You Have to Admire Google

These guys just seem like they are really trying hard to do the right thing:

Google’s Goal: Renewable Energy Cheaper than Coal

Mountain View, Calif. (November 27, 2007) – Google (NASDAQ: GOOG) today announced a new strategic initiative to develop electricity from renewable energy sources that will be cheaper than electricity produced from coal. The newly created initiative, known as RE-C, will focus initially on advanced solar thermal power, wind power technologies, enhanced geothermal systems and other potential breakthrough technologies. RE-C is hiring engineers and energy experts to lead its research and development work, which will begin with a significant effort on solar thermal technology, and will also investigate enhanced geothermal systems and other areas. In 2008, Google expects to spend tens of millions on research and development and related investments in renewable energy. As part of its capital planning process, the company also anticipates investing hundreds of millions of dollars in breakthrough renewable energy projects which generate positive returns.

Lots more details at the link. Good stuff.

21 thoughts on “You Have to Admire Google”

  1. Producing renewable power that is cheaper than coal with sequestration seems a lot more feasible. Doing that at a large scale could be a hugely valuable contribution, in terms of reducing greenhouse gas emissions.

  2. How do you pronouce that? “RE less than C”??? HTML reads the “less than” sign as a tag. Naming the company is their first mistake. Hard to blog about it.

    Advanced coal generates at $60-70 / MWhr. Sequestration will add $10-20 to that figure. Best solar can do right now is around $120-140. Good luck to RE–C at getting renewable power cheaper than coal.

    Google has a profit margin of 27%, compared to XOM at 12%. Seems like a poor business to jump into the energy business. Maybe Page & Brin will figure out how to make ads pop up every time we flip on the lights.

    I guess when you have your own custom 767 and trucks full of money you think there isn’t any problem you can’t solve.

  3. I get the idea, from the people I know in enviro consulting, that the goal for many is to stay slightly ahead of legislation and public opinion.

    American companies manufacturing in Vietnam, for instance, set up their own environmental practices ahead of any law … arguably for “good” but also so that they would not get walloped as bad guys when a movement or laws arose.

    I think these Google guys are good, and rich enough that it doesn’t hurt … but there have been rumblings about their power draw and environmental footprint.

    This gives them green cred and keeps them ahead of those who would, say, demand server power regulation.

  4. This gives them green cred and keeps them ahead of those who would, say, demand server power regulation.

    I’d agree, it is all about greening up their image so people forget how much power they suck up and how many tons of carbon dioxide the 767 spews out the back.

    When an energy company tries to do the same thing we get pilloried. Google does it and gets praised. The cost of electricity probably doesn’t make much difference to their bottom line. So they can afford to pay a little extra for green power.

    XOM $471 billion market cap, 12% profit
    GOOG $210 billion, 26.9% profit

    So which company is the robber-baron?

    Those servers need to be located a lot closer to cheap power.

  5. “When an energy company tries to do the same thing we get pilloried.”

    Not by me. I even rise to defend (good) offsets!

    (We now know, when economics and sciences collide that “good” offsets are all about demonstration additionality.)

  6. That should be “demonstrating additionality” of course.

    (I guess if oil company defenders are on record opposing offsets and additionality though … it might be hard for them to position themselves to use them now!)

  7. i believe GOOGLE is implementing this strategy simply for corp survival[their control of future expense and assurance of their own sustainability].

    their business allows any convenient locatability to energy resources to be studied/used

    they know the cost factor for coal is headed into the stratasphere based on world wide demand forecasts.

    they know their future energy demands will also be astronomical[computational use by their developers and by business they will sell].

    their business survival rquires that they succeed in this venture. bottom line–they don’t care what the color is, so long as it is the cheapest cost under their control.

    in business it’s called strategic sustainability. if it sounds like “good citizen”, that’s another plus. but not the driving factor.


  8. Actually I disagree with Fran. I suspect that energy costs are going to be a small-ish factor in Google’s overall scheme of things.

    Given the wealth and youth of its founders, I suspect that this is actually a case of corporate idealism (although to be sure not corporate charity). Regardless of motives though, good for them. Hope it works out.

    It will be interesting to see if they are accused of PR and greenwash. I’m not going to put my money on it.

  9. How do you pronouce that? “RE less than C”??? HTML reads the “less than” sign as a tag. Naming the company is their first mistake. Hard to blog about it.

    Yeah, I had to modify that, because the HTML bombed out on it. It kept chopping off the paragraph at that first less than sign.


  10. armchair, check your facts.

    Electricity is one of google’s biggest expenses. They have around 500,000 server PCs.

    So they have a business reason to do this. But I’d guess the environment is also something the founders care about.

  11. In the quarter ending Sep 2007, Google reported:

    Revenues $4.2 B
    Cost of Rev $1.7 B
    Gross Profit $2.6 B

    Op. Expense ?
    R&D $0.5 B
    SG&A $0.7

    Op. Income $1.3 B

    They didn’t break Op. expense out, so it is either not material or is imbedded in the Cost of Revenue figure.

    I’m sure their electric bill is quite large, but R&D and salaries are much bigger. Cost of electricity really doesn’t hit their bottom line too much. They can afford to be green.

    Getting renewables cost below coal requires skills that Google doesn’t posess. As far as I can tell, they don’t make anything. Lowering costs will require ramping up production, improving manufacturing processes, and other measures. Google doesn’t buy enough electricity on its own to achieve any economy of scale.

    From Vinod Khosla’s incoherent ramblings on Prop 87 and ethanol, it is clear that fantastic success in one field of endeavor doesn’t translate in to success in other areas. Google should stick to what it knows.

  12. I found this imbeded in the Yahoo story on Google:

    Google intends to spend at least $20 million next year to finance renewable energy research and hire more experts in the field. At least 20 to 30 new employees will participate in the project next year, Page said, though he hopes the number will be larger than that.

    Call me unimpressed. Let’s see, that is about 1/10th of what my company will spend on renewable energy research next year.

    Where are they going to find all these really smart people to do this? Are all the energy “rocket scientists” working as baristas at Starbucks just waiting on the call from Google? Hire more Indians and Chinese? They are maxed out on H1B Visas now. What would you need to pay someone like me to come live and work in Mountain View, CA. $500,000 a year? A million $?

    Hey Robert – is your phone ringing yet? Call 1-800-rsq-uard.

  13. Isn’t “concentrating solar thermal” under-subscribed at the moment?

    Who else is doing it?

    (I think our state, California, is dumb to do photovoltaic credits when thermal still demonstrates better ROI.)

    Not to say Google shouldn’t spend more ;-). That’s the nice thing about demanding things from a company concerned with their image … they might do it.

  14. I’d live in Mountain View for a lot less than $1 mm…. as long as they bought me a house. The Bay Area is a great place to live actually. I did it once, for about 4 years and loved it.

    Unfortunately I don’t know enough about alternative energy. 🙂


    this is the most likely solar candidate for baseload power application in vogue today. FPL, AUSRA, SOLEI plan major capx expenditures over next 3-5 year timeframe in FLA and CALIF. others also, but memory fails me.

    20-30 new hires by GOOGLE FOR C greater than RE sounds about right if you’re conteplating application competence center–using the best the rest of world has to offer–to implement in house program for RE.

    this approach will provide GOOGLE with max flexibility to locate their facilities anywhere globally, with greatest protection from ecopolitics, xmission/generation infrastructure/outages, terrorism while maximizing control of major escalating cost[ENERGY].


  16. I’d live in Mountain View for a lot less than $1 mm…. as long as they bought me a house.

    I quickly browsed the real estate listing. Holy Cow! Houses are selling for $600-750 per sq ft. in and around San Jose.

    Let’s say someone like me moved down and only wanted a 1,800 sq foot house (smaller than my first house). That would run $1.2 mil. A 5% mortgage puts the payments at something like $8,500 per month(not including taxes and insurance.) So figure $10,000/month. At 25% of my salary, I would need to pull down at least $500,000 a year just to afford to live in a small house near work. Even if I commuted an hour each way (in my mandatory Toyota Prius, the state car of California), I likely wouldn’t do much better.

    And for what? When Google decides that alternative energy is no longer the flavor of the month, I’m out of a job, stuck with a tiny crappy house in California with huge mortgage payments.

    Sorry, I’d rather take my chances with a traditional energy company in Texas (lower cost of living, no state income tax). Living in CA has no appeal. For just the differnce in housing I could afford to fly to San Francisco every weekend and do whatever it is that I might do living there.

  17. King,

    Agreed…. I wouldn’t consider living on CA, if I wasn’t in the game already. It’s just not worth those kinds of payments coming in from somewhere else. And don’t forget property tax at 1% would run you another $1000 per month for a house you wouldn’t be embarrassed to invite friends to. I don’t know about the Prius thing though. I count probably 5-10 SUV’s per Prius.

    But once you’re in,though, it’s great place to be. There’s a small but lively little oil patch (I’m an upstream guy). CA produces about 700,000 bopd.

    I always thought thought that Houston’s lack of a state income tax was a bit of a smoke and mirrors act though. When I last lived there it was almost 3% property tax. Add sky high summer utility bills, and my discretionary income after housing and taxes was about the same as the east coast.

    But I digress. WAY off topic!

  18. We pay about 2.5% property tax. When we left Oklahoma the income tax was about 6% plus a 1% property tax. We pay slightly less in taxes here. But you are right about energy bills.

    I love California. If housing wasn’t an issue I would live in the Santa Ynez valley. We haven’t figured out where to retire yet. We have an energy star rated house, but my retirement home will be much better.

  19. Isn’t hydro power much cheaper than coal has ever been? On the Nordpool spot market the price of power was around USD 0,005 / kWh during five weeks this summer.

    Hydro power, like solar, is not availiable everywhere. But hydro power can easily be stored with little to no energy loss.

  20. I read about this in the WSJ the other day.

    The first word I thought of was “hubris.”

    Then I saw another google article later. One of the “free” google cafes (food is apparently “free” at the google workplace) specializes in food grown w/in 150 miles. ah…food-miles, and it all made sense.

    The smarts that it takes to be amazingly competent at software & hardware is not the same it takes to understand energy production, consumption and economics. But Google does know marketing and image-building…

    I see a couple answers here, reality is prolly a mix:

    (a) Google is really dumb enough to think they can make a non-subsidized, profitable go at making electricity.
    (b) Google is making an internal/external (i.e., for employees and consumers) PR effort to show that “they care.” It’s like buying a hybrid SUV…not particularly good for the environment, but shows the socially appropriate level of concern, if not actual positive effect.

    Google has to keep its talent happy, productive, and working for google. Google has to keep the general public generally happy with google. Two birds, one PR effort.

    And to the earlier poster that thinks google’s electric bill is a large expense: Yes, it sounds large in dollar amounts. But it is miniscule compared to worker compensation (wages + health care + other benefits).

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