Why would Google want to create an internal group to develop software and other technology for managing the electrical grid?
In many ways, it’s a risky idea.
The primary customers are utilities, which tend to be slow, demanding and cheap. Every decision they make must be run through the gamut of public hearings.
It is an already crowded market dominated by companies like ABB, Alstom, Siemens, Emerson and Eaton who tend to operate on lower margins.
Google has also failed before: it pulled the plug on PowerMeter for managing home energy consumption back in 2011 after two struggling years. Intel, Microsoft and other IT giants have rolled snake eyes on energy projects too.
And Google already has a promising sideline in robotics. Why take on two new initiatives?
That said, here are a few reasons why Google has, and always will, keep its eye on energy:
1. Math is Energy. For decades, utilities have dealt with spikes in demand by generating more power. They build multimillion dollar peaker plants whose primary function is to just carry them through a few hot days a year. In 2006, PG&E used some of its capacity for only 51 hours. It has been an industry driven by controlling supply.
Data analysis gives utilities (and their customer) a practical way to control consumption from the demand side of the equation for the first time. By predicting what consumers have done in the past, Google can create new energy profiles of what will occur in the future, which, of course, is how their search services work. The robotics push also plays into this. Smart thermostats like the one Google acquired with Next are ultimately machines that think (i.e. absorb and analyze data) and act (i.e. change the temperature.) Nest co-founder Matt Rogers told me once that his career plan was always to work on robots: the thermostat let him fulfill that.
Google is not alone in this ambition. Several start-ups and large companies are bringing Big Data and software to the grid. But the company conceivably could carve out an IBM-like role by providing standards and an underlying framework for a host of independent smart grid applications.
2. It lets the company monetize internal technologies. Google consumes a tremendous amount of energy. In 2013, Rick Needham, then director of energy and sustainability at Google, noted that their data center efficiency initiatives had already saved the company $1 billion.
“While fossil-based prices are on a cost curve that goes up, renewable prices are on this march downward,” he said then.
Many of the technologies Google will have to design to cut its own power consumption—AC/DC conversion techniques, increased network and download efficiency—will be technologies that they can package and resell without losing their competitive advantage. Google isn’t going to license its server designs, but if it can sell a power management system for industrial sites to a utility, which is going to be as secretive and paranoid about keeping secrets as Google itself, why not.
In some ways, it’s similar to how Amazon has transformed its back-end infrastructure into a revenue source with Amazon Web Services.
3. It’s a cultural fit. Google executives seem sincere in their desire to reduce fossil fuels and do something about climate change. Sergey Brin and Larry Page were two of the earliest investors in Silicon Valley in solar. They invested it Nanosolar—it tanked badly—but the personal interest was intriguing. Eric Schmidt has a foundation dedicated to environmental causes.
The company employs Arun Majumdar, a former UC Berkeley professor and director of ARPA-E. Majumdar, who heads up the new group, is also world-recognized expert on waste heat, the kind of heat dissipated by servers and storage systems that with the proper technology can be reconverted into marketable energy. Coincidence? (Majumdar also came up with one of my personal favorite energy stats. The world uses about 10 trillion watts of energy a year, but it also burns up 15 trillion watts in to generate those 10 trillion watts. )
Last month, the company announced the $1 million Little Box prize for inventors who can develop a smaller inverters. Inverters convert DC power to AC. While power electronics like this are applicable to datacenters, the opportunities may even be greater in rooftop solar, where any financial payoff will be more remote.
Granted, Google has walked away from energy initiatives when they became too expensive. The vaunted “less than coal” that sought to fund next-generation technologies such as high-altitude wind power got shelved in 2011. But you can’t completely divorce the personality of the management team and the company. The goals of the ostensible program are also far more realistic than some of the energy technologies Google, Page and Brin used to invest in.
If the company can figure out a way to at least not lose money in grid initiatives, it may stay in for the long haul.