Google says “no” as often as it says “yes” as it expands its profile in the energy business.
Increasingly a major player in the electricity sector, internet search giant Google’s strategy has been a source of increasing scrutiny.
The company has focused on clean energy investments and on transmission infrastructure opportunities where they overlap with its own infrastructure plans for high-speed fiber optic cable.
No To Nuclear
Pure economics excludes carbon capture and storage (CCS) and nuclear from Google‘s “clean energy” portfolio, the company’s green czar, Bill Weihl told Breaking Energy.
“From a climate point of view nuclear is great, it’s low carbon,” he said. “I think there are clearly issues such as the recent crisis in Japan which has certainly raised issues in people’s minds. But the biggest issue is around cost rather than safety, certainly in this country.
“We don’t have a corporate position on nuclear at the moment, but I think the odds of new nuclear investment making strong economic sense in this country today are small.
“CCS I’d say is more of a concept than a reality. CCS right now wouldn’t be a good investment from a financial perspective. It’s something that governments really need to support with pilot deployments so we can really understand it before it would make sense for an investment by us or others.”
Yes To Renewables
Google has positioned itself at the forefront of clean energy investments since it declared itself carbon neutral in 2007. To date, the internet company has invested $350m in clean energy, and signed two 20-year contracts with NextEra Energy Resources to purchase wind-generated electricity for its data centers in Iowa and Oklahoma.
But Weihl said that return on investment is the over-riding determinant in decisions on where to invest its clean energy dollars.
“We’re not overspending on the deals that we have signed for renewable energy. We expect over the long-term, 20-year lifetime of those deals to spend no more than we would otherwise from ordinary electricity from the utility. Both of those PPAs [power purchase agreements] make economic sense.”
Weihl said that each contract is carefully calibrated and factors in energy market changes such as a price on carbon based on estimates between $50 to $200 per ton.
Pricing Carbon
“Certainly some day there will be a price on carbon. I won’t even try to predict when,” he said.
“But one of the things now that we’ve been doing for several years in making our decisions on our data centers is looking at the carbon intensity of the power and what price we can negotiate for the power. We add on top of that a shadow price for carbon so we basically say let’s assume we’ll be paying X dollars a tonne for carbon – what does that do?”
But Google’s decisions on PPAs are also guided by the multiplier effect for the developer. He said: “Our signing those agreements has made a real difference in terms of the developers’ ability to build more projects. That’s one of the things that is really critical – additionality – not a word that you find in the dictionary. Does signing that contract mean what will happen will be beyond what would have happened anyway?”
“If you just go to your utility and say can you sell that your hydropower to me instead of just the generic stuff you’ve got, that doesn’t change the power mix. It just means that someone else is getting less hydroelectricity.
“The 20 year contract we signed last year for wind in Iowa was something the developer could take to the bank and get low-cost financing which then frees capital for them to build another project.”
Leading By Example?
Google’s leadership on clean energy is a position that the company takes very seriously, said Weihl.
“Others see what Google is doing and that is one of the impacts that we want to have. If others see what we’re doing and we can explain why we’re doing it and why it makes sense for any business hopefully many others will do similar things.
“We have worked really hard over the last several years to understand the energy sector and the energy markets and what it takes to actually source renewable energy in a way that makes sense.”
“We have worked really hard over the last several years to understand the energy sector and the energy markets and what it takes to actually source renewable energy in a way that makes sense.”
Although he recognized the difficulty in the approach taken by Google, he called on other companies and the government to purchase clean power.
“Sourcing clean energy is hard. I would not want to give other companies too much grief for the fact that they haven’t done much yet. But it’s not been easy. And we’d like to see other companies – for that matter governments and people who buy lots of power – to do similar things and our hope is one of the things we did today was that will help and educate others to follow our example.”
He admitted, however, that the company would stop short of disclosing its emissions because it would also reveal financially sensitive data.
He said: “We have not disclosed carbon emissions in the past because those details about number of servers, power consumption and so on, we felt were important for us to keep private for competitive reasons. The industry has changed over the last few years we can probably begin to disclose more of that over time. But in any industry depending on what stage it’s at will find that times when that kind of information will be a really important competitive advantage for some companies and forcing them to disclose it means they can’t have that advantage.”
He said that Google would continue to lead by example in every other area within the energy sector, which was still waiting for a policy signal on carbon from Washington.
“We’re trying to do our part. From a business point of view it doesn’t effect us directly, but it effects the uncertainty around where climate and energy policy might go. It’s pretty clear for the next 2-3 years that it’s not going to change much in this country,” he said. “But where it might go in the next 5 years or 10 years, that makes it very difficult for companies in the energy space because there are trying to plan capital investments that will last for 30, 40, 50 years and that makes it very hard for them to plan what to build.
Google’s Clean Record
Last month, Google made its first clean energy investment in Europe, with a €3.5m contribution to a solar photovoltaic power plant in Germany. Next year, the turbines will start to turn on its Shepherd’s Flat Wind Farm in Oregon, a $100 million investment, which will produce 845MW of energy, enough to power more than 235,000 homes. Last year, it invested $38.8 million in two North Dakota wind farms. It is backing the audacious Atlantic Wind Connection offshore transmission project, which will plug in 6,000MW of clean power to the New Jersey and Virginia coast. Google’s largest investment by far was this year’s $168m in BrightSource Energy‘s 392MW solar tower plant in the Mojave Desert, California.
In addition to direct investments, Google last month signed a second power purchase agreement within a year to supply wind-generated electricity to power its data center in Mayes County, Oklahoma. Last July, Google signed a contract with the same developer, NextEra Energy Resources, to purchase 114MW of clean wind energy at the Story County II project in Iowa at a set rate for 20 years.
