IN DEPTH: Google's green search

In the space of three years, Google has emerged as one of the world’s largest investors in wind and solar — and has arguably become the most influential.

The company’s stunning growth, financial success, reputation for innovation and sheer dominance of internet search give it worldwide reach, influence and power that inspire both admiration and respect — and in some instances, fear.

Deep inside its “Googleplex” headquarters in California, specialist teams continually scour the globe for opportunities to invest in and procure large amounts of renewable energy.

From Australia to Zambia, no stone is left unturned as they seek to generate solid financial returns, and support projects and technologies that induce “transformative impacts” — those that enable solar and wind to become cost-competitive with fossil fuels. And with Google’s core web businesses in full growth mode, their mission extends to finding new sites for an expanding network of massive data servers — and renewables projects to feed them.

“It’s all geared toward this long-term view of getting to what we classify as a clean-energy future,” Rick Needham, director of energy and sustainability, tells Recharge. In Google’s view, it is technology, plus supportive public policies, that will enable renewables to achieve grid parity.

“The future would be great if there were a lot of options available and you’re able to select clean energy. Not just because it’s the cleaner option but because it’s the economic one. That’s going to happen. It’s just a matter of time,” he says.

For renewables developers and entrepreneurs, Google is perhaps the most sought-after investor or partner — its cachet is so high that it can transform a project’s potential. One example is its 37.5% equity stake in the Atlantic Wind Connection, a proposed high-voltage direct-current subsea transmission line that would link future offshore wind farms to load centres from New Jersey to Virginia.

“When Google invested, we were an idea on a piece of paper,” says Bob Mitchell, chief executive of Trans-Elect, the lead company in the venture. “They saw the vision of the project and what contribution they could make to creating a new industry for the US. Its involvement has been immeasurable in a positive way. Certainly the project received attention and credibility from the git-go because of their investment.”

At a time when many traditional solar and wind companies are struggling, Google has billions of dollars at its disposal to support its clean-energy ambitions. So far, it has invested $1.19bn in 12 renewable-energy projects and companies — six solar and six wind. While all but two of these projects are in the US, future investments are more likely to be further afield — about 54% of the company’s $50.1bn revenue last year came from overseas, and international growth will outpace its home market.

In May, it took a $12m stake in a PV project in South Africa. Needham is tight-lipped about future investments but says he likes the clean-energy outlook there, as well as in Asia, parts of Latin America and North America. “I suppose there are plenty of places where renewable-energy investment is a little bit nascent,” he says. “[But] we continue to find opportunities that we think are attractive.”

According to Needham, Google became involved in renewables out of necessity, and its move to assume a leadership role came naturally. “What got us into investing was that when we looked around at sourcing it for our operations we realised it wasn’t exactly easy,” he says. “There weren’t a ton of options to find economic renewable energy. Maybe we could help move the industry forward by making the investments ourselves.”

Google believes that other cash-rich companies should be investing in renewable energy. “They talk about their commitment to sustainability — here is a great way of exercising that commitment while also making a good financial return. It also helps to have a different asset not tied to interest rates, while diversifying where you put your cash,” he contends.

Google’s most lucrative deal so far has been SolarCity, where it invested $280m before the rooftop solar-leasing leader launched an initial public offering last December. SolarCity shares began trading at $8 and peaked at $52.77 on 20 May, before falling to $38.54 on 5 June.

The company’s $168m stake in BrightSource Energy’s 377MW Ivanpah project, due on line later this year, also appears a winner, even though Google is no longer investing in concentrating solar power, given the sharp fall in PV prices. It had provided $10m to seed the company in 2008.

Google has also promoted innovation in wind. Its $157m investment in two projects at the Alta Wind Energy Center in California, for example, used a leveraged lease structure (whereby an investor buys an asset and leases it back to a developer) — a first for the sector. The projects also use some of the first dedicated transmission lines to bring renewable energy from remote, resource-rich areas to major load centres.

Other projects include a $100m investment in the 845MW Shepherds Flat project in Oregon and a $94m stake in four Recurrent Energy PV arrays in California.

“To date, we’re pretty happy with the way our portfolio of investments has been performing,” Needham says.

But what would Google do if Congress allows the wind-energy production tax credit (PTC) to expire this year? “As a tax-equity investor, what happens to the PTC is important to us,” says Needham. “Because we have the tax credit, we can use the PTC when developers sometimes can’t. As an offtaker, it helps too by keeping down the price of power.” If lawmakers want to end the PTC, then remove subsidies for all other forms of energy, he adds. “Level the playing field.”

Since going public in August 2004, Google has carefully reinforced an image as a geeky, socially responsible outfit that applies science and innovation in an environmentally sustainable fashion. Its corporate philosophy includes principles now part of the Silicon Valley lexicon such as “you can make money without doing evil” and “you can be serious without a suit”.

Company founders Larry Page and Sergey Brin — now chief executive and head of product development, respectively — have declared they want to “solve really big problems using technology”. Among the biggest is finding a solution to the world’s energy and climate problems, with much of that work being done through the company’s philanthropic arm,

The notion that a 14-year-old company can lead the world away from centuries of dependence on fossil fuels strikes many as idealistic, comical and more than a little arrogant.

Google’s legions of supporters see it as bringing the star power and money that the renewables sector badly needs to counter Big Oil, wake up Washington politicians and rally public opinion.

But Google is not squeaky clean. The perception that it is carbon-free is inaccurate, although it has been carbon-neutral since 2007. Its operations emitted 1.67 million tonnes of CO2-equivalent in 2011, about a 10% increase from 2010, although much less than revenue growth. The company points out that its “carbon intensity” has actually declined since 2009.

Google’s business practices have also come under fire. In January, it dodged a federal anti-trust lawsuit by making voluntary changes to its search engine after competitors complained that results favoured Google products. At the same time, its tax-avoidance strategies have drawn scrutiny in France and the UK.

Analysts expect it to remain dominant in the rapid-growth market of internet advertising, while expanding other businesses such as YouTube, the Android phone operating system and Chrome web browser. The company says it handles about 3.3 billion search queries a day and indexes more than 20 billion web pages, as well as streaming millions of YouTube videos and enabling a sophisticated advertising system that works in milliseconds.

Underpinning this digital empire is an eye-popping physical infrastructure that includes hundreds of thousands of servers around the world (Google won’t discuss actual numbers) that require prodigious amounts of electricity. “These data centres can typically require tens of megawatts for each phase. They can get pretty large over time,” Gary Demasi, director of data center strategy and energy, tells Recharge.

Data released by Google in 2011 suggested that it then required about 300MW on a continuous basis to operate its network. Since then, the company has grown by a third, is building three large data centres in Asia and one in Chile, and has announced major expansions at four even bigger ones in the US. Demasi declines to talk about the company’s smaller facilities.

As Google’s demand for power increases, so does its insistence that utilities supply more renewable energy to its operations. In 2011, its energy mix was 67% “brown” and 33% renewables, mainly wind. It wants suppliers to add clean capacity and seeks supply solutions that directly address problems limiting green power.

In April, it proposed a new tariff structure whereby US utilities would bundle and sell large amounts of renewable power voluntarily to buyers such as Google that want it, without impacting on other ratepayers. Google believes the idea will provide a powerful tool for accelerating renewable-energy growth, and help utilities by providing new business and products to customers. Security analysts note that the above-market rates for solar and wind should appeal to utilities, given that electricity demand is hardly growing in the sluggish US economy.

But the proposal drew a muted response from the conservative industry and regulators who would need to approve the new tariff plan in each state. An exception was Duke Energy, which pledged to develop such a programme within 90 days in North Carolina, where Google plans a $600m data centre expansion. Demasi hints that billionaire Warren Buffett’s MidAmerican Energy may also embrace the concept.

Google’s push to extend its influence beyond Silicon Valley has sparked anxiety and resistance from those who believe it is becoming too powerful too fast, especially the traditional power companies. Civil-liberties advocates are concerned that the company already has too much access to people’s personal lives, while Republicans seem uncomfortable with its perceived Democratic policies and its enormous influence.

Needham acknowledges these fears, but waves them aside. In contrast to some of its critics, he implies, Google only wants a brighter future for renewables.