Google’s Purchase of Nest: Possible Implication on Future of Electricity

Tony Fadell, Founder & CEO, Nest Labs

Tony Fadell, Founder & CEO, Nest Labs

On Monday Google announced that it would be acquiring Nest Labs for an astonishing $3.2 billion dollars. Two former Apple engineers, Tony Faddell and Matt Rodgers, founded the four-year-old company that is now mostly known for their smart thermostat and combination smoke and carbon monoxide detector.

My initial thought was, “Good grab Google! That’s going to be a good one for the portfolio.” Then I began to ponder what exactly this means for Google moving forward. Nest is a company that functions in the home-automation sector, developing hardware in what is now often called the Internet of Things.  Their thermostat transformed a seemingly unattractive device that went unchanged for years, and it did so by saving households energy and money.

The entire smart home movement that seems to be growing at an attractive pace focuses around this idea of the Internet of Things, which connects devices to one another and communicates with users to learn routines and patterns with the intention of increasing efficiencies. This idea of increasing efficiency is an interesting one for me, because as households become more aware of their energy consumption I believe they will likely adopt more efficient habits – either automatically through these devices or consciously because of the data available through the devices. There isn’t much better of a way to curtail energy consumption, and thus production, than through making systems more efficient, and that’s exactly what Nest aims to do in the household.

Google is clearly looking to be a player in home automation in some capacity. They must see some value in such resource-saving technology like Nest to throw $3.2 billion dollars at the company, right?

The electric grid as we know it is indeed changing as governments attempt to add more environmentally friendly sources into the network. Increasing renewable energy in the grid creates more variance in generation, which effectively means electricity output depends on sunlight, wind, etc., which are not constant. When renewables are introduced, it essentially creates a need for another source of electricity to back it up, which is most often achieved through the use of dirty fossil fuels.

It’s important to note that there are implications on utilities – specifically electric power – industries. There have been projections that decentralized energy will become more popular in the future as smart grids begin to develop, which easily links to this notion of smart homes, offices, and facilities. Bettering efficiency on the demand side of energy systems is pivotal in advancing smart-grid ecosystems. Nest can already be seen as an actor in this through their energy-saving plans and instant rebates linked to their utility company partnerships around the United States. Stagnant utility companies that lack innovation may have some unforeseen challenges ahead as decentralized energy gains momentum, especially with deep-pocketed technology giants like Google sniffing around.

This then begs the question, what is Google’s intention?

One professor of mine, when asked about the trend of decentralized energy, mentioned that telecommunications companies could be some of the movers and shakers in the field because of their connectivity and capability to provide services. For example, Google could potentially broker demand response services or analyze consumption usage data in order to offer suggestions on improving efficiency.

Was my professor right? Will telecommunications play a key role in developing smart-grid ecosystems and advancing decentralized energy? I don’t know how far to read into this acquisition by Google, but there’s potential to connect a few dots.

It would be interesting to know what Nest has on the drawing board, but I guess we must wait to see how this venture unfolds.

Photo Source: Flickr