Google’s Nest Acquisition Will Speed Along the Smart Grid

Google is buying Nest, the maker of a smart thermostat for homes, for $3.2 billion in cash. With it comes a relatively untapped source for a company that aspires to organize all the world’s information: detailed data about power consumption. The search giant’s financial power and ambition could help accelerate development of a more efficient “smart grid” that’s responsive to actual demand for electricity.

While the jokes are flying about Google’s hypothetical ability to link your ambient temperature to your little-used Google+ profile, this isn’t the first step Google has taken toward disrupting the power system. The company has invested more than $300 million in distributed solar companies that allow homeowners to place photovoltaic panels on their home and cut their power bill; those installations depend on effective smart-metering to manage power use throughout the day. As the grid gets smarter—and starts including not just distributed power generation but also distributed power storage devices—technology like that developed by Nest will be increasingly important.

Nest started off simply by building a thermostat that learned users’ preferences, allowing it to adjust energy usage automatically and reduce bills by 20%. A smart smoke and carbon monoxide alarm soon followed. But the real promise of Nest—and what Google is likely investing in—is Nest Energy Services, which manages partnerships between the company and power generators across the United States.

Large-scale users of electricity, including Google and its many server farms, are already taking advantage of the savings that come with power management. Some of the company’s moves to save energy last year made it seem almost like an electric utility. Now, Google is nicely situated to take advantage of the network effects that come with having a well-received product in a consumer market that seems sure to expand.