Google Buys Wind, Bets on Sun

March 6, 2012 by  
Filed under Green Energy News

Google (GOOG) is stepping up wind-power purchases to reduce emissions, even as it devotes most of its renewable energy investments to sun-related projects, a trade-off aimed at reining in costs as the company seeks higher returns.

Google drew 30 percent of the energy it consumed last year from renewable sources, virtually all of it from wind, up from 19 percent a year earlier. Yet of the $917 million that the company has invested in renewable-energy projects, about two-thirds—or $622 million —is channeled toward solar.

Wind power is at least 50 percent cheaper than solar energy, according to data compiled by Bloomberg. That explains why Google, which consumes 2.26 million megawatt-hours of electricity a year, mainly for data centers that run its billions of Web searches, increasingly prefers wind. Whole Foods Market (WFM), Bank of New York Mellon (BK) (BK), Starbucks (SBUX), and Intel (INTC) are among those companies that made the biggest wind-power purchases in 2010, data compiled by Bloomberg New Energy Finance show.

“Wind energy is the lowest-cost form of renewable energy available now in the U.S.,” says Matt Kaplan, associate director of IHS Emerging Energy Research. “In general, wind has become a much more mature form of renewable energy and it’s now seen as almost a mainstream power generation in the U.S. That wasn’t the case three to four years ago. The industry has made a lot of strides.”

There’s been a boom in wind-farm creation in the U.S. in recent years, in part because of incentives from the Obama administration. Via the economic stimulus package passed in 2009, wind-farm developers could get cash grants, in lieu of tax credits, to encourage development. Businesses installing facilities that produce electricity from wind could choose the 30 percent tax credit for investments in energy projects or a production tax credit that gives up to 2.1¢ per kilowatt-hour for electricity produced from renewable resources.

The world’s wind-energy capacity increased last year by 41 gigawatts, enough to power about 12 million U.S. homes, according to the Global Wind Energy Council. Of all the renewable energies, wind is the most mature and least expensive, says Amy Grace, an analyst at Bloomberg New Energy Finance. The average wind project yields about 80 megawatts to 100Mw while an average large utility-scale solar project yields about 5Mw, she said. “Wind makes more economic sense right now,” says Gary Demasi, who manages the data-center location- and site-selection team at Mountain View (Calif.)-based Google.

The company operates data centers in states that include Iowa and Oklahoma. “In the Midwest right now, you’re seeing $30 to $50 dollars per megawatt hour for wind, and solar is typically two to three times that,” he says.

The levelized cost of onshore wind is $80.04 per Mwh, compared with at least $169.18 per Mwh for solar photovoltaic modules mounted on structures that turn to follow the sun. (Those measures are compiled by Bloomberg as of the end of 2011.) Power prices from both wind and solar energy are under pressure, as an oversupply of equipment and low wholesale-power prices squeeze project developers. Still, solar power remains more expensive. That’s why the lion’s share of Google’s wholesale electricity purchases have been for wind energy, while most of its investment dollars are devoted to solar.

“We’re trying to be as economical as possible while being green, so low power-purchase-agreement prices are what interest us,” Demasi says. “On the investment side, they’re looking for returns, so they’re looking for high-priced power-purchase agreements.” While both types of energy are pricier than coal-generated electricity, Google makes the purchases as part of its effort to be carbon neutral.

Although Google has invested more than $622 million in solar projects, the company doesn’t purchase solar power for its data centers. The solar panels on the company’s headquarters generate about 3 million kwh of energy, compared with more than 790,000 Mwh—virtually all of the renewable energy it buys—for wind. And while Google has invested more than $295 million in wind projects, it doesn’t buy power from the wind farms in which it invests. Instead, it seeks power on the electric grids where its data centers are located.

The company has set up long-term power-purchasing agreements with NextEra Energy (NEE) in Iowa and Oklahoma, which both contain Google data centers. After purchasing the electricity wholesale from NextEra, Google resells it to a local utility in exchange for renewable energy credits, offsetting the price of conventional electricity from the utilities.

Other big wind-farm developers are Portland (Ore.)-based Iberdrola Renewables and Terra-Gen Power, based in New York. Harnessing power from the wind comes with challenges. It can be harmful to wildlife and costlier than natural gas, Bloomberg’s Grace says. It can also be unreliable, given that wind doesn’t blow as much in some seasons as in others, she says. “Any tall structure will kill a bird or a bat, and wind turbines are notorious for having killed many of them.” Grace also says builders are paying much more attention to locating wind farms in areas that will have as minimal impact as possible on birds and bats.

Another wind-power consumer is Intel, the world’s largest maker of computer chips. The Santa Clara (Calif.)-based company will buy about 2.7 million Mwh of renewable energy in 2012, said Marty Sedler, the company’s director of global utilities and infrastructure. “We’re expecting wind to be about 50 percent of it because it’s one of the most abundant renewable energy resources available,” he said.

Sedler said Intel also buys solar, geothermal, low-impact hydro, and biomass. “With purchasing, we’re going to include all green technologies,” he says.

Google’s largest investment in wind power currently is in the Mojave desert, at the Alta Wind Energy Center, a project being developed by Terra-Gen Power. The Web-search company has invested $157 million in two wind-development projects. Google has also invested $100 million in Shepherd’s Flat, predicted to become the world’s largest wind farm, near Arlington, Ore.

While Google may currently be purchasing large amounts of wind, the company hasn’t ruled out buying solar in the future. “Solar prices are moving down pretty quickly, and we’re always talking to solar companies,” Demasi said. “We have an obligation to run the business as efficiently as possible.”

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