help I would no gotten this far.
José Antonio
It is for me an honor to have the pleasure to interchange with you.
I have read many EPRI papers since the 1970s., and obviously your name is in many of them.
In the mean time, I will read your posts.
If you get close to Dominican Republic, let me know, so that we could talk person to person.
Best regards,
José Antonio
By golly, I looked from top to bottom of "Free Market and Central Planning, Under R1E2" as you advised. Could not find anything that remotely resembled quantification of EWPC paradigm simulation results shown side-by-side with the VIU paradigm results, both run on Black's simulation.
There is no need for simulation at all.
The R1E2 concept makes the VIUs and the EWPC paradigms indistinct in term of the non-triviality of electric power systems, which is missing from IMEUC and all deregulation experiments.
The added efficiency of EWPC with respect to the VIUs paradigm comes from demand integration and the elimination of prices controls. Said in other words, the VIUs paradigm can't no longer maximize welfare for the future, as that process started back in the 70s.
Given that your requirement under EWPC is for "ultraquality transportation" which integrates all transmission and distribution in a geographic area into a single entity, but you propose that "2GR" retailers should implement demand management, which of them do you propose owns and operates the meters?
Does the T&D company control the meters? If so, a) how does a "2GR" retailer get an inovative new metering system / demand controller implemented?
Does the "2GR" retailer company control the meters? If so, a) how does the T&D entity assure its linemen of safety when working on distribution circuits which have e.g. local microCHP or microDG? b) How do you propose to integrate grid-smart PHEV's?
IOUs have a perverse incentives barrier to obstruct progress and innovations to the power industry, in order to extend the VIUs paradigm well beyond its useful life. EWPC has the proper incentives to eliminate the barrier to all distributed sources, as 2GRs compete for the customers the incentive is completely aligned. Federal standards should be developed to easy interconnections. I understand there is a lot progress in that direction at some jurisdictions. Under EWPC the system engineer and the transportation utilities will favor such developments.
My response once again requires you to hit the links and read the articles. Please go to a comment under <a title="Go To Blog Entry: Increased Sense of Urgency of EWPC" href="http://www.energyblogs.com/ewpc/index.cfm/2007/11/...">Increased Sense of Urgency of EWPC</a>. Read it slowly please!