Does Google’s Approval as Power Marketer Signal Something Much Bigger?
February 22, 2010 - By Justin E. Gehrke
A Geek Shui Living Opinion Editorial
February 22, 2010 – In a move that, at first glance, seemed…well…weird, Google has officially obtained approval from the Federal Energy Regulatory Commission (FERC) to act as a power marketer. Ok, so for non-industry types like us, what is a power marketer? According to the Your Dictionary website, it is defined as:
“A wholesale power company that has registered with the Federal Energy Regulatory Commission in order to buy power at wholesale prices and sell the power to other marketers or public entities at market prices. Power marketing companies may be financial intermediaries, companies affiliated with utilities, natural gas marketers, or entrepreneurs. Power marketers usually do not generate the power; they just sell it.” Your Dictionary, 2010
Now that we’re industry experts, why would Google want to be able to directly buy? Aren’t they an internet company? Perhaps they have plans to take over the entire internet, but can they go much farther than that? The answers to these questions demonstrate the true genius within the seeds of possibility that Google has been planting for years.
How can Google benefit in this new deal?
According to Google, they want the ability to be able to directly purchase renewable energy, in order to support their humongous data centers. First of all, let’s preface the rest of this post by saying that we did not talk to anyone at Google. The rationale we lay out is based on our own logic, as IT professionals, with strong backgrounds in IT Project Planning.
On one hand, the move is both bold and admirable. Why? While buying energy from your local power company ensures you have light, you cannot really decide what type of energy you want to buy from them. The general customer cannot call the company and request that the electricity provided to them only be generated from a renewable source (i.e. wind, water, etc.). To this end, one cannot say, “I just want to make sure my electricity isn’t generated from burning coal.” Technically, you could ask, but the power company representative is probably going to give you a very polite answer explaining this isn’t part of the company’s policy.
Google, through their approval to purchase power directly, they can now decide from where their energy will or will not come. By bargaining with multiple energy companies, Google will now be able to obtain the largest amount of energy at the most competitive price possible. This means they stand to save considerably, compared to what they are probably paying now, which means their operating costs are lower. As anyone know, the less you have to invest in running the show, the more money you take away from the show.
The additional benefit for Google is a public relations one. While they are certain to save a significant amount of money by purchasing renewable energy, they will also be able say, “Look how much we care. Our commitment to the world is to provide first-rate internet services, applications, and support, but that doesn’t surpass our desire to preserve our precious natural resources and pave the way for future generations.”
What is Google planning to do next?
According to a Reuters Report, IT and Telecom companies account for approximately 3% or 120 billion kilowatt hours of the total electricity consumption annually. Additionally, Reuters cites that U.S. data centers are consuming electricity at a rate, which will likely require two new power plants per year.
Now consider with what Google started – a search engine. At first they focused on traditional Information Technology by developing Google Translator, Google Maps, Gmail, Google Earth, and Google Apps. Somewhere in there, they moved into Telecom territory, with Google Voice, the Google Phones, and the multiple Google applications for smartphones. Along the way, they also added Google Wave, Google Analytics, and Google AdSense. The Google Chrome browser and Google Chrome OS are on the fast track in the development department. Finally, fast forward to 2010 and we see the launch of Google Buzz.
As recently as this month, we heard news about the possibility of Google building its own high speed internet infrastructure. When you consider all of these together it quickly becomes apparent that Google isn’t just an internet giant anymore. They are networking and telecommunications giant.
The sum total of Google’s achievements represents a huge, forward-positioned capability. Google will very soon be able to say it has its own fully-functional OS, applications, telephones, social media platform, internet infrastructure, marketing mechanisms, and, with the FERC approval, direct energy purchasing power. Now, does it make more sense? Google has effectively gone against what every other company has done, in recent years. Instead of outsourcing to reduce costs, they have insourced everything, to include utilities.
What is Google’s long-range plan?
Google has strategically positioned themselves to be nearly 100% self-sufficient. Don’t think this is an accident either. While company officials are not likely to admit it, we can be certain that everything that has happened in the past decade has not been the result of a knee-jerk reaction. No, each and every product, decision, etc. has been based on a carefully designed strategic and business plan.
All that’s left is for Google to purchase a few large tracts of land, around the world, strategically chosen based on the close proximity of a significant water source. From there, they simply need to build hydroelectric power plants on the sites. Now, in addition to having the ability to directly buy electricity at discounted rates, they can also generate their own electricity. It would be easy to say this is a far-out conspiracy theory. Looking at it from an economic standpoint, though, it isn’t that much of a stretch.
Imagine a company that doesn’t have to depend upon utility suppliers to run its operations. They can now power their own data centers. Additionally, their ability to expand would be only limited by their own ability to invest more profit in their expanding their infrastructure. Since operating costs have been decreased so significantly, the potential exists for Google to save enough money in the next two years on electricity costs, to redirect the savings into a plan like the one we have outlined above.
How does the sum total represent Google positioning itself for the future?
In the end, this is what IT Project Planning is all about. Any company has to be certain that the potential costs and risks have been identified. Additionally, they have to ensure that the potential Return on Investment (ROI) will not only pay for the cost of the project but be enough to represent a sustained increase in profit. For many companies, the weak link in any project is the dependence upon suppliers and other stakeholders, to ensure their own timelines are met. Google has effectively removed this dependence by having its own software, hardware, infrastructure, etc.
Let’s take the scenario one step further. Google can now directly purchase energy. The approval also means that they can resell energy too. In our Google Power Plant theory, they would have the potential to sell excess amounts of electricity they generate to other power companies. This would offset their operating costs even more and, yes, increase their potential profit margin.
Of course, along the way they have stumbled. Gmail was hacked. Google Wave hasn’t exactly taken off, and the verdict is still out on Google Buzz. If you notice, though, they don’t seem to be losing sleep over small setbacks. This is probably not an indication of indifference, as much as it demonstrates how focused they are on the long-term goal.
Is everything here, beyond the news that Google has been approved as a power marketer, an unsubstantiated theory? Yes, it is. Is it beyond the imagination, though? No, it really isn’t. It may be something that no other company has ever thought of or had the nerve to try, but it isn’t impossible.
It was the late President John F. Kennedy who said, “Efforts and courage are not enough without purpose and direction.” Google has already demonstrated its effort and courage. Now, we’re just left to see exactly what their exact purpose and their intended direction truly are.
(Disclaimer: The views and opinions represented herein are those of Geek Shui Living. They are not intended to represent those of Google, its holdings, or its partners. The discussion has been entirely theoretical and is not based on any official or unofficial source.)
