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Google Explains Why It Became an Energy Trader 112

Posted by kdawson from the not-pulling-an-enron dept.
angry tapir writes "Google has explained how it might use its status as an energy-trading company to increase the use of renewable energy sources in its data centers. In February, the company's Google Energy subsidiary received approval from the US Federal Energy Regulatory Commission to buy and sell power on the wholesale market."
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Google Explains Why It Became an Energy Trader More

Google Explains Why It Became an Energy Trader

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  • More crazy US laws. (Score:5, Interesting)

    by 0100010001010011 ( 652467 ) on Monday May 03, 2010 @11:54AM (#32074092)

    It is currently illegal to resell electricity that you generate using 'waste'.

    So say you run a heat-treat process. You don't have much incentive to install a way to reprocess that heat. I wish I could remember the TLC/Discovery/History channel special that they had about it...

    By becoming an 'energy trader' I'm wondering if Google can skirt these laws and make their data centers more efficient or even energy negative.

    • Re: (Score:3, Interesting)

      by Anonymous Coward

      It is currently illegal to resell electricity that you generate using 'waste'.

      Okay, you're going to have to explain that. (ie [citation needed]).

      (And, if you're generating it, it would be "sell", not "resell", wouldn't it?)

      • Re:More crazy US laws. (Score:4, Interesting)

        by MBGMorden ( 803437 ) on Monday May 03, 2010 @12:14PM (#32074338)

        (And, if you're generating it, it would be "sell", not "resell", wouldn't it?)

        Depends on your viewpoint. Waste heat from electronics is just the energy your purchased with it's form converted. If you convert it BACK to electrical energy, you could be considered to be REselling it. This is opposed to hydro, geothermal, solar etc where the original form was never actually purchased. Coal, nuclear, etc might still be considered "reselling" even for the power company though since in those cases you do buy a material with stored energy.

        Either way though, pointing out these differences is just being a pedantic ass, but I suppose turnabout is fair play.

    • Re: (Score:3, Interesting)

      by sigipickl ( 595932 )

      What? You better tell that to the thousands of dumps across the country burning 'waste' methane to produce electricity to sell.

      Many industrial facilities also produce energy from waste heat and manufacturing bi-products. It's called co-generation. For example, many cement manufacturers burn natural gas (among other things) to produce lime-ash. They take the waste heat and produce steam to turn generating turbines, often producing more electricity than they use.

      • Re: (Score:1, Funny)

        by KahabutDieDrake ( 1515139 )
        "often producing more electricity than they use"

        Guys, seriously? Welcome to hyperbole 104. We will teach you to exaggerate in ways that are believable, but still carry impact. For instance, in the example, we see someone clearly talking out their ass. This speaker has forgotten that this is a techie site, and that thermodynamics isn't negotiable. We might say instead, "often generating significant portions of the original energy input". Now, we might also want to give it a bit more kick. So we coul

        • Re:More crazy US laws. (Score:5, Insightful)

          by SQLGuru ( 980662 ) on Monday May 03, 2010 @12:29PM (#32074490) Homepage Journal

          I simply read it as: they burn more natural gas for lime-ash, using the heat from the lime-ash process to turn turbines. This generates more electricity than is required by their day to day operations. Thus, more electricity than they use. The excess electricity is then sold. Nothing there violates your sacred law. I think you just skipped over the part about burning natural gas.

          • Re: (Score:1)

            by Zediker ( 885207 )
            Correct, especially when the natural gas could be contained within the limestone itself, thus unlocking it during processing. It would technically be possible to have more energy unlocked than it took to unlock it. However, it still took as much energy to put it there in the first place, however that was all done by biological and geological processes millions of years ago.

        • Re: (Score:3, Interesting)

          by amorsen ( 7485 )

          "often producing more electricity than they use"

          Guys, seriously? Welcome to hyperbole 104.

          No, it isn't uncommon for manufacturing to produce more electricity than it consumes, and it doesn't violate thermodynamics. Hint: the GP didn't write "energy" in that quotation.

        • Re:More crazy US laws. (Score:5, Informative)

          by FluffyWithTeeth ( 890188 ) on Monday May 03, 2010 @12:31PM (#32074514)

          GP said electricity, not energy, they could well be producing more electricity than they use.

          For an example of an industry producing more electricity than it uses, may I point you towards something called "power stations"?

          • Re: (Score:2)

            by vlm ( 69642 )

            For an example of an industry producing more electricity than it uses, may I point you towards something called "power stations"?

            Battery manufacturing plants? Can't take that much to make an AA or a watch battery.

            • No need to come up with more examples. It's possible to make any industry produce more electricity than it generates as long as it uses an energy source other than electricity, or someone else is expending the energy on your behalf. For the former, just hook your machinery up to enough windmills or waterwheels to fully power it, then use any excess kinetic energy to drive a turbine. Battery manufacturers are basically doing the latter, since an alkaline battery uses zinc. Zinc does not occur in a pure form

            • Re: (Score:2)

              by G00F ( 241765 )

              For an example of an industry producing more electricity than it uses, may I point you towards something called "power stations"?

              Battery manufacturing plants? Can't take that much to make an AA or a watch battery.

              A single AA holds about 4.2 watt-hours, assume 9.8 cents/kwh, the power would cost about $0.0004. The battery when purchased cheap in bulk cost about $0.85 each. Over a 200,000% markup. Which would suggest, at least to me, that the energy used to produce that battery takes a lot more than you get out of it.

        • I don't know what is wrong with his statement. Last time I checked, power plants produce more electricity than they use without violating any thermodynamic principles...
          Presumably they are converting the stored energy in the waste into electricity, much as a coal fired plant might convert the chemical energy in the coal into electricity.

        • Re: (Score:3, Interesting)

          by sigipickl ( 595932 )

          Lighten up, Francis....

          I wasn't challenging the laws of thermodynamics, I was challenging the parent comment "It is currently illegal to resell electricity that you generate using waste".

          As for my resume', I'll spare you the details, but my background is in energy and energy transmission contracts- more specifically, natural gas sourced co-generation.

          Besides the "illegal" comment from the parent post, the statement "You don't have much incentive to install a way to reprocess that heat", is BS. There are th

          • Re: (Score:1)

            by sheph ( 955019 )
            Yeah, but why introduce truth and logic to a perfectly good irrational argument?
          • In case it wasn't clear, I was attempting (and failing) to be amusing. Not to actually call you out. My background ISNT in heavy industry at all, so I really don't have any idea what goes on.

            Used to be that even a half assed thermodynamics joke would get a +5. /. in decline, I suppose. (or arguably, getting better)

          • Re: (Score:1)

            by Agarax ( 864558 )

            Lighten up, Francis....

            I wasn't challenging the laws of thermodynamics, I was challenging the parent comment "It is currently illegal to resell electricity that you generate using waste".

            As for my resume', I'll spare you the details, but my background is in energy and energy transmission contracts- more specifically, natural gas sourced co-generation.

            Besides the "illegal" comment from the parent post, the statement "You don't have much incentive to install a way to reprocess that heat", is BS. There are thousands of facilities here in California selling electricity produced from 'waste' heat as a bi-product of their primary business. There are incentives for doing this- specifically, decreased natural gas transmission costs for BTUs put back on to the grid in the form of electricity (electricity that they market themselves or sell through marketers). Check out http://www.cpuc.ca.gov/ [ca.gov] and search 'cogeneration'. It's a huge industry here in CA and is heavily 'incentive-ised' and subsidized as an alternative to building power plants.

            Hi. Welcome to Slashdot. We don't believe in Santa Clause, the Tooth Fairy, good Republicans, or a rational argument.

      • When I toured the local wastewater treatment plant about, oh, nine years ago or so, they told us about how they could extract methane from the plant and generate their own electricity.

        They didn't. Buying power from the local electric utility was cheaper.

        • Re: (Score:2)

          by XanC ( 644172 )

          Why is that strange? Wouldn't you expect the electric utility to be much more efficient at producing electricity?

          • Not when the electric utility has to pay for their raw energy source (assuming it's not wind/solar/hydro), whereas the wastewater plant is paid to receive it's energy input.

            It may cost more up front to install the equipment, and it may cost more in a typical 3- to 5-year ROI, but over the long term the costs should be lower unless the maintenance and repair costs dominate.

            • They had all the equipment installed, and had used it in the past, so I believe it was because of the maintenance costs.

          • In general one would expect the utility to be more efficient, yes. But it is not obvious that a captive power plant with *free* fuel (methane) would not be cheaper than the local utility. They probably had to run the numbers to confirm that it was so.

    • Re: (Score:3, Informative)

      by BarryJacobsen ( 526926 )

      It is currently illegal to resell electricity that you generate using 'waste'.

      So say you run a heat-treat process. You don't have much incentive to install a way to reprocess that heat. I wish I could remember the TLC/Discovery/History channel special that they had about it...

      By becoming an 'energy trader' I'm wondering if Google can skirt these laws and make their data centers more efficient or even energy negative.

      I'm curious how you think this could make them energy negative. The entire article was about the face that they have multi-year contracts to lock in their rates, and previously they either had to overlap the contracts (i.e. purchase something they're not using) or pass on good deals. Nowhere do they discuss generating extra electricity themselves, just reselling electricity that they aren't using.

      • It may not be in the article, but Google have posted articles in the past indicating that they're experimenting with all sorts of alternative energy sources, including solar, wind and even wave/tide power generators.

        I'm not saying that it's likely they're going to become a net producer any time soon, but it's not impossible.

    • Excess energy? That’s a problem I’d like to have! ^^

      Oh Tesla coils! How I wish I had a couple of you just fizzing away all day long! That would definitely keep out the thieves! :D

    • Re:More crazy US laws. (Score:5, Informative)

      by vlm ( 69642 ) on Monday May 03, 2010 @12:57PM (#32074824)

      It is currently illegal to resell electricity that you generate using 'waste'.

      OP is technically correct but its a massive simplification, and not a serious problem for an organized well run company.

      It has to do with depreciation and losses. If IBM writes off an ancient server and sends it to the scrapyard, they don't have to pay any property tax on it anymore and can deduct the value of the server off their profits and balance sheets. Its a simplification, but you don't have to pay tax on a loss of money from giving up and scrapping that server.

      This applies to pretty much any industry. Let say you're a sawmill. And your accountant deducts the value of some screwed up scrap wood, so you don't have to pay tax on that wood anymore, or at least it offsets the gains/profits that you do have to pay taxes upon. Then, dude installs a cogeneration plant, burns the "worthless" scrap wood, and gets money for it. Unless they tell the accountant/IRS that wood is now a profit center instead of a loss center, big tax problems can develop. Its also complicates the situation if some "valuable" wood is freely given away in the trash can, and some is burned for profit, because its a money laundering/theft/fraud opportunity.

      This is one line of thinking that leads to scrapped computer equipment being pushed thru a chipper shredder to make sure no one can ever use it again.

      • Re: (Score:3, Insightful)

        by aronschatz ( 570456 )

        So, what you're saying is that taxes are the problem...

        • Comment removed based on user account deletion

          • Actually, no. I'm in agreement. I was just waiting to see if I would get flamed for that. Slashdot is a pretty progressive (IE: Progressivism) place and tax is the basic tool that progressives use to control the public.

      • Re:More crazy US laws. (Score:5, Informative)

        by Steve Hamlin ( 29353 ) on Monday May 03, 2010 @03:04PM (#32076316) Homepage
        I'm an accountant, have read your post a few times, and still can't figure out what you're trying to say. (caveat: this post assumes U.S. tax law)

        "If IBM writes off an ancient server and sends it to the scrapyard, they don't have to pay any property tax on it anymore and can deduct the value of the server off their profits and balance sheets."

        (1) IBM probably doesn't pay much, if any, property taxes on server equipment. (state and local taxes on the current market value of installed equipment)

        (2) IBM has already deducted the cost of the server equipment from their U.S. income tax return as a depreciation expense - for such small costs, it is immediate-to-very-quickly. Scraping equipment results in a tax benefit only when you have not already 'written off' the cost of the equipment on a tax return, which tax accountants do as quickly as allowable.

        (3) Similarly, IBM shows server equipment on their balance sheet as 'equipment, net of depreciation', that is, the un-depreciated (or not-yet-'written-off' portion of acquisition cost). Scrapping already-expensed or fully-depreciated equipment generally doesn't change the balance sheet that much. (there are tax vs. book differences in depreciation and expensing equipment, but minor in the great scheme of things)

        ----------

        As to the Sawmill example:

        The entire plant is Revenues minus Costs = Profit. You bought the input wood, and produce wood products for sale. You deduct, as Cost of Goods Sold, all of the input wood as raw materials. If you previously threw away waste sawdust, that is your inefficiency, but doesn't change the fact that you would still deduct the full cost of the wood raw materials.

        If you start selling the waste sawdust, then you still deduct the same amount for the cost of raw materials - you bought the same amount of wood. Only now, you are selling another product for additional revenue, which used to be thrown in the trash. That the sawdust used to be thrown in the trash isn't what caused those taxes to be lower - it's that you didn't have as much revenue (and profit) which caused the lower taxes. Now that you are selling the sawdust: More Revenue, same Costs = more Profit due to a better sales model. More income taxes are owed as a result of the increase profit, not because you sold product out of a loss center (profit and loss center are not tax terms; they are used in management/operational accounting), or used to record some deduction for throwing the sawdust away (you didn't record any such deduction, you simply didn't record any revenue from the (non-existent) sale of the sawdust).

        There would be regulatory and special tax depreciation considerations if you are burning sawdust to generate electrical power for sale, and there might be a difference in how you would characterize and value a charitable contribution of sawdust in the two scenarios (due to differing evidence of value of the contribution), but those are both sidepoints to the main topic of characterizing the sawmill's economic transactions for tax purposes.

        • Re: (Score:2)

          by vlm ( 69642 )

          I think the key part of my post was "not a serious problem for an organized well run company"

          Its possible, although kind of dumb to exclusively rely upon, to essentially numerically integrate what comes in vs what comes out to figure your books. If the accountants don't understand where the cash is flowing, and you calculate everything off cash flows including, eventually, taxes, there's a pretty obvious failure mode when someone screws with the cash flows by making money off scrap. That system could fail

    • Allowing Google to enter the wholesale energy market is surely a huge boon to Google. But shouldn't they already be trying to make their data centers the most efficient possible, anyway? If they could reprocess some of the heat from the data centers in to electric current, shouldn't they be able to use it themselves in the cooling of the datacenter? What do you mean by "energy negative"? That the data-centers will start generating energy instead of consuming it?
    • You've got a whole thread now asking you what the hell you're talking about. Since I don't see one on first, +3 scanning, I'll give you one:

      [[citation needed]]

      Especially given the farmers in Vermont being paid to turn cow shit into electricity [cvps.com]. If you don't consider a steaming pile of cow shit "waste", I'm not sure what qualifies...

  • Okay, I thought this was pretty obvious: Google realizes it's not going to remain a financial powerhouse by milking the same products over and over. Like every other tech firm, if you don't diversify you die. Google is capitalizing on the massive cash reserves it has right now by spreading itself out as much as possible. Anything even tangentially relevant to its existing business enterprises is going to be explored. And it's not like people are going to stop needing electricity anytime soon.

    • Re:Explaination (Score:5, Funny)

      by eln ( 21727 ) on Monday May 03, 2010 @12:06PM (#32074232)
      Plus, Google has always been about doing what other companies have done before, only bigger and better. Enron used shady energy trading practices to cause rolling blackouts in California. Google will improve on this process to cause rolling blackouts nationwide.

      • Re: (Score:3, Funny)

        by Monkeedude1212 ( 1560403 )

        Actually, Google plans to cause rolling blackouts globally, in an energy scheme they are calling "Night and Day".

        • Re: (Score:2)

          by inKubus ( 199753 )

          Eric Schmidt: If you're not following the the normal day/night patterns of the sun, maybe you shouldn't be doing it.

      • Re: (Score:3, Informative)

        by Wyatt Earp ( 1029 )

        No, Enron didn't cause it, the California regulators, environmental regulation changes, energy prices and Enron caused it.

        If California hadn't deregulated, Enron wouldn't have had a position to tweak the markets, then by capping prices the energy companies didn't expand to meet demand, which by the time the needed to expand there were environmental regulations in place that made expansion impossible and before you knew it, the Terminator was govenator and Enron was selling it's big E on ebay.

    • Re:Explaination (Score:5, Informative)

      by SydShamino ( 547793 ) on Monday May 03, 2010 @12:10PM (#32074282)

      Except that's not at all what the article says. They aren't trying to expand into the energy trading market. All they're trying to do is increase the available supply of renewable electricity for their own data centers.

      I guess it wasn't quite that obvious.

  • Elementary (Score:4, Interesting)

    by Anonymous Coward on Monday May 03, 2010 @12:02PM (#32074182)

    Also, this way the extent and sizes of their data centers can be hidden behind a energy trading corp controlled by them.

    • They still have to file with SEC every year, so I don't think they can really hide any such thing.

      • Re: (Score:1)

        by funkboy ( 71672 )

        They still have to file with SEC every year, so I don't think they can really hide any such thing.

        So did Enron.

  • Because they know more than anyone else? (Score:4, Interesting)

    by llamalad ( 12917 ) on Monday May 03, 2010 @12:05PM (#32074214)

    I wonder if they can get any insight into other energy trading companies' plans and strategy based on the search activities of their employees and executive teams...

    • Re: (Score:2)

      by hlee ( 518174 )

      Getting a bit off topic here, but you raise an interesting issue.

      I bet that the frequency of certain searches can predict whether a company stock will increase or decrease, e.g. lots of searches for " problems" is a precursor to that company stock crashing.

      I wonder what policies are in place regarding usage of such aggregate information within Google (or other search companies).

      • For that matter, they could start betting on where the next government scandal is going to come from based on work-time searches for pr0n. There are so many possibilities when you start abusing your customer privacy agreements!

      • Re: (Score:2)

        by TheSync ( 5291 )

        I bet that the frequency of certain searches can predict whether a company stock will increase or decrease, e.g. lots of searches for " problems" is a precursor to that company stock crashing.

        If insider trading was legal, we could simply watch what insiders were trading on the public markets to find out what is going on in a company. Instead, it gets hidden until the big quarterly SEC filing, unless simply camouflaged by accounting gimmicks until too late.

  • Depending on whose stats you read. Plus Google is the largest data server in the world. Not necessary the largest electricity consumer if you read about their green technology. Since energy costs as much 50% TCO of a data server, it makes sense to hedge it.

    • ok, they use 2-5% of the electricity, but with that small perentage, they still supply 95% of spam. That seems pretty efficient.

      • Definitely more efficient than, say, an aluminum foundry that uses as much electricity as a small town but only produces as much spam as the boss's botnet-drone laptop can manage.
  • Your local energy supplier. I think this is a great idea to energize our economy and spur new innovations in green-thinking-enterprises. It's already smart that Google builds it's data-centers near flowing water for hydro-electric power. I think it's an even better idea for them to be able to sell energy, not to pun the green idea, but it's definitely an organic move for them. I'd be interested in seeing how far this move takes developers in a greener path. The downside is that their aware of the "Enron" de

  • What is Greenpeace smoking? (Score:2, Informative)

    by Anonymous Coward

    From Google's website: "By 2010, we seek to reduce global CO2 emissions from the operation of computers by 54 million tons per year"
    From TFA: "Greenpeace [...] faulted the company for not setting emission reduction targets"

    • Re:What is Greenpeace smoking? (Score:5, Informative)

      by Jeng ( 926980 ) on Monday May 03, 2010 @01:09PM (#32074942)

      I hate to say it, but Greenpeace does not care for any sort of facts.

      They are the birthers of the environmentalists.

      As an example, read a nice little article by them regarding the type of processing that is done for toilet paper. Any company that did not respond to their request was assumed to use the most environmentally damaging processing. Greenpeace then used this information to say that XX% of TP is made using these really harmful processes.

      In short, Greenpeace is full of shit and they are afraid to wipe.

  • ENRON (Score:3, Interesting)

    by HaeMaker ( 221642 ) on Monday May 03, 2010 @12:47PM (#32074684) Homepage

    You know who else was an energy trading company? /I keed.

  • Can Google generate power by burning spam? Maybe that is their nefarious plan. They steal all the spam from Google Mail, and burn it to generte electricity. Given the amount of spam I get to my regular email account, they must collect a metric buttload every day. Instead of just throwing it into a landfill, they can burn it instead.

    Ok, I need to check out the pork futures wharehouse now, to see if they will have any specials.

  • please watch this ad (Score:3, Insightful)

    by StripedCow ( 776465 ) on Monday May 03, 2010 @01:49PM (#32075372)

    You have just plugged in your laundry machine. Please watch this context-sensitive advertisement about washing detergents before mains power is supplied.

    • Re: (Score:2)

      by Belial6 ( 794905 )
      If the electricity is supplied in exchange for that commercial instead of cash, you can be that a lot of people would jump at the offer.

    • Dunno how it works in the US, but over here in europe Energy Traders typically aren't the same parties that sell directly to households.

      Households use about 3000 kWh in a year. Traders deal and think in terms of M/GWh.

  • FTW and screw you too, all I can say, is google is bypassing the middle man, and taking a few people along for the ride too...this is awesome, imagine if there were more companies like google that would do this sort of thing, and push for monopolies to end....from their dark fiber network for free internet, and now energy, as well as we all know and love their search engine...I think it is awesome
    that this sort of thing is going to now push the elec. co. to bring down their prices.

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