Amazon and Google launch secret plot to power your home
Alexa

Amazon and Google launch secret plot to power your home

Don’t be fooled by their cute, glowing speakers and pleasing conversation. Amazon Echo and Google Home devices are Trojan horses, designed to endear and overthrow.

The Wall Street Journal ran a story Monday that speculated Amazon.com (AMZN) and Alphabet (GOOGL) were using their fledging home-automation empires to expand into the electricity business.

Don’t laugh. The process is already underway.

Amazon and Google managers cleverly put artificial intelligence at the core of what they do. In the process, they build businesses (that are often loss leaders) to collect data required to train algorithms.

The greater the influx of information, the faster the algorithms learn. It is a virtuous cycle, one with a big reward for success.

Amazon and Alphabet are vying to own the “operating system” of living. They want to lock users in.

The World Economic Forum published a report in May 2018 about the need for AI agents in the emergent energy sector. As nations reduce carbon emissions, an unintended consequence has evolved …

Gigawatts of unpredictable renewable energy started hitting power grids. Suddenly, cloudy and windless days produced energy shortfalls, and vice versa.

Smoothing out weather-related ebbs and flows requires storage. It also often means dirty diesel generators, which negate much of the benefit of going green in the first place.

Researchers found another solution using AI, and it’s a doozy.

The basic premise is to use AI models to predict how much energy will be produced based on weather, and how much demand there will be for said energy.

The next step is to use AI agents to briefly switch off energy-consuming devices on the network. In the blink of an eye, thousands of refrigerators might be switched off, then on again.

All this might seem crazy, and a bit creepy, but it is entirely possible. And it can be done at scale using AI inside a large network.

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In 2016, DeepMind, an internal AI division at Google, deployed AI across a network of super-efficient data centers.

Filled with always-on servers, routers and switches, these data centers run hot. So, refrigeration represents a big portion of the annual spend.

DeepMind software cut cooling costs by 40% across the network. Overall, data center costs were reduced by 15%.

Alphabet’s entry into the home began in 2014 when the company bought Nest Labs for $3.2 billion. At the time, acquiring a maker of digital thermostats seemed far outside its scope of business. However, the search giant was following its larger game plan.

In addition to helping consumers save money, Nest thermostats gather a tremendous amount of data …

In 2017, Alphabet encouraged 750,000 Nest owners to opt into an automated program to reduce energy usage ahead of a solar eclipse. The system-wide finagling saved 700 megawatts during the eclipse. That’s about the same amount produced by seven natural-gas-powered plants.

Amazon has been active as well …

It invested $61 million in Ecobee, a Nest competitor, in March 2018. Seven months later, it struck a partnership with Arcadia Power, a home-efficiency bundler with a penchant for smart devices.

Amazon has been aggressively building out its Echo platform for connected devices. Alexa, its line of smart speakers, occupies all the top 20 bestseller spots at Amazon.com.

ComScore, a media measurement and analytics firm, reported in April 2018 that U.S. smart-speaker penetration reached 20% of households with Wi-Fi. This was a 50% increase over the previous quarter, representing 18.7 million homes.

Devices either made or licensed by Amazon and Google make up the entire category.

And the core technology is showing up in refrigerators, stoves, TVs, home entertainment systems, and washers and dryers. All this information is being collected, analyzed and used to train AI algorithms.

While most investors are overlooking this opportunity, Amazon and Alphabet are not …

In 2018, Alphabet formed partnerships with utilities companies in the U.K., the Netherlands and several U.S. states. In Texas, Reliant Energy is offering free Google Hub devices, and weekend electricity, to its clients.

Such deals make sense for power companies because training customers to reduce energy consumption puts less strain on the grid, and cuts operating expenses. Consumers save with smaller energy bills. It’s also environmentally friendly.

For Amazon and Alphabet shareholders, it is the way into homes. It means collecting data that will eventually become a huge new source of revenue as new business models develop. It also means locking users into what is becoming the ecosystem of everything.

Amazon trades at 58x forward earnings. The forward P/E ratio for Alphabet is 22.7.

Neither stock is especially cheap, but the stocks can be bought into every significant decline.

Best wishes,
Jon D. Markman

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Comments 2

Vilas March 9, 2019

40% cloud cooling savings is not really saving. ( remember congress has projection budget and there is actually pass budget; the delta is considered cut by these geniuses). The conventional engineering non tech aid approach ( meaning no AI algorithms) requires build up to cover all bases. Power scaling is 10 year new concept which both Amazon and Google seem to be using in building their infrastructure. They ignore the uptime institute models that individual corporations relay on for their structures. Rest of the infrastructure industry does not use scaling as theirs needs are not dynamic as the Cloud industry. Variable frequency drives are cheap and price keeps dropping on the low end models; if you make conscious decision to ignore the harmonics impact to your neighbors ( this is similar to industries permitted to release their hazardous waste into nearby streams rivers lakes whatever). Utilities Benifit the 120 MW power consumption at Northern VA Lounden county due the sprouting of clouds as I was told that the fiber comm line passes thru our state and that county’s closet presence made it a prime location to build besides FEDS are ready made client to sell services to besides others. The power flows thru UPS before it reaches their power quality sensitive equipment which is their bread and butter. Industrial motors are rugged and can take that beating up to certain extent. Smaller measures like ground ring reduces motor failure. Chinese motors make replacement cost below reasonable. Use of
90 degree computers is another reason for getting away from 75 degree ambient requirement. In addition the Charlotte NC consultants started using 480v DC powered computers 10 years avoiding conversion losses thus reducing heat release. LED light very bright intitially low heat release. Another Chinese low cost product cheap to replace. Soon AI base BOTS would be tasked to identify and replace non performing lamps/bulbs. But they promote as if deep mind made the 40% saving possible. If they subject their claim to peer review I can bet a dollar it would be around 15%. Things human minds cannot easily identify. Even Eistein had limits.

Hope these tidbits helps with understanding the hysteria.

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Fred Clore January 30, 2019

For anyone who buys into cheaper energy bills because of less energy usage, I’ve got news for you. I went through this in Arizona with water. First there were a lot off special offers to have people switch over to water saving devices, not necessarily a bad thing living in a desert. After a high percentage of people started conserving water, the water company made the argument that they were selling less water so they needed a rate increase and guess what, they got it. Of course the high usage businesses still got a break because why? because they used more. So what I’m saying is, it may be could to reduce usage from an environmental view point but don’t expect any price breaks for it.

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