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Google Explains Why It Became an Energy Trader

Posted by kdawson on 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."

20 of 112 comments (clear)

  1. More crazy US laws. by 0100010001010011 · · Score: 5, Interesting

    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.

    1. Re:More crazy US laws. by Anonymous Coward · · Score: 3, Interesting

      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?)

    2. Re:More crazy US laws. by sigipickl · · Score: 3, Interesting

      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.

      --
      Never trust anyone who takes pride in being called a 'geek'....
    3. Re:More crazy US laws. by MBGMorden · · Score: 3, Interesting

      (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.

      --
      "People who think they know everything are very annoying to those of us who do."-Mark Twain
    4. Re:More crazy US laws. by SQLGuru · · Score: 4, Insightful

      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.

    5. Re:More crazy US laws. by FluffyWithTeeth · · Score: 5, Informative

      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"?

    6. Re:More crazy US laws. by vlm · · Score: 5, Informative

      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.

      --
      "Science flies us to the moon. Religion flies us into buildings." - Victor Stenger
    7. Re:More crazy US laws. by sigipickl · · Score: 3, Interesting

      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/ 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.

      --
      Never trust anyone who takes pride in being called a 'geek'....
    8. Re:More crazy US laws. by aronschatz · · Score: 3, Insightful

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

    9. Re:More crazy US laws. by Steve+Hamlin · · Score: 4, Informative
      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.

  2. Elementary by Anonymous Coward · · Score: 4, Interesting

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

  3. Because they know more than anyone else? by llamalad · · Score: 3, Interesting

    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...

  4. Re:Explaination by eln · · Score: 4, Funny

    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.

  5. Re:Explaination by SydShamino · · Score: 4, Informative

    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.

    --
    It doesn't hurt to be nice.
  6. Re:Explaination by Wyatt+Earp · · Score: 3, Informative

    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.

  7. Re:What is Greenpeace smoking? by Jeng · · Score: 4, Informative

    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.

    --
    Don't know something? Look it up. Still don't know? Then ask.
  8. Re:What is Greenpeace smoking? by pmc · · Score: 4, Interesting

    My favourite Greenpeace press release contained the following sentence:

    "In the twenty years since the Chernobyl tragedy, the world's worst nuclear accident, there have been nearly [FILL IN ALARMIST AND ARMAGEDDONIST FACTOID HERE]"

    Yes - the bit in caps is theirs.

  9. Re:Explaination by aztracker1 · · Score: 3, Insightful

    I don't have a problem with environmentalists, or conservationism for that matter. What really irks me is the sheer militant anti-corporatism, backed by spoiled brats using their cell phones (with radio technology implemented by big corporations), while driving their hybrids (built by companies that also product large gas guzzling commercial and luxury vehicles). Eating their "organic" produce that realizes low yields (can't feed the world), and utilizes "natural" pesticides that are more harmful to the environment, grown by the same big corporate commercial growers and harvested from countries that can't even maintain their own laws regarding food standards. But hey, to each their own.

    --
    Michael J. Ryan - tracker1.info
  10. Re:What is Greenpeace smoking? by Chris+Burke · · Score: 3, Funny

    Ooh, Greenpeace Mad-Libs! I love it!

    "In the twenty years since the Chernobyl tragedy, the world's worst nuclear accident, there have been nearly ONE NUCLEAR DISASTER!"

    Hmm, not Armaggeddonist-y enough. Ah, here we go.

    "In the twenty years since the Chernobyl tragedy, the world's worst nuclear accident, there have been nearly FIFTY RECORDED TYPE 1-A SUPERNOVAE, WHICH IS A FUSION REACTOR EXPLODING WITH THE POWER OF A STAR EXPLODING!"

    Still think nuclear power is safe? Huh?!

    --

    The enemies of Democracy are
  11. Re:What is Greenpeace smoking? by flonker · · Score: 4, Informative

    Citation: http://www.washingtonpost.com/wp-dyn/content/article/2006/06/01/AR2006060101884.html