August 30, 2003

The nature of electrical markets II

Earlier I wrote about some features of electrical markets and how it would be an improvement both economically and from a national security standpoint to have a smart electrical grid.

mhp over at Netcraft writes about a Rackshack notice in their support forums cancelling a setup fee sale. They were offering setup fees of $1 but had to cancel because their local power company did not believe that Rackshack's power requirement estimates were accurate.

What Rackshack woke up to was a notice one day to put no extra load on the grid because the local segment was at maximum capacity. No doubt this restriction will cost them some sales, momentum, and is embarrassing for them as it creates the impression that one of their critical vendors is simply not up to the task of properly forecasting demand, a real negative for a hosting provider which must guarantee 24/7/365 service.

In a smarter grid, capacity would be part of the information flow transmitted in the ebb and flow of the market. Instead of writing a note on some engineering diagrams, Rackshack could have bought a futures contract for power delivery and they most likely would have gotten the juice that they needed, when they needed it. And if they didn't have it, they could have bought on the spot market from a distributed producer. At the worst, a trailer carrying a generator would have been parked at the facility until more permanent arrangements could be met (and the defaulting provider would probably have to swallow the cost).

Posted by TMLutas at August 30, 2003 08:31 PM