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Why Nest Could Be A Nightmare For Google

Jan 14 2014, 1:46am CST | by

Why Nest Could Be A Nightmare For Google
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Google’s headquarters in Mountain View and the California Public Utility Commission in San Francisco are only about 50 miles apart as the crow, or techie commuter bus, flies.

But when it comes to style and outlook on life, they might as well be in separate galaxies.

The Googleplex is the ultimate fantasy workplace. Fantastic food. Free bikes. Infinity pools in case you want to swim laps before a meeting. Jimmy Carter gives lunch hour lectures. I visited last May and shoulder-checked into the crown prince of Belgium in the hallway. Wealth freedom, opportunity, and Green Machines abound.

“This isn’t work,” the wife of a friend that works there said on her first visit. “It’s like adult day care.”

The CPUC, by contrast, is a symphony in linoleum. The most “foreign” dish in the cafeteria is Yoplait. Bureaucrats shuffle about inside, street people hover on the outside.

But it’s not the drab, hopelessness of the décor that stands out. It’s the public hearings. Several times a month activists gather to object to arcane rate proposals or natural gas pricing. I distinctly remember one hearing back in 2010 about PG&E’s plan to deploy smart meters:

  • One individual allegedly died from smart meters, said one witness. Granted, the witness admitted that the individual had cancer, but argued that smart meters accelerated the disease.
  • Another person quoted Shakespeare and said that smart meters violated the U.S. constitution.
  • Another analogized smart meter rollouts to the Nuremberg trials.
  • Another witness said that another person entered a home with a smart meter and felt sick. Then she put foil around the meter and felt 50 percent better.

It was an ordinary day.

So why is this a problem for the Google/Nest Love Fest? Nest sells thermostats that help people reduce power consumption. (It’s actually a robot, fitting in with Google’s robotic strategies.) While Nest makes money on the thermostat, one of the big profit centers, potentially, will be signing up Nest customers to contribute to demand response programs where homeowners turn down their thermostats during hot afternoons for money.

Nest founder Tony Fadell told Forbes last month that his company had struck deals with close to 20 utility companies, who paid Nest $30 to $50 per thermostat annually, to manage the energy usage of Nest customers who had opted into their utility’s demand-response program.

Demand response will play a fundamental role in managing power consumption and it’s a purely American invention. FERC estimates that demand response can replace 188GW of peak demand in the U.S. It’s even drawing the interest of European and Japanese utilities.

But here’s the catch. Demand response payments are heavily regulated. Is $30 to $50 too much to pay per thermostat per year? How do you measure the results? How does Nest ensure that the needed capacity reductions are delivered? Is it really fair to have a program like this that targets upper income households that might own a Nest?

What about competing thermostats from Ecofactor and ecobee? Can they qualify for similar deals? Should we offer rebates per thermostat, per therm or per square foot? And who owns the data and gets access to it?

CPUC engineers and regulators might be unfashionable, but they are scrupulous. They are going to want detailed answers to questions like those above and more before handing $50 per year—paid by ratepayers across their states–off to a bunch of guys in Palo Alto. One of the big tragedies of green technology is that many companies didn’t realize that selling to utilities is far, far more challenging than selling to consumers or ordinary businesses. The utility business is intellectually engaging and interesting, but also painful and slow, and often for good reasons.

So imagine being the Google business manager trying to justify staying in home energy management, considering the time and legal expenses. Google already exited once before. There he is, listening to the Atlanta Citizens for Thermostat Justice ramble on about his experience in Home Depot. One quick call and I could get a helicopter ride to the airport and a plane to Burning Man. And I could double my salary.

Home energy is compelling, but it’s not for the fainthearted.

Source: Forbes

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