Models for Electric Deregulation
Posted: Sat Feb 15, 2003 10:42 am
Rafael,
Andy Ford, Jeff Amlin, and I have been performing electric utility sector
(and other energy) analyses for over 25 years each. (Talk about being in a
rut!) Much of the recent work has actively focused on deregulation. We see
that all countries and regions to-date have repetitively made the same
serious, obvious mistakes with regard to deregulation because they did not
recognize the feedback within the system. More importantly, the rules of the
market are developed through political compromises where all parties attempt
to protect their vested interests. That necessarily results in
counterproductive rules that prevent market-based feedback mechanisms from
working as required. A simulation model can readily test proposed markets
and show the (often dramatic) positive and negative impacts of proposed
procedures and rules. To-date, none of the markets worldwide have allowed
the simulated stress testing of proposed markets to determine how they will
behavior under real, as opposed to the assumed perfect, conditions.
No one would commercialize a new aircraft design without thorough
esting -- just as we routinely perform extremum tests on our SD models.
Yet, this simple validation step is never allowed, let alone accepted, by
policy makers implementing market deregulation. As might be expected, the
simulation models, from even 8 years ago, perfectly produce "the impossible
to have anticipated" dynamics that have befallen the markets thus far --
especially California. We have see the same dynamics in The Netherlands, the
UK, Germany, Scandinavia, New Zealand, Australia , Chile, Brazil, all
regions of the US and Canada. Because humans are human everywhere, and
economic logic knows no borders, I claim these dynamics are universal and
obvious (at least to SDers). I hope you can limit the problem Spain and the
rest of the EU will replay because they refuse to test before implementing.
Some information on Andys work can be found at http://www.wsu.edu/~forda
and on Jeffs and my our work can be found at www.energy2020.com.
George
George Backus
Policy Assessment Corporation
14602 West 62nd Place
Arvada, CO 80004
Bus: 303-467-3566
Fax: 303-467-3576
Email: George_Backus@ENERGY2020.com
Andy Ford, Jeff Amlin, and I have been performing electric utility sector
(and other energy) analyses for over 25 years each. (Talk about being in a
rut!) Much of the recent work has actively focused on deregulation. We see
that all countries and regions to-date have repetitively made the same
serious, obvious mistakes with regard to deregulation because they did not
recognize the feedback within the system. More importantly, the rules of the
market are developed through political compromises where all parties attempt
to protect their vested interests. That necessarily results in
counterproductive rules that prevent market-based feedback mechanisms from
working as required. A simulation model can readily test proposed markets
and show the (often dramatic) positive and negative impacts of proposed
procedures and rules. To-date, none of the markets worldwide have allowed
the simulated stress testing of proposed markets to determine how they will
behavior under real, as opposed to the assumed perfect, conditions.
No one would commercialize a new aircraft design without thorough
esting -- just as we routinely perform extremum tests on our SD models.
Yet, this simple validation step is never allowed, let alone accepted, by
policy makers implementing market deregulation. As might be expected, the
simulation models, from even 8 years ago, perfectly produce "the impossible
to have anticipated" dynamics that have befallen the markets thus far --
especially California. We have see the same dynamics in The Netherlands, the
UK, Germany, Scandinavia, New Zealand, Australia , Chile, Brazil, all
regions of the US and Canada. Because humans are human everywhere, and
economic logic knows no borders, I claim these dynamics are universal and
obvious (at least to SDers). I hope you can limit the problem Spain and the
rest of the EU will replay because they refuse to test before implementing.
Some information on Andys work can be found at http://www.wsu.edu/~forda
and on Jeffs and my our work can be found at www.energy2020.com.
George
George Backus
Policy Assessment Corporation
14602 West 62nd Place
Arvada, CO 80004
Bus: 303-467-3566
Fax: 303-467-3576
Email: George_Backus@ENERGY2020.com