Well here’s a bit of interesting news in the energy trading world. Google Energy LLC, a recently formed subsidiary at Google, has applied for approval from the Federal Energy Regulatory Commission (FERC) to “act as a power marketer, purchasing electricity and reselling it to wholesale customers.”

Yes, that’s right. Google wants to get into the business of energy trading.

Enron anyone…?

As noted in the San Francisco Chronicle, Google spokeswoman Niki Fenwick denies any similarity to the Houston based, now defunct, energy company. "We want to be able to procure more renewable energy as part of our carbon neutrality commitment," she said. Apparently securing “market-based rate authority” from FERC could allow the company to purchase power from alternative sources like wind, geothermal and solar.

(By the way, this is not an unprecedented move. Wal-Mart owns Texas Retail Energy, an electricity provider it helped create in 2004, to provide power to its stores. It has yet to sell electricity).

Google is not new to the energy sector. It already consumes massive amounts of energy to power its data centers. It is also no stranger to funding alternative and green energy initiatives through its philanthropic arm, Google.org. Many of Google’s facilities are also topped with solar panels. In a way, then, getting into the energy business seems like a logical step for a company used to venturing and investing in places it holds technological (or at least psychological) dominance, like books, video (YouTube), mobile phones (Nexus One), and more.

So if Google wants to get into the energy business in order to achieve a carbon neutral position, more power to them (so to speak). The red flag in this story, however, is in the trading capacity of Google Energy’s positioning. Again, from the Chronicle: “The company doesn't have any specific plans to actually trade or sell energy, but it wanted to ensure it had all the flexibility it needed to reach its goals, Fenwick said. For instance, she described one scenario in which the company could buy solar or wind power directly, strip off the renewable energy credits to offset the company's carbon footprint and then resell the energy.” Google says it has “no concrete plans” to sell energy… but that doesn’t mean it couldn’t.

Where are the potential pitfalls and risks in Google’s move? There will be trading issues, no doubt. How Google intends to buy and sell renewable energy on the open market comes with its own hazards. Same goes for buying and selling green credits and carbon offsets, a trading area still trying to get its legs. Moreover, as a utility, Google Energy will be falling under a new umbrella of state(s) and federal government regulation and compliance.

Further, is there a conflict of interest if the utility Google Energy purchases renewable power generated by companies funded by the philanthropic arm, Google.org?

Google always seems to be one step ahead of the curve, this one is worth keeping an eye on.

Posted by Shaun Randol at 11:28 AM