Google and Energy
February 22, 2010
I left the power generation industry in 1975 (I think). I did a study of the online transaction service rolled out for Enron’s energy trading. That project forced me to look at how other companies dabbled in this once little-known niche in the US energy sector. Anyone remember Aquilla, a name derived from the Latin word for eagle. Aquilla is still around, but it does business as Black Hills Energy. The other companies in this sector now have some competition.
The basics of energy trading is a variant of online search and retrieval. Information is indexed and then either analysts or smart software work through the data and their changes. The algorithms stipulate that when A happens, B should occur if the probability is X.
In short, energy trading is just another application running on a computer. The reason I mention this is that Google is now in the buying and selling of energy business. You can get the basics in “Google Energy Can Now Buy and Sell Electricity.”
Most of the commentary I have scanned suggests that Google will be able to save money on its own electricity bills. That’s partially correct. My view is that the Google platform is going to take the “old” Enron model and improve it. Just as search and retrieval in the late 1990s was stuck in a rut, energy trading is similarly encumbered with inefficiencies.
My view: Google could be a bigger and better Enron. I do hope that its managers exercise somewhat better judgment than the “old” Enron group did. Worth watching because prior to this announcement I think the power generation, energy traders, and Wall Street mavens did not perceive Google as a mover or shaker in financial markets.
Well, that group of pundits will regroup once the light bulb goes on. Will the power be intermediated through Google’s trading desk? Buying and selling stuff based on digital data is just another Google application. Simple statement. Big implications in my opinion. Those janitor methods at Google are going to be busy little beavers.
Stephen E Arnold, February 21, 2010
I wish to report to the DOE that I was not paid to write this article. I was thinking of making the disclosure to the SEC, but I think that group has its hands full with traditional publicly traded power generation companies.
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