Google launches utility company: Google Energy(news.cnet.com)
news.cnet.com
Google launches utility company: Google Energy
http://news.cnet.com/8301-11128_3-10427993-54.html
7 comments
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.
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.
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.
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?
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.
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.
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?
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?
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)).
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)).
Actually, as interesting and exciting as it would definitely be to see Google in the utilities market, I think it's almost as interesting just that the people at Google feel strongly enough about carbon neutrality being a Good Thing that they are putting a really significant amount of time and money into achieving it.
I wonder if you can use that excuse for other purchases. Like buying a small country to more efficiently manage physical waste disposal, or something.
There is precedent.
Becoming your own government entity (Reedy Creek) seems to have worked out for Disney.
I for one welcome our new Google overlords.
Becoming your own government entity (Reedy Creek) seems to have worked out for Disney.
I for one welcome our new Google overlords.
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?
Am I being a total neophobe or do others think they're drifting dangerously far away from their core competencies?
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.)
Google's stated mission: to organize the world's information and make it universally accessible and useful.
I.e. ALL the information on earth (they may need reword from "world" to galaxy or whatever in the future).
Whenever they need a resource or perform an activity at scale and the existing solutions suck they like to invent better ways (e.g. dutch auction instead of investment bank cabal when listing on a stock exchange).
PS: I'm not a big fan of the corporatist phrase, "core competency". I dislike it almost as much as I dislike the phrase "best practice", for the similar reasons.
I.e. ALL the information on earth (they may need reword from "world" to galaxy or whatever in the future).
Whenever they need a resource or perform an activity at scale and the existing solutions suck they like to invent better ways (e.g. dutch auction instead of investment bank cabal when listing on a stock exchange).
PS: I'm not a big fan of the corporatist phrase, "core competency". I dislike it almost as much as I dislike the phrase "best practice", for the similar reasons.
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.
Do you genuinely believe that a company with such a huge investment in data centers is demonstrating a lack of focus by concerning themselves with energy?
It is advantageous to them to have power, sure - but it doens't really directly contribute to their goal of organising the worlds information does it?
IMO they would do better to offer hard-to-turn down deals to energy companies in return for guaranteed clean power. (it would be a hell of a thing to have on your power companies adverts)
IMO they would do better to offer hard-to-turn down deals to energy companies in return for guaranteed clean power. (it would be a hell of a thing to have on your power companies adverts)
It is advantageous to them to have power, sure - but it doens't really directly contribute to their goal of organising the worlds information does it?
Is it any stranger than designing and commissioning the manufacture of their own server hardware as to achieve a more efficient ratio of price/reliability for their specific use-case?
There's a lot of information to organize, and doing it efficiently at scale requires moving quite a bit farther down the stack.
Is it any stranger than designing and commissioning the manufacture of their own server hardware as to achieve a more efficient ratio of price/reliability for their specific use-case?
There's a lot of information to organize, and doing it efficiently at scale requires moving quite a bit farther down the stack.
I agree. A large-scale web company should care very much about power.
Designing your own hardware also, incidentally, lets you control power consumption.
Designing your own hardware also, incidentally, lets you control power consumption.
Andrew Carnegie would have agreed.
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.
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.
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.
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.
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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There is something key that you are missing here. Being unfocused is a core corporate value for Google. That's why they deliberately give every engineer 20% of their time to do pretty much whatever they want to do. Many popular products, such as gmail, started this way. Crazy as it sounds, so far this has been working out quite well for them.
The side effect is that you see apparently crazy things like some engineer deciding that he wants to install solar panels in the parking lot, which after one thing lead to another lead the company as a whole deciding to be carbon neutral. However the culture sees this as a benefit. After all that was good for morale, good for the corporate image, and the resulting focus on efficiency has been saving money. What's not to like?
The side effect is that you see apparently crazy things like some engineer deciding that he wants to install solar panels in the parking lot, which after one thing lead to another lead the company as a whole deciding to be carbon neutral. However the culture sees this as a benefit. After all that was good for morale, good for the corporate image, and the resulting focus on efficiency has been saving money. What's not to like?
I'm really starting to wish there was a way to merge submissions.
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.
http://news.ycombinator.com/item?id=363
Maybe this should be a feature request.
It would be interesting to see how they implement a market for this.
"The search giant formed a Delaware-based company called Google Energy "
Gotta love those Delaware state tax laws
Gotta love those Delaware state tax laws
It's not just for tax purposes - Delaware also has the most established corporate law, so companies can expect fewer legal surprises.
Why do they have the most established corporate law? (Please explain for a non-American. Thanks!)
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...
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.
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...
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.
Buy and sell electricity. Gooron!