Power Marketer Google?
February 9th, 2010 by Fereidoon Sioshansi, EEnergy InformerGoogle has a habit of surprising its competitors. The fast moving company is known for launching into new forays not always knowing where it may end up. In this sense, it is not only the competitors who are trying to read what the company’s latest move may entail.
In early January, Google submitted an application to the Federal Energy Regulatory Commission (FERC) seeking approval to become a power marketer. There are approximately 1,500 entities in the US who have FERC’s blessing to operate as power marketers. Most are utility companies, power generators or pure traders, companies who buy and sell power at wholesale prices and serve as intermediaries between generators and large consumers. Some are large energy-intensive electricity users such as Alcoa and Safeway with hundreds of supermarkets across the country. But why Google?
Google is closed mouthed about its full intentions, only acknowledging that as a power marketer it could “better manage (electricity) supplies for its own operations” and have “greater access to renewable energy resources.” Both are reasonable reasons to seek official power marketing status. In 2007, as part of its slogan to do no harm, the company announced its intention to become carbon neutral, hence the interest to find and buy low cost renewable energy.
First, Google installed a 1.6 MW solar PV array on its headquarters roof in Mountain View, California, among the largest commercial installations of its kind at the time. Then, following an audit of its internal energy usage, the company announced that its data centers were the most efficient in the world without divulging how many data centers it operates or how much energy they use.
In the early days of the Industrial Revolution, steam engines, factories belching out black smoke, mills, canals and railroads were considered the quintessential sign of progress and prosperity. In today’s information-based economy, it is large data centers, routers and cloud computing facilities that really count. And as the industry grows and matures, companies invest in such facilities not only to serve their own data or computational needs but those of others.
The global Internet infrastructure business is estimated to be worth nearly $30 billion in 2009, expected to exceed $50 billion by 2012, according to Tier 1 Research. Microsoft’s latest mega data center in Dublin, Ireland – among the biggest computing and storage facilities in Europe – occupies 300,000 sq. ft., cost a reported $500 million to build and uses over 22 MW of capacity at peak – as much as a small city. Microsoft is reportedly adding some 10,000 servers per month to keep up with the growing demand for its services.
Google, Amazon, Yahoo and a host of others also own and operate formidable data centers of their own, leasing their surplus capacity to anybody who needs massive data storage, computing power, or related customer-services associated with managing and maintaining large data files such as customer credit card records, insurance or banking services.
As the size and significance of these facilities grow, so do their electric bills – which explains why Dublin was selected by Microsoft’s latest investment. The cool Irish climate cuts down on the center’s cooling load. Just as energy-intensive industries like aluminum smelters have historically looked for secure, stable and cheap electricity prices, today’s data centers increasingly search for inexpensive power supply as a major criteria in locating their next cloud computing or data storage facility.
There is speculation that Google operates some 2-3 dozen large data centers globally. Assuming that each uses 10-20 MW, we may be talking about a potential range of 240-720 MW to make all those fast search engine results possible. Viewed from this perspective, it makes perfect sense for Google to become a power marketer. It’s FERC application says the company wishes to have the right to “act as a power marketer, purchasing electricity and reselling it to wholesale customers” and trading “in the bulk power markets,” which means that Google would have the option to potentially resell power acquired from wholesale markets to customers other than itself.
Niki Fenwick, a company spokesperson says Google “could go directly to a renewable energy projects for our operations.” When asked about what else could be in the offing, she said there was currently “no plans” to sell its energy management services to others or to become a speculative energy trader, but she ventured that Google’s green team was “not sure what they were going to do,” and neither does anybody else.
It is expected that FERC would grant power marketing license since it does not see Google as enjoying dominant market power nor engaging in manipulating market prices or engaging in devious behavior – criteria that FERC uses to grant or deny power marketing status. But FERC is likely to ask for further clarification of the company’s intentions and/or may put certain restrictions on Google’s license.
Google’s competitors will be watching, especially since Google has become active in the energy space with the launch of its PowerMeter project, previously reported in this blog (Why is Google playing in my sandbox?).
Fereidoon Shioshansi
This post is extracted from EEnergy Informer, February 2010 issue.
March 3rd, 2010 at 6:35 pm
Part of me feels that google are trying to muscle in on too many markets, after dominating search, they’re looking at becoming a major player in communications with their mail, their Buzz and their new phone, not to mention the operating system their due to launch soon. Saying that, google are doing what many large companies have done to reduce their energy expenditure and to make the ‘carbon neutral’ claim to win green support. It’s no bad thing… in fact, in the current economic climate, it’s sensible!
March 26th, 2010 at 3:18 am
Interesting. As long as they go for green power I don’t see any problems with google competing with conventional power utilities. I think google’s activities could even help to make the transformation to a renewable energy system faster.
April 1st, 2010 at 4:10 pm
Google is doing a good job going so green. We are using Google services and we are happy that they have a good sense of the environment. Go Google Go!
April 5th, 2011 at 11:12 pm
As assumed in this article, the Federal Energy Regulatory Commission granted Google Energy LLC the authority to buy and sell energy on the wholesale market the 18th February 2010. Google describes this event in its website as “giving to Google the flexibility to procure renewable energy at competitive prices”. In June 2010, Google Energy LLC announced a 20-year Power Purchase Agreement with NextEra Energy Resources to buy 114 MW coming from wind turbines in Iowa. This contract is the first for Google Energy LLC in the US wholesale market. The 114MW could cover the needs in electricity of several data centers. There are different advantages to this contract from Google perspective: it secures a part of Google’s energy needs with fixed prices and gives to Google the flexibility to sell or buy depending on the moment. Furthermore, it affirms Google’s will to become a leader of the “green IT”. As an illustration, Google invests $38.8 million in May 2010 in two Dakota wind farms that generate 169.5 MW -the equivalent of 55,000 household- developed by NextEra Energy Resources. Google also made a development stage investment in a project to build a backbone transmission line off the Mid-Atlantic coast. The project would put in place a 350-mile line which could connect up to 6,000 MW of offshore wind energy. At destination of the public, Google launched Google Earth Engine, project that enables global-scale monitoring of changes in the earth’s environment and could be used in particular to support efforts to stop global deforestation. This innovation, but also the Google PowerMeter mentioned in the article, are representative of Google policy concerning sustainable development -and of course beyond sustainable development, the will of energy independence.
It is interesting to see the position of the European hosting company concerning the “Green IT”. The German 1&1, one of the three European biggest hosting companies and one of the 20 world biggest, claims that 100% of its energy comes from renewable sources, in particular from a Norwegian hydroelectric plant. In France, Telecity and Ikoula have also added a green touch to their policy by using special contracts with EDF that ensure a fixed percentage of the electricity coming from renewable sources and by increasing the energy efficiency of their buildings. But beyond those actions, the new NOME act in France could allow some hosting companies to become energy suppliers themselves, along with companies such as Rio Tinto Alcan and ArcelorMittal which already announced their will to become energy supplier. OVH, French leader on the hosting market, is also interested as reported in an interview with Octave Klab, founder and technical manager of OVH. According to Mr. Klab, the tariff increase will not be sustainable for the company in the near future if they don’t pass at least part of the cost increase to the customers, even with the huge efforts in energy-saving already made -water-cooling and air-cooling of the data centers. OVH wants to create a subsidiary for the energy supply and invest 10 million euro in wind turbines project to create fields of 10-20 kVA to supply their data centers independently in 2015. They are also thinking about buying nuclear energy to EDF. Nuclear energy is indeed perfect for a data center which has a really stable consumption of electricity during the day and the year. In other words, OVH is treading the path of Google after the liberalization of the French electricity market.