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Google: Just Brokering Power, Or Creating and Selling It?

Last week, Google (GOOG) received permission from the Federal Energy Regulatory Commission to act as an energy wholesaler. To date, it's been saying that it doesn't know how it's going to use the authority, but wasn't planning to become an energy trader, the best known of which I think is still probably Enron. But why does it need to, when it might be able to generate its own power and sell it, creating a critical additional and substantial revenue source not depending on ads?

The following is conjecture, but based on some news stories and data, so follow a moment, if you will. First, check this video below of the 60 Minutes piece on Bloom Energy (or read it here):

Watch CBS News Videos Online Granted, the breathless and credulous nature of the story is a bit much, but the concept of cheap energy without a grid is intriguing, and apparently Bloom Energy has managed to produce enough results to snare some large corporations as customers, including ... Google. Four Bloom Boxes have powered a Google data center for the last 18 months, using half the natural gas a traditional power plant would require. Did I mention that Kleiner Perkins partner John Doerr was a major first investor at both companies?

In the course of the story, Bloom admits to having about $400 million in investments so far. The company is only able to produce one of its boxes, running about $700,000 in price, a day. In a week, they can produce $3.5 million of equipment that can more than power a Google data center at half the fuel cost of normal gas-powered electrical generating equipment.

According to U.S. government statistics, in October 2009, the cost of coal as a fuel for electrical generation plants was about $2.17 per million BTUs. The cost of natural gas was $4.78. Electric utilities use natural gas for so-called peak power, because the generators can be brought up or down quickly but that are more expensive to fuel. However, divide the $4.78 by 2, and you're down in roughly the same range. In other words, if the figures we're hearing are right, Bloom's devices could be cost competitive with coal.

That means Google could buy plenty of units -- think of the company's bank account and cash flow -- and install them to run data centers and then sell off the extra wholesale. Suddenly Google could be in the electric business, creating power farms as readily as it assembles server farms, powering its own data centers, and making extra capacity available. That's potentially a lot of money coming from nothing more than pushing electrons a little differently than it usually does.

Image via stock.xchng user Ayla87, site standard license.