Financial aspect to Google's environmental goals grows

By Miguel Helft
Published: October 28, 2008

SAN FRANCISCO: Google, the Internet search and advertising giant, is increasingly looking to the energy sector as a potential business opportunity.
From its beginning, the company has invested millions of dollars in making its own power-hungry data centers more efficient. Its philanthropic arm has made small investments in clean energy technologies.
But in recent weeks, Eric Schmidt, Google's chief executive, has hinted at the company's broad interest in the energy business. He also joined Jeffrey Immelt, General Electric's chief executive, to announce that they would collaborate on policies and technologies aimed at improving the electricity grid. The effort could include offering tools for consumers.
Meanwhile, engineers at Google are hoping to unveil soon tools that could help consumers make better decisions about their energy use.
And while the company's philanthropic unit, Google.org, has invested in clean energy start-ups like one that uses kites to harness wind power, Google is now considering large investments in projects that generate electricity from renewable sources.

"We want to make money, and we want to have impact," said Dan Reicher, director for climate change and energy initiatives at Google.org.
The timing could be off. With a recession looming and oil prices dropping, investors might pressure Google to curtail its clean energy ambitions.
Google's shares have lost more than half their value in the last year, and some analysts complain that the company has a long history of dabbling in new initiatives with mixed results. It still relies on one business — small text ads that appear next to search results and on other sites — for the bulk of its earnings.
And Google's online success does not guarantee success in the energy business.
But none of this has deterred Google from going deeper into the alternative energy business. To support its efforts, it has hired a growing number of engineers who are conducting research in renewable energy, former government energy officials, scientists and even a former NASA astronaut, whose hands-on experience with all sorts of electronic gadgets is being put to use to develop energy tools for consumers.
"They are a high-profile actor in the energy field," said Daniel Kammen, a professor in the energy and resources group at the University of California, Berkeley, and an adviser on energy to the Obama campaign. "Google is in the lead in terms of human resources as well as money."
Last year, Google unveiled an ambitious initiative called RE < C, denoting its goal to develop renewable energy that is cheaper than coal. Since then, much of the public focus on the initiative has been in the approximately $45 million in investments that Google.org has made in wind, solar and geothermal energy start-ups.
That effort now also includes a small but growing group of engineers at Google who are conducting their own research and development in those technologies, which Google said it might commercialize in the future.
Google.org also announced a project last year to develop plug-in hybrids. To make them widely available, the electrical grid would have to be upgraded so that cars could be plugged in at multiple locations, where they could be recharged and consumers billed.
Google now says it is interested in developing technologies to support some of those upgrades, as well as other tools at the intersection of energy and information technology, like "smart" electrical meters. The partnership with GE is aimed in part at exploring some of those opportunities.
Google has also increased its lobbying in Washington on energy issues. And the company is looking at larger investments in renewable energy projects that would be primarily motivated by their profit potential, not their environmental promise.
How far Google plans to go with its energy efforts, the company does not yet know, or at least is not willing to say.
"We have been debating, 'What are the business opportunities for Google in this area,' " Schmidt, Google's chief executive, said recently. "And I think right now, we would answer the question that our primary mission is one of information."
Schmidt said that Google would be active in "information businesses or communications businesses" related to energy. Speaking more broadly about the energy sector, he added, "As to whether we will be in these other businesses, we will see."
Google is known for stealth. The search engine company kept its advertising ambitions under wraps for years, a strategy that helped it become the dominant tech company in Silicon Valley. And with $14.5 billion in cash in the company's coffers, it has plenty of resources to keep making further investments in new energy ventures.
Google's efforts in the energy area remain relatively modest. The company has long said it assigns 70 percent of its resources to its core search and advertising business, another 20 percent to related business, like various Internet applications, and 10 percent to long-term, strategic projects. Its energy work falls in the last group.
But even that may be too much for some investors.
"With the stock cut in half and shareholders becoming increasingly frustrated, a lot of these initiatives are going to be called into question," said Ross Sandler, an analyst with RBC Capital Markets. "Google is a search and advertising company. We are in a belt-tightening period. They should focus on the core business."
And others still are raising questions about some of the company's goals.
"The Silicon Valley guys have this idea that we are going to make solar cheaper than coal," said John White, executive director of the Center for Energy Efficiency and Renewable Technologies. "To me that's the wrong idea. I don't think it needs to be cheaper than coal to be successful. The focus needs to be on the investment and deployment of the technology."
Google's commercial and philanthropic interest in energy emerged, in large part, from the intersection of its idealism and its business goals.
"The issue globally, and particularly in the U.S., is that renewable energy is hard to come by and is expensive," said William E. Weihl, Google's green energy director. "But as a competitive business, we can't afford, anymore than anyone else, to say we are going to pay more."
Google has gone to great lengths to conceal how much electricity it uses in its data centers. For instance, Google agreed to build a $600 million data center in Oklahoma only after the State Legislature passed a law exempting public utilities from disclosing the energy use of their largest customers. Google has also vowed to be carbon neutral, but unlike its rival Yahoo, for instance, it has refused to reveal its overall carbon emissions.
Google said that its power use was information that could be used by rivals to learn secrets of its operations, which it considered a competitive advantage.
Still, a picture of the scale of its data center operations has emerged through various reports. The company is believed to have about two dozen data centers around the world of various sizes. Some, like the one it built in The Dalles, Oregon, which is largely powered by hydroelectricity, are among the largest in the industry. Two people familiar with that facility, who spoke on the condition of anonymity, said that it was operating at about 50 megawatts — enough to power 37,500 homes — but was built to handle even more capacity.
Google's desire to better align its idealism and business interests helped motivate the RE < C project.
"For us to clean our energy supply, we need renewable energy available more broadly and more cheaply than it is today," Weihl said.
Google does not maintain a strict divide between the energy work of the corporation and Google.org. A recent status meeting included employees from both sides. Google.org was set up not as a traditional philanthropy, but rather as a Google unit that could profit from its investments and that, unlike traditional nonprofit organizations and foundations, was allowed to lobby.
Google's business development executives, as well as some company engineers specializing in energy, work with Google.org to make investment decisions. Reicher, a former assistant secretary of energy for conservation and renewable energy in the Clinton administration, said that Google.org investments were primarily aimed at pushing an environmental agenda. But Google itself is eyeing more capital-intensive projects, including some to generate renewable energy on a commercial scale.
"If we make those investments," Reicher said, "it would be largely from a profit motive rather than an impact motive."