Many people aren't totally sure what to make of Google's ambitious announcement on Tuesday that it intends to generate one gigawatt of electricity--the equivalent of a few power plants--from renewable-energy sources.
After all, what is a company that makes its money from search and advertising know about the stodgy world of utilities and power generation?
Search giant Google on Tuesday pledged to spend hundreds of millions of dollars to make renewable energy cheaper than coal.
The effort, dubbed RE
Technologies created by Google will likely be used by Google, whose data centers are voracious consumers of electricity. The company envisions either selling electricity from renewable sources or licensing technology on terms that would promote broad adoption, according to company founders Larry Page and Sergey Brin.
Its overarching goal is to produce 1 gigawatt of electricity from renewable sources--enough to power the city of San Francisco--faster than the current pace of green-technology development.
"The main crux of this is that we believe that you can do it cheaper than coal...and we want to make it happen now," said Page, Google's president of products. "Most people who are doing this now are trying to do it less expensive than people before, but they are not trying for that goal which will have a significant effect on the world."
Investments in other companies will be funded by Google's philanthropic arm, Google.org, which has about $2 billion worth of Google stock available to it.
In particular, Google will be investing in solar-thermal technology, wind power, and geothermal systems. Its target is to fall below the price of coal power generation, which can be as low as 2.5 cents per kilowatt-hour, said Bill Weihl, Google's green-energy czar.
Google said it's already working with eSolar, a solar-thermal company building systems for utilities to generate electricity from heat. It has invested in Makani Power, which is pursuing electricity generation by harnessing wind at high altitudes.
As part of the effort, Google will be hiring experts in the energy field. It expects to hire 20 to 30 people into its clean-energy division in the next year. More substantial investments will come as energy projects come online, Weihl said.
Although an ambitious plan, Google's impact on the clean-tech market segment in the near term is likely to be more psychological than financial, said Paul Clegg, a senior equity analyst who follows clean tech at Jefferies.
"Tens of millions of dollars is not a small number, obviously, but you're spreading that over things that a lot of other companies are attacking on an individual basis with more money going at it," Clegg said. "I think they'd have to invest a lot more money to get the next Manhattan Project going."
However, Google's initiative is significant in that it could indicate how corporations will start addressing their energy needs and climate change going forward, he said.
A strategic move
The push to mitigate the effects of climate change through clean energy falls squarely into Google.org's missions to improve human health and alleviate poverty, said Larry Brilliant, the executive director of Google.org.
Its foray into the energy business is part of Google's corporate charter to expand into new business areas that are "strategic," according to Brin.
As a large consumer, Google can benefit from cheaper sources of electricity and technologies it successfully develops could generate revenue, he said. In addition, those technologies could potentially bring cheaper sources of electricity to areas of the world that don't have it.
"For economic development to be possible in these areas and for new industries to be spurred along, we want to develop cheap alternatives that are widely available," Brin said. "This isn't just about solving a problem. It also creates a gigantic opportunity."
Right now, the most widely used form of renewable energy in the United States is from hydropower, which makes up about 7 percent of power generation. Other renewables make up 2.4 percent, while coal-fired power plants generate nearly half of the power in the United States, according to the United States Energy Information Administration. Google estimates that about 40 percent of power worldwide comes from burning coal, one of the most polluting fossil fuels.
Some renewable forms of power promise to approach the cost of fossil fuel production, notably solar thermal and wind, which both benefit from government incentives.
In an FAQ document, Google said it will pursue "enhanced geothermal technology that taps into heat underground to generate usable energy. It said this approach differs from traditional geothermal technology because it can be used nearly anywhere, rather than only in locations with specific geological features.
Avoiding hypocrisy
Google's intention to invest directly in power generation technologies is unusual for a business outside the energy sector.
Companies with environmental stewardship programs or commitments to reduce greenhouse gas emissions typically invest in on-site renewable energy or purchase carbon offsets that represent investments in clean-energy projects.
Wal-Mart, for example, has a high-profile program to make its stores more energy efficient by using the latest technologies, including solar photovoltaics. It has also done reviews with suppliers to reduce waste and packaging in its supply chain and stores
I would argue that Google's commitment to clean energy is a smart move.
Will it make fabulous riches from its investments? We won't know for a while. But in the meantime, its announcement has done exactly what the Googlers wanted--it focused people's attention, however briefly, on the importance of clean energy.
Judging from news articles and blogs, there are plenty of people in the "distraction" camp.
The reaction from ZDNet blogger Larry Dignan (writing for a site owned by News.com parent company CNET Networks) was that Google should not do energy.
"I can't help but think Google is a company with too much cash on its hands and is spreading itself too thin," Dignan wrote.
One financial analyst told the New York Times that he thought the announcement was a "joke," calling the move into energy risky.
Others pointed out there are plenty of other technology companies doing as much if not more to save energy and address climate change
Renewable energy advocates were predictably quite happy with the news.
"It might strike some people as odd that Google would get into the renewable energy field, but I think of Google as a transformative technology company, and that philosophy is very welcome in the renewable energy business today," said Michael Eckhart, president of the American Council On Renewable Energy (ACORE), in a statement.
To put things in perspective, Google.org--its philanthropy, not the corporation--will be investing hundreds of millions in clean energy companies. Google has committed to hire about 20 to 30 people in a new clean energy division in the next year who will do research and development. The money there will be in the tens of millions.
So the dollar amounts are not going to derail Google's core search and advertising business or its investments in Web applications.
Similarly, those investments won't rock the world of clean tech overnight. Venture capitalists are putting about $3 billion a year into the sector, and that's still a fraction of overall research and development from public corporations and government funding.
Where's the upside for Google? It can actually use the technology it develops or helps funds. Co-founder Larry Page said in a conference call with reporters on Tuesday that it's likely that Google will do on-site power production, capture waste heat for electricity, and take other smart energy measures for its facilities.
Of course, if these innovative energy companies that Google.org is seeking out make lots of money, it stands to make some revenue.
What may seem odd is that Google is combining environmental leadership with business. Aren't those at odds?
If you need to clean up a brownfield site, then yes, being good to the environment is a financial drain. But the notion that businesses can profit from the world's woes is being tried and tested every day.
IBM first talked about its "Big Green Innovations" campaign earlier this year which focuses on computing energy efficiency as well as products and services in things like water conservation and solar technology.
Another obvious example is General Electric's Ecomagination, one of its fastest-growing initiatives.
In the end, what Google's trying to do is increase the speed of innovation in clean energy, which most people agree is needed. To do that, Google is investing in a potentially profitable field and using the rock star status (among geeks, anyway) of its founders Larry Page and Sergey Brin to inspire energy entrepreneurs.
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