

Google launches utility company: Google Energy - abraham
http://news.cnet.com/8301-11128_3-10427993-54.html

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wmeredith
According to Google their intent is not to enter the utilities market, but to
be able to more easily manage their goal of becoming a carbon neutral entity.

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sophacles
Right, thats why they have the google power meter stuff too. Having a large
pile of statistical data, and realtime data, and a major statistical analysis
engine AND the ability to buy low and sell high for power is not at all a
massive money maker.

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sophacles
So I work in the power grid space, and talking to some collegues about this,
turns out the behaviour in my speculation is actually VERY illegal. There are
many regulations about keeping groups that handle these types of data and
operations very separate. Otherwise it is essentially collusion.

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DaniFong
Can you please elaborate? Are you really saying that it isn't legal to be able
to use one's data on usage intelligently? Don't utilities need to -- and do
this -- anyway? Is it true internationally?

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sophacles
So my understanding is limited, and only applies to the US as far as i know,
but it goes something like this:

The power grid involves a few distinct parts -- generation, transmission,
distribution. Distribution is the aspect most people ever deal with, its the
"last mile" part. Generation is self explanitory, and transmission is the high
voltage lines between the generators and the distribution.

Some companies only do one aspect, some do 2 or all 3. The "deregulation" of
the power market, was actually the creation a wholesale market of a commodity.
This means that A generator operator in michigan can "sell" electricity to a
utility in florida. In reality, the electrons never get transported that of
course.

The way the market works is -- Various generators place a bid on the market: x
watts for y price/watt. An official, neutral party aggregates all the
distribution loads, and does some fancy analysis, and puts out an official
number -- how many watt of power the peak draw will be for that period. All
bids are sorted, lowest price to highest price. Like this (very very fake
nubmers):

5W $1/W

10W $2/W

3W $3/W

In our example the peak draw is projected at 13W. Starting with the lowest bid
and working up, the available power is used. in this case the first 2 bids.
The highest bid under the line sets the price for power. So in this case power
is sold at $2/W. This is the price for the whole market, it is what wholesale
power costs to distribution companies for that period. The company that can
provide 5W at $1/W makes a healthy profit. The expensive company doesnt make
any money, their electricity is unused.

The regulations keeping metering groups separate from the power market groups
are there for market efficiency. First the generation only companies lose out.
Second, if some companies had extra data, they could start playing with
things, arranging for thier power bids to be raised/lowered in ways that are
market inefficient. This enforces everyone to try to bid as low as possible to
try to get their power sold at all.

So to answer your question: no it sets up the stage for price gouging on the
power market. the data is used intelligently for various long-term
forecasting, efficency determinations, and for reporting to the markets, but
the markets use the data intelligently for setting loads. Note, the data
reported to the market by a utility is in effect statistical prediction, but
the people who determine bid price for electricity never see this data.
(people means algorithms here too).

I'm pretty free-market, but these regulations make sense, in the same way that
insider trading regulations make sense, and regulation against monopolistic
competition. If it is not clear they are the same thing, it is more likely my
explanation than the alternative.

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DaniFong
But, as I understand it, most energy markets in the US and internationally are
_not_ commodity markets: they're regulated monopolies, often with a certain
regulated maximum rate of return. I would _think_ that these monopolies can
use the data that they themselves collect: they _have_ to in order to plan and
to supply the power to the grid on a cycle by cycle basis. Isn't this true?

But even if it's not, I personally, along with other members of the public,
can access historic clearing prices in several day and hour ahead markets
(e.g. Midwest, Texas, etc.) Surely I'm allowed to use _that_ data. And it
seems to me that this is the important data -- unless one wanted to use
metering data to do price discrimination, which the law already protects
against.

But even ignoring that... I don't know of any other such regulations on
commodity markets. Can you think of any?

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sophacles
The regulated monopolies are on the distribution end, not on the generation
end. The generation end is hour- (and day-) ahead markets. The data in
question -- metering data in this discussion, is enough to do price fixing.
Those utilities with distribution divisions gain enough of an edge over those
who don't to gouge consumers and go all monopolistic competition on thier
competitors at the same time. Both of which are actions that break market
efficiency.

As for other commodity markets, im not super familiar with them, but I know in
general price fixing and insider trading is illegal -- for good reason.

Also an interesting observation on electricity is that it is far more "ideal"
than a lot of commodities, in that there is absolutely no way to distinguish
between generator A electricity and generator B electricity (unlike say...
corn). There is also not nearly the consideration about movement involved --
Put it on the wire and the whole system adjusts accordingly (this is a physics
thing more than a "good system" thing (mostly, but the system is good too)).

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qeorge
I hate to be a downer, but this just sounds crazy to me. Yes, I understand
that they use a ton of power and can probably get it cheaper this way, but
this is an advertising and software company, not a power company.

Am I being a total neophobe or do others think they're drifting dangerously
far away from their core competencies?

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DaniFong
Actually the practice of companies managing their own energy preceded the
creation of the electric grid, and preceded the existence of software
companies by over a century. Even today most large scale engineering outfits
are both vertically integrated and use vertical integration to launch into
other markets (e.g. General Electric, and Tata, which was a steel company.)

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rebelvc
Great news for internet startups. The more unfocused they are more companies
they have to buy to catch up. Also, more time for startups to outmaneuver
Google.

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mtkd
At some point one of these new, non-core, ventures will be identified by
historians as the point at which Google made the same mistake as Microsoft and
started out on the slow path to insignificance.

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apu
Do you really think that MS is in trouble because they focused on non-core
ventures?

If anything, I'd say the complete opposite: they're in trouble because they're
_not_ good at focusing on the web, which is a major non-core venture for them
(I think MS Windows & Office are their bread & butter).

Fundamentally, MS never "got" the internet, and they have too much weight to
maneuver effectively now.

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ams6110
They are in trouble because they are in so many things that doing something
good in one niche will cannibalize sales in another niche.

Make a killer web office suite? Kills off sales of Office and Windows. Make a
great webmail site? Kills off Exchange and Windows Server sales.

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sophacles
dupe of <http://news.ycombinator.com/item?id=1037287>

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tvon
I'm really starting to wish there was a way to merge submissions.

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tokenadult
I am too. I see that done on the online forum I spend the most time on after
HN.

<http://news.ycombinator.com/item?id=363>

Maybe this should be a feature request.

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ortichi
It would be interesting to see how they implement a market for this.

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clistctrl
"The search giant formed a Delaware-based company called Google Energy "

Gotta love those Delaware state tax laws

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icey
It's not just for tax purposes - Delaware also has the most established
corporate law, so companies can expect fewer legal surprises.

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eru
Why do they have the most established corporate law? (Please explain for a
non-American. Thanks!)

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icey
It's the most established just because that's where most corporations have
incorporated. Corporations don't want any surprises when it comes to legal
dealings, so it's very attractive to incorporate in a place where most
plausible scenarios have been tried and resolved in court previously.

There are a number of legal reasons for incorporating in Delaware (in addition
to the favorable tax situation):

[http://en.wikipedia.org/wiki/Delaware_General_Corporation_La...](http://en.wikipedia.org/wiki/Delaware_General_Corporation_Law)

The short summary is: A long history of legal precedence, a separate court for
corporate law which ensures a judiciary that is deeply familiar with corporate
law, and the State of Delaware has generally corporation friendly laws. In the
United States, corporations are held to the laws of the state they are
incorporated in, even if they do business in all 50 states.

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waterlesscloud
Buy and sell electricity. Gooron!

