Renewable “green” energy is having a tough slog in the United States. While some countries, such as Germany and China, are investing huge amounts of money in renewable energy, in the U.S. things are moving backward in some ways. With budgets strapped, states and the federal government have ended many tax credits that had funded green energy initiatives. Republicans have made attacking government loans and credits for renewable energy projects part of their campaign pitch, and even the Democrats, while giving lip service to green energy at their convention, are balking at subsidies and talking up shale gas.
Enter Google, the $40 billion Internet company.
A year ago, Google, which says it is already carbon-neutral—a goal that its founders espoused from the beginning—began a major program of buying renewable energy rather than using carbon-based energy and then offsetting it. This year, the company has turned things around and is investing in green power generation directly, instead of just buying it from others.
As Kojo Ako-Asari, corporate finance manager, explains, there are a lot of renewable energy projects across the U.S. with good potential out there in wind, solar, water, geothermal and other sectors, “but there is not a lot of capital available to develop them.”
“We at Google had a $30 to $40 billion cash balance, so we thought, 'hey, if we can invest in green energy, it could help us bring down the price, bring down the cost of these projects, and help our customers gain access to green energy, too,” he says.
Google committed $915 million to renewable energy projects through the end of 2011, with $880 million of that in 2011 alone. “That's a relatively small investment for Google, but it's a large investment for the sector,” Ako-Asari says.
The company estimates that its investments represent about 11% of the total amount invested in the U.S. in renewable energy in 2011.
In December, Google closed a deal on an 88-megawatt project with Recurrent Energy and the investment firm KKR. It was the company's ninth power generation investment.
“We recognize our core business expertise is not managing a power generator,” says Ako-Asari, “so we partner with groups that have that expertise.”
Even so, the company realized that it needed to have expertise in the power generation area just to be able to decide how to best invest its money. To meet that challenge, Google last year expanded its renewable energy team and split it into two groups. One team focuses on deploying capital to fund established technologies and the other focuses on transformative technologies.
Treasury, as program leader, supports both teams by conducting financial and risk analyses for all the projects targeted for investment. There is also an investment committee, consisting of Google Treasurer Brent Callinicos, the head of energy and the company's deputy general counsel.
Ako-Asari stresses that the green energy program is not an act of charity or even PR. “We're in this for profit,” he says. “These investments are structured to generate a profit for the company's investors.” He agrees that the program is also a “win-win” for the company, as successful projects are expected to help lower the cost Google pays for energy—the company used 2.7 million megawatts of power in 2011—and should also generate goodwill among the search giant's users.
As the Google gains experience, Ako-Asari says it plans to expand its investments beyond the U.S. to include the rest of the world. Already Google has one investment in a renewable energy project in Germany.
See a slideshow of the 2012 Alexander Hamilton Award winners here.
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