Google may not seem like an energy company, but it sure is acting like one.
Through more than $1 billion in investments and through large contracts for renewable power, Google has become the most significant player in the energy business outside of actual energy companies and financial institutions.
The Internet search giant’s efforts to transform the world’s use of power and fossil fuels have included a $200 million investment in a Texas wind farm and the purchase of a company that makes innovative flying wind turbines. It has invested $168 million in a solar project in California and is funding the development of an offshore grid to support wind turbines off the Atlantic coast.
In total, it has an ownership stake in more than 2 gigawatts of power generation capacity, the equivalent of Hoover Dam, said Rick Needham, Google’s director of energy and sustainability.
Innovation: Google makes big bet on ‘kite power’
Google even has a subsidiary, Google Energy, that’s authorized by the Federal Energy Regulatory Commission to sell wholesale electricity that it generates from its power assets.
Analysts say it is the only company other than energy businesses and financial institutions that has taken large ownership stakes in major stand-alone power projects.
And although energy is not Google’s core business, the investments are paying off, said Michael Di Capua, head of North America analysis for Bloomberg New Energy Finance.
“I think they do see economic value in making the investments, even though it does require some hassle,” Di Capua said.
Needham said Google executives have spent 14 years being “obsessive fanatics” about reducing the energy needed to run the Internet’s most popular services while also developing more efficient ways to support the online material.
Through its efforts to cut its energy use, for example, Google now uses the same amount of energy as an electric hand dryer to power 100 searches. In another comparison, Google says it uses the same power needed for one load of laundry to enable three days of nonstop video streaming through its YouTube service.
Spinning Spur: Google sinks $200 million into Texas wind farm
Much of that increasingly efficient Google processing power is fueled today by renewable energy that Google continues to pursue, said Joe Kava, vice president of data centers at Google.
Those efforts are influencing changes in the energy landscape.
Last year, as Google considered investing in a 48-megawatt Oklahoma wind farm, the Grand River Dam Authority there scrambled to invest first so that it would be able to sell power to Google rather than losing the company as a potential customer.
The result was additional renewable power that otherwise would have been unavailable to Google and other ratepayers, Dan Sullivan, CEO of the Grand River Dam Authority, said in a statement. The utility was able to support the wind farm’s construction because Google agreed to pay a premium for its power, Sullivan said.
Big power appetite
At the heart of Google’s intense push for renewable power are its online services, which run on data centers that require huge amounts of electricity. In 2011 alone, Google used 2.7 million megawatt-hours of power, according to the company. That’s the equivalent of a year’s worth of electricity for 243,000 households – about the size of Austin.
To fuel those operations, Google has been on a mission to find renewable energy sources and to help to build more of them where they don’t exist, Needham said. In the process, Google has found ways to make money off energy, he said, though the company declined to disclose ownership stakes or earnings for the company’s energy investments.
“We’ve said this is a place where we can really have a double win,” Needham said. “We can have attractive returns but at the same time help get to that future that we want to see, which is one where clean energy is ubiquitous and it’s economic.”
Google’s spending on renewable energy has surpassed even large energy companies. Exxon Mobil Corp., for example, has invested $200 million in renewable energy – a fifth of Google’s ante. Other oil giants, however, have invested far more, with BP committing $7.6 billion and Chevron Corp. funding $5.4 billion for renewable energy efforts, according to those companies.
Energy Foundation: Google grants $2.6M to influence energy policy
Google’s substantial spending in the energy sector, which might trouble investors in other non-energy companies, may be more palatable to Google shareholders, said Marlene Motyka, leader of the U.S. alternative energy group for consulting firm Deloitte.
“I think they’re seen as being more innovative and cutting edge,” Motyka said. “They probably have more brand approval to make investments in a broader perspective than some others might.”
Besides its direct ownership in energy projects, Google has signed long-term contracts for decades of wind power. It has contracted for electricity from a combined 330 megawatts of wind turbines worldwide, enough to power 165,000 homes.
“What these developers are looking for is a long-term power purchasing agreement,” said Gary Demasi, Google’s director of global infrastructure. “So Google has played that role, sometimes signing up for (power purchasing agreements) when there are no other buyers.”
Liz Salerno, director of industry data and analysis for the American Wind Energy Association, said contracts with Google have given emerging wind projects the certainty they need to get funding from banks and other investors.
The contracts also are causing some concern among utilities, said Di Capua, the Bloomberg analyst.
“If companies directly invest capital in wind projects, that’s not necessarily bad for the utility … but if companies themselves are kind of sidestepping the utility and signing their own deals with renewable energy projects, I think all of these could potentially eat into utility sales,” Di Capua said.
Utilities typically prefer to retain large customers rather than see them build their own generation or contract directly with power plants, said Brandon Smithwood, manager of the policy program for Ceres, a sustainability advocacy organization.
Google’s Demasi said that concern inspired the action from the Grand River Dam Authority in Oklahoma and has helped Google push for concessions from other utilities.
Needham said deals with traditional utilities could put Google back in the position of being an energy customer, though it is still looking for new energy investments as its needs grow.
“We’ll need to think about how we’re going to supply that energy,” Needham said, “in a way that’s not a negative for the environment but that’s positive for the environment.”
Google’s big energy investments include:
*A 161-megawatt wind farm in the Texas Panhandle
*A 337-megawatt solar power project in California
*An offshore grid to connect wind resources off the Atlantic coast
*A company that created wind turbines that fly like kites