The Implications of Google as an Electric Utility

On September 17, Google announced that its energy subsidiary (aptly named, Google Energy) will purchase all of the electricity produced by the 240 megawatt Happy Hereford wind farm, which will be built near Amarillo, Texas. Google Energy has a license to buy and sell electricity, just like any traditional utility. Google also operates a large data center in Oklahoma. And while Google Energy cannot deliver the electricity from the Happy Hereford wind farm directly to the Google data center, the company will sell the electricity into the Oklahoma wholesale market.  In doing so, Google will be able to deduct emissions from its carbon footprint just as if it had used the wind energy itself.

Traditional utilities  across the United States have been feeling the effects of the downturn in the economy. More recently, we have seen significant growth in distributed generation (such as rooftop solar). Now, a large industrial user of electricity is using green power incentives to enter the utility market. Granted, Google’s Happy Hereford announcement is a “drop in the bucket” as far as the overall electric market is concerned (Google has also invested another $168 million into the Ivanpah solar thermal power plant in southern California). But how long will it be before other large industrial users try to duplicate Google’s strategy?

As noted in an earlier post, the future of the electric utility industry is far from clear. But Google’s announcement suggests strongly that the future is likely to look very different for traditional utilities, regulators, consumers, investors and rate payers. The survival of electric utilities depends on their ability to effectively forecast the implications associated with current trends, including the trend of large scale users generating their own electricity. If they don’t get a handle on these implications – soon – utilities are in for a rude awakening.

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