Takeaway: In an unexpected move, Google has gone offline in an attempt to diversify its business. The company recently started an energy subsidiary with the goal of making renewable energy more affordable.
Taking such a large step away from its core business to enter a highly capital intensive industry will likely leave analysts wondering what Google’s ROI projections look like for its new division.
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Excerpt from FastCompany, “Google Expands Its Empire With Energy Subsidiary” by Ariel Schwartz, January 7, 2010.
It’s no secret that Google is interested in clean energy technology. The company has previously invested in enhanced geothermal technology, smart grid ventures, electric cars, and wind power. Now Google is forming its own energy subsidiary called Google Energy. The Delaware-based company was quietly formed in December, and earlier this week it put in a request to buy and sell electricity on wholesale markets. What, exactly, is Google up to?
The search giant is hoping to use its new venture as an aid in its quest for carbon neutrality. Presumably, that means Google Energy will help Google offset its power use by buying clean energy credits and selling excess power off to the grid. Google already has a 1.6 MW solar array at its Mountain View headquarters.
Knowing Google, however, the new energy subsidiary might be more than meets the eye. Company reps admit that there aren’t any concrete plans for Google Energy yet. That means Google isn’t ruling out the possibility of becoming a utility sometime in the future. It wouldn’t be all that surprising–Google has already stated its plans to make renewable energy cheaper than coal. The company says that its “over-arching vision is that one day a large portion of the world’s vehicles will plug into an electric grid fueled by renewable energy,” so why wouldn’t it also want to be in charge of doling out that energy?
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The Homa Files 
February 4, 2010 at 9:46 am |
Actually, energy trading can be done with fairly modest levels of working capital. The problem with that approach is you’re out in the market without the natural long position a power plant can provide. If you get caught needing extra megawatts while prices are spiking you can get your face ripped off.
What worries me most about this is the talent needed to run a trading and marketing operation. It’s VERY different from Google’s other businesses and tacit knowledge of physical markets and personal relationships are key assets. There’s some talent available after layoffs and closures in the sector, but is it enough? Also, how do they plan to build the organization and risk management stuctures to ensure they don’t blow up?
February 4, 2010 at 10:14 pm |
Sounds to me like the hubris of intelligent people with great math skills again.