Electricity Regulation/Deregulation
Posted: Sun Apr 08, 2001 2:09 pm
Hello all,
Jaideep raised some interesting questions which are not easy to answer. I
personally think, system dynamicists saw this thing coming. Why did nobody
listen? I can merely guess but this is truly a high political issue. Instead
of browsing what went wrong or whos fault it might be, lets think about
solving this mess.
A little mental model of the situation might be of assistance. When we think
of energy supply (and there seems to be a shortage) two flows come to mind:
an outflow caused by energy demand and an inflow from energy generation. If
considered a stock, energy generation also has an inflow, lets say use of
energy resources. Between energy generation and supply there are inevitable
losses in energy transportation. That seems to be a crucial point. These
losses are not only caused because of thermodynamics or Ohms law, but also
by the power line infrastructure. After deregulation investments in this
infrastructure dropped. This is common not only to energy but as well as
telecommunication and railway markets. If investments are triggered by
earnings and earnings are triggered by energy price, then deregulation,
which leeds to falling prices, can be thought of as a major source of this
crisis. What can be done?
Nothing in the short turn, thats for sure. Investing in infrastructure is
highly important but will take quite some time. Building more power stations
(again, time delays) wont do anything until the infrastructure has been
improved and the environmental impacts of such a policy are likely to raise
even more problems. The most promising solution appears to be reducing the
outflow, that means the energy demand. Of course, this also is not a short
term solution and maybe we are about to experience a fine example of worse
before better. So, is that a solution, let the markets have their say and
energy prices increase? I think so. At the same time political actions have
to be taken to
a) invest in power line infrastructure (maybe accompanied by careful
reregulation of the infrastrucuture)
b) encourage energy savings through the use of the tax system (e.g. green
taxes, tax reliefs for low energy use, regenerative energy use etc.)
Im seeing forward to hearing other statements and alternatives. This is an
important issue and as Jaideep put not only for the US. This is truly a
global issue and therefore can only be solved globally.
Regards,
André Reichel
A.Reichel@epost.de
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Subject: REPLY Electricity Regulation/Deregulation (SD3280)
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Mark Wallace makes some interesting observations on "pseudo-deregulation."
Many similar things happened when New York State de-regulated hospital
prices but forced substantial expenditures as surcharges on prices and costs
and left a particularly constraining (and political) licensing system in
place. The one major difference is that the demand for hospital services is
falling. So when hospitals manifest financial problems, its the regulatory
changes that get blamed (like electricity in CA). In the public debate quite
difficult to disentangle what the real cause is.
John W. Rodat
President, Signalhealth, LLC
Information Based Health Care Strategies
jwr@signalhealth.com
(518) 439-5743
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Reply-To: "Bob Walker" <walker@delsysresearch.com>
From: "Bob Walker" <walker@delsysresearch.com>
To: "SD Listserve" <system-dynamics@world.std.com>
Subject: QUERY Top 20 Models
Date: Fri, 8 Jun 2001 10:40:06 -0400
Organization: Delsys Research Group
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In a recent posting on SD Certification (SD 3283), Jim Thompson =
introduced a suggestion by Jay Forrester: ( That ) "practitioners should =
have about "20 models" as the basis for all their work. He started his =
list with industrial dynamics, market growth, and world dynamics / =
limits to growth. We should try to complete that list as part of this =
exercise."
"20 Models" was the subject of a small group discussion among SD =
Consultants, Academics and Business practitioners held at the Harvard =
Faculty Club in 1998, moderated by Sharon Els. The Group began by =
establishing criteria for admission to such a list... These were:
1. Model has proven robust over time, capable of being reused as a =
template.
2. Model has passed validity tests commonly used by top level =
practitioners.
3. Model is relevant to real world issues, especially those involving =
High Stakes.
4. Model contains or is useful in demonstrating important "dynamic =
lessons".=20
5. Model collection represents those models that all managers should =
study.
>From my notes, here is that list... the order does not imply a ranking.
As I recall, Jay began the discusssion with his own "short list"...
1. Workforce - Inventory (commodity cycles)
2. Production - Distribution
3. Technology Diffusion (including Bass Diffusion, infection, epidemics =
etc.)
4. Market Growth as influenced by Capital Investment
5. The Economic Long Wave (Kondratieff Cycle)
6. Aging Chains (many forms, including skill migration, leadership =
development.
7. Boom and Bust (as seen in the Beer Game and Mark Paichs B&B work)
8. Project Dynamics (particularly the Rework Cycle)
9. Resource Allocation (e.g. Nelson Rs TQM model at Analog Devices)
10. Urban Dynamics
11. World Dynamics (both the original and subsequent models such as =
World 3)
12. Escalation Dynamics (Pricing, Affinity)
13. Competitive Dynamics and Cooperation
14. Consumer Dynamics (dynamics of Customer behavior)
15. Productivity and Morale (may include other phenomena such as =
Burnout)
16. Dynamics of Quality (especially erosion of quality)
17. Public Policy (broad issues including impacts of Regulation, =
Community, Environment, Geography).
18. Financial / Accounting. (including interfaces with Financial =
Markets)
19. Dynamics of Research and Development (R&D)=20
20. Inter-organizational relationships (Partnerships, Alliances, =
Coalitions etc.)
Generally... Industry level dynamics.=20
Its a start, and not bad for 45 minutes of work.=20
It seems to me that there are elements of a useful Taxonomy of models =
here, and that the field might benefit from further thinking about how =
the pieces might be reorganized or recombined to provide a more general =
statement of scope, depth and applicability. Is there interest in a =
voluntary "virtual discussion" on how this might be done?
Perhaps those of like mind could agree to "find each other" at the =
Atlanta Conference as a way of getting the ball rolling.=20
Bob
Robert J. Walker
System Dynamics Practice Leader
Delsys Research Group, Inc.
Suite 400 - 45 Rideau St.
Ottawa, ON K1N 5W8 CANADA
TEl: +1 (613) 562-4077
FAX: +1 (613) 562-4102
Mail: walker@delsysresearch.com
Jaideep raised some interesting questions which are not easy to answer. I
personally think, system dynamicists saw this thing coming. Why did nobody
listen? I can merely guess but this is truly a high political issue. Instead
of browsing what went wrong or whos fault it might be, lets think about
solving this mess.
A little mental model of the situation might be of assistance. When we think
of energy supply (and there seems to be a shortage) two flows come to mind:
an outflow caused by energy demand and an inflow from energy generation. If
considered a stock, energy generation also has an inflow, lets say use of
energy resources. Between energy generation and supply there are inevitable
losses in energy transportation. That seems to be a crucial point. These
losses are not only caused because of thermodynamics or Ohms law, but also
by the power line infrastructure. After deregulation investments in this
infrastructure dropped. This is common not only to energy but as well as
telecommunication and railway markets. If investments are triggered by
earnings and earnings are triggered by energy price, then deregulation,
which leeds to falling prices, can be thought of as a major source of this
crisis. What can be done?
Nothing in the short turn, thats for sure. Investing in infrastructure is
highly important but will take quite some time. Building more power stations
(again, time delays) wont do anything until the infrastructure has been
improved and the environmental impacts of such a policy are likely to raise
even more problems. The most promising solution appears to be reducing the
outflow, that means the energy demand. Of course, this also is not a short
term solution and maybe we are about to experience a fine example of worse
before better. So, is that a solution, let the markets have their say and
energy prices increase? I think so. At the same time political actions have
to be taken to
a) invest in power line infrastructure (maybe accompanied by careful
reregulation of the infrastrucuture)
b) encourage energy savings through the use of the tax system (e.g. green
taxes, tax reliefs for low energy use, regenerative energy use etc.)
Im seeing forward to hearing other statements and alternatives. This is an
important issue and as Jaideep put not only for the US. This is truly a
global issue and therefore can only be solved globally.
Regards,
André Reichel
A.Reichel@epost.de
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Subject: REPLY Electricity Regulation/Deregulation (SD3280)
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Mark Wallace makes some interesting observations on "pseudo-deregulation."
Many similar things happened when New York State de-regulated hospital
prices but forced substantial expenditures as surcharges on prices and costs
and left a particularly constraining (and political) licensing system in
place. The one major difference is that the demand for hospital services is
falling. So when hospitals manifest financial problems, its the regulatory
changes that get blamed (like electricity in CA). In the public debate quite
difficult to disentangle what the real cause is.
John W. Rodat
President, Signalhealth, LLC
Information Based Health Care Strategies
jwr@signalhealth.com
(518) 439-5743
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Reply-To: "Bob Walker" <walker@delsysresearch.com>
From: "Bob Walker" <walker@delsysresearch.com>
To: "SD Listserve" <system-dynamics@world.std.com>
Subject: QUERY Top 20 Models
Date: Fri, 8 Jun 2001 10:40:06 -0400
Organization: Delsys Research Group
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In a recent posting on SD Certification (SD 3283), Jim Thompson =
introduced a suggestion by Jay Forrester: ( That ) "practitioners should =
have about "20 models" as the basis for all their work. He started his =
list with industrial dynamics, market growth, and world dynamics / =
limits to growth. We should try to complete that list as part of this =
exercise."
"20 Models" was the subject of a small group discussion among SD =
Consultants, Academics and Business practitioners held at the Harvard =
Faculty Club in 1998, moderated by Sharon Els. The Group began by =
establishing criteria for admission to such a list... These were:
1. Model has proven robust over time, capable of being reused as a =
template.
2. Model has passed validity tests commonly used by top level =
practitioners.
3. Model is relevant to real world issues, especially those involving =
High Stakes.
4. Model contains or is useful in demonstrating important "dynamic =
lessons".=20
5. Model collection represents those models that all managers should =
study.
>From my notes, here is that list... the order does not imply a ranking.
As I recall, Jay began the discusssion with his own "short list"...
1. Workforce - Inventory (commodity cycles)
2. Production - Distribution
3. Technology Diffusion (including Bass Diffusion, infection, epidemics =
etc.)
4. Market Growth as influenced by Capital Investment
5. The Economic Long Wave (Kondratieff Cycle)
6. Aging Chains (many forms, including skill migration, leadership =
development.
7. Boom and Bust (as seen in the Beer Game and Mark Paichs B&B work)
8. Project Dynamics (particularly the Rework Cycle)
9. Resource Allocation (e.g. Nelson Rs TQM model at Analog Devices)
10. Urban Dynamics
11. World Dynamics (both the original and subsequent models such as =
World 3)
12. Escalation Dynamics (Pricing, Affinity)
13. Competitive Dynamics and Cooperation
14. Consumer Dynamics (dynamics of Customer behavior)
15. Productivity and Morale (may include other phenomena such as =
Burnout)
16. Dynamics of Quality (especially erosion of quality)
17. Public Policy (broad issues including impacts of Regulation, =
Community, Environment, Geography).
18. Financial / Accounting. (including interfaces with Financial =
Markets)
19. Dynamics of Research and Development (R&D)=20
20. Inter-organizational relationships (Partnerships, Alliances, =
Coalitions etc.)
Generally... Industry level dynamics.=20
Its a start, and not bad for 45 minutes of work.=20
It seems to me that there are elements of a useful Taxonomy of models =
here, and that the field might benefit from further thinking about how =
the pieces might be reorganized or recombined to provide a more general =
statement of scope, depth and applicability. Is there interest in a =
voluntary "virtual discussion" on how this might be done?
Perhaps those of like mind could agree to "find each other" at the =
Atlanta Conference as a way of getting the ball rolling.=20
Bob
Robert J. Walker
System Dynamics Practice Leader
Delsys Research Group, Inc.
Suite 400 - 45 Rideau St.
Ottawa, ON K1N 5W8 CANADA
TEl: +1 (613) 562-4077
FAX: +1 (613) 562-4102
Mail: walker@delsysresearch.com