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To make the emergent power industry smarter, there is a need to restructure the power industry to enable Second Generation Retailers integrate the require demand side innovations to power system planning, operation and control.

Forget Demand Side management (DSM); Think Demand Side Innovation (DSI)

By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity

EWPC Systems’ ArchitectFirst posted in the GMH Blog, on April 7th, 2009.

Copyright © 2009 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. This article is an unedited, an uncorrected, draft material of The EWPC Textbook. Please write to javs@ieee.org to contact the author for any kind of engagement.

In the EnergyPulse article Does Smart Grid Make Utilities Smarter?, by Hahn Tram, VP Enterprise Solutions, Quanta Technology, the case for reform of the power industry is set, as Mr. Tram writes that:

…to support utility customers in applying the advanced energy demand management capabilities and in navigating through the number of options available to them, the utility's Customer Service Representatives (CSR) will need to have the same, if not greater, capabilities at their disposal … As well, because the typical CSR and consumer may not be so tech savvy, the energy portal must be "user affectionate." Smart Grid needs an AOL, Google, or Yahoo!”

The readers should have no doubt that Mr. Tram is actually calling for market innovations to make the power industry smarter on the demand side. The way to do it is to restructure the power industry away from the investor owned utilities (IOUs) paradigm and into the technology neutral electricity without price control (EWPC) paradigm.

Under EWPC, competitive Second Generation Retailers - 2GRs aim to develop such “user affectionate” business model innovations in a market environment similar to that of the computer and information technologies industry. That is the way to make the power industry smarter. Business model innovations and the necessary market environment are described in the EWPC article The Sixth Disruptive Technology. 2GRs will enable demand integration to power system planning, operation and control.

Customer service representatives belong to competitive 2GRs that aim to develop business model innovations. That way humans could "operate at the same decision frequency as we did 10,000 years ago," as Daniel claims.

I propose that that EWPC paradigm shift involves also a shift from demand side management (DSM) to demand side innovation (DSI). Today I came up with the idea of DSI as a replacement of DSM, while twittering during the PowerUp Canada. This was the tweet “gmh_upsa: Thanks @NaomiDevine DSM is utility oriented. Please ask McArthur about the new customer oriented term "Demand Side Innovation" #powerup.”

Then I looked to see if there was a formal definition of DSI and I could not find one. Wikipedia does not has even an accepted one for DSM. A good definition of DSM is given by the Energy Information Administration in the EIA Energy Glossary:

The planning, implementation, and monitoring of utility activities designed to encourage consumers to modify patterns of electricity usage, including the timing and level of electricity demand. It refers to only energy and load-shape modifying activities that are undertaken in response to utility-administered programs. It does not refer to energy and load-shaped changes arising from the normal operation of the marketplace or from government-mandated energy-efficiency standards. Demand-Side Management covers the complete range of load-shape objectives, including strategic conservation and load management, as well as strategic load growth.

There is no doubt that it is utility or supply oriented definition. What is needed then is to reform the power industry to enable DSI to be able to develop needed business model innovations.

Finally, there is one of many examples of the informal use of DSI that I found in the filing “In Re: Rule Development proceedings re Proposed Renewable Portfolio Standard Rules 25-17.400; 17-410 and, 17-420 F.A.C, Docket No. 080503-EI Dated: September 3, 2008.” The introduction of FIPUG COMMENTS WITH RESPECT TO PROPOSED RPS RULES says:

The Florida Industrial Power Users Group through its undersigned attorney has attended and participated in the concurrent workshops on Energy Efficiency and Renewable Energy that the Commission has conducted over the past twenty months. The FIPUG representative makes the following general comments with respect to the proposed rules. The rules are well thought out and well drafted, but they preserve an existing utility supply model that discourages demand side innovation.

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member photo Your concept of DSI as opposed to DSM seems to be quite on-track in my opinion. This centers around the traditional "control" vs "motivation enablement" which seems to share similarity with the concept of DSI. The reason utilities had to control or manage demand is because the INFORMATION was not available at the demand end of the grid. Simply making the information available already enables both innovation and market-driven product development. If my consumer product is able to receive energy information (price or price schedule for example) we leave the creative innovation in the hands of the product designers who know the product, components, their consumer, and the usage patterns and requirements for their product and any future products. An innovative new product can respond in the best possible way for that product and can also take the role of creatively relaying information to the consumer as well as defining when/where/how the consumer can direct or influence the energy efficiency and energy response of the product. I firmly believe this is where the DSI takes place.

You can search energy and my name to see some similar concepts I have presented in recent years on this topic while researching this issue at a consumer device manufacturer.

Gale Horst
# Posted By Gale Horst | 4/15/09 8:32 AM | Report This Comment as Foul/Inappropriate
member photo Thank you Gale for your timely comment.

I will look at the fine work you have done in the past 16 years and a half.

I am glad to tell you that EPRI's Framework for the Future was right on. In the meantime, to get a better introduction of EWPC, please take a look at my presentation at Carnegie Mellon University back in 2007 http://grupomillenium.org/AGenerativeDialoguetoRea...

In slide 36 I use the EPRI's Framework to assign its key essence as 5 predetermine elements of the End-State of the industry for quite some time, into the two subsystems of the emerging whole power industry.

In the past two years, I have further refined the EWPC market architecture and design paradigm and even consider now as the basic innovation framework for the power industry. The subsystem are 1) an integrated power transportation (T&D) only regulated utility system under a compact with a responsibility to transport and 2) an open market commercial system in the value chain generation, retail, prosumer (a consumer that may produce).

Best regards,

José Antonio
# Posted By Jose Antonio Vanderhorst-Silverio | 4/15/09 3:37 PM | Report This Comment as Foul/Inappropriate
member photo Gale, I would add that we also need to address the retail regulatory regimes in the various American states and Canadian provinces. The range is enormous. On one hand, you have robust retail activity down to the residential level in Texas, New Jersey, Ontario and Alberta. On the other hand, monolithic regimes continue to hold sway in many areas. In the middle, we have states that have wholesale markets with monolithic retail, alongside states that have monolithic residential, but competitive commercial and industrial.

In order to fully realize the potential of dsm/dsi (or whatever you want to call it), we need the information to flow to the decision makers, the CONSUMERS. We also need regulatory regimes that allow them to respond to that price information and benefit from their decisions.

Fyi, the Compete Coalition has great information about retail competition.


James Carson, JBCarson@RisQuant.com http://www.RisQuant.com
# Posted By James Carson | 4/16/09 2:00 PM | Report This Comment as Foul/Inappropriate
member photo James, I certainly see your point. The smart grid will benefit from more commonality across state borders. From the perspective of a device manufacturers considering products to link to the smart grid, the many tariffs within just a single state operating under the direction of the same PUC seems to discourage the innovation potential. I am likely not an expert on this nor EWPC. But I think simply providing motivational information electronically will enable innovation that could have significant impacts regardless of whether or not it has the regulated price control element.
# Posted By Gale Horst | 4/16/09 2:51 PM | Report This Comment as Foul/Inappropriate
member photo Gale and James,

This is the last post under the article "Propelling the Power Industry to a Superior Solution Path," in reponse to James Carson:

The COMPETE Coalition and competitive U.S. electricity markets

The COMPETE coalition helps serve the national interest by advocating policies which promote reliable, low-cost electric power through competitive U.S. electricity markets. Compete's members include 281 electricity customers, suppliers, generators, and their nearly 7 million American workers as well as electricity consumers. We advocate well functioning, competitive wholesale electricity markets which enable state governments to implement retail electric service options best sited to their regional needs and which enable consumers to benefit from the best possible price and service.

I repeat "We advocate well functioning, competitive wholesale electricity markets which enable state governments to implement retail electric service options best sited to their regional needs and which enable consumers to benefit from the best possible price and service."

Such statement is the result of the EPAct 92 BIG flaw, explained above. {see the mentioned article in the link http://www.energyblogs.com/ewpc/index.cfm/2009/2/1... ]

Under EWPC, retail electric service is not simply enabled by wholesale electricity markets. Retail electric markets and wholesale electricity markets mutually reinforce each other to provide a fully functional electric service [if I recall correctly, that happens to be EPRI's Framework for the Future wording]. That is why EWPC is able to produce a superior solution path through innovation in retail electric service at the federal level.

# Posted By Jose Antonio Vanderhorst-Silverio | 2/17/09 3:36 PM
# Posted By Jose Antonio Vanderhorst-Silverio | 4/16/09 6:41 PM | Report This Comment as Foul/Inappropriate

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