We can't replace decades of "natural monopoly" regulation overnight without some effort to create new markets. We can’t replace decades of monolithic systems design without constantly re-examining our assumptions. It is going to be hard work to move to agent-based integration at every level. It will take continuing hard work at each transaction surface. The hardest part, though, will be changing the habits of thought.
This is why many of the “lessons” learned from the last round of electrical de-regulation are not very useful. A little de-regulation of the wholesale markets power without allowing new market entrants as buyers accomplishes just a little. A mix of regulated and un-regulated markets just creates gray markets for the pre-existing products. Today’s technologies, when brought to bear on power generation, distribution, and consumption, give us new opportunities, opportunities for markets and opportunities for innovation.
Today, at every surface of electrical transaction, the technology could easily handle open markets. The surfaces are the borders between Generation / Transmission / Distribution / Consumer. With today’s technology, there is no reason why individual consumers should not be able to contract with any generator they wish, whether individually, or through third party aggregators, the equivalent of mutual funds. With today’s technology, there is no reason for local distribution to be owned by the same company that owns the transmission lines – and some good opportunities to be had by separating them.
In the early PC era, common practice and ITS guidance was that computer equipment must be fully depreciated over 5 years. Looking backward at cost instead of forward at value prevented companies from realizing benefits from technological change. By some accounts, the moment when Microsoft seized control of the PC industry from IBM was when Gates realized that IBM was maintaining 286-based systems until fully depreciated. Utilities, with their focus on regulated cost recovery and static efficiency are stuck in the same trap. Until this changes, the electricity industry in the US will never be focused on the value creation and dynamic efficiencies that are the hallmark of every other engineered business in today’s world.
The old model for power markets was vertical integration from generation to consumer regulated as a natural monopoly. Economical microgrids integrating heterogeneous sources and storages methods cast doubt on how natural the monopoly is. Live metering technology with two way communications enable a market at each transition. Intelligent building systems let end users manage their power consumption, in response to their internal needs and to live pricing from the grid. The operations assumptions based around integrated operation, dumb metering, and lack of information are no longer valid.
We will recognize true deregulation of power markets by an increase in end user autonomy and an accompanying increase in innovation. It will enable market models that are nimble, looking to future value rather than back to sunk cost. Future value is dynamic, as it reflects changing consumer tastes in environmental policy, social environment, and in technology. True markets will let new entrants in, seeking to create value in novel ways. The last round of deregulation focused more on freeing up rent seekers, and, for some, escaping from poor [nuclear] plant decisions more than it did on creating any actual markets.
The technology is hard, and will be hard. Skilled engineering will be needed to find the value in new approaches. Great patience and public communications will be required to convince the public and utilities commissions to stay out of the way. But what we will need most is nimble vision to discover the new business models that will unlock innovation.
And the lenses that cloud the vision the most is seeing the way we have always done it.