Google makes Business Case for Wind

Bill Opalka | Jun 16, 2011


Renewable energy developers agree: The lack of clear, long-term signals from policymakers stalls investments in the clean energy space. As the new kid on the block, and not an energy company, Google is plowing ahead.

While Congress seems absent on energy policy this year – except for the predictable hearings on high gasoline prices – clean energy companies are looking for a signal that investments will pay off once various credits and subsidies expire at the end of this year and next.

The message came through at a press conference at the American Wind Energy Association conference in Anaheim.

But along with the policy imperative, Google said there’s a business case to be made. “We believe in a clean energy future so we’re trying to do what we can to help enable that, but we also believe very strongly that all the things we are doing make good business sense,” said Rick Needham, director of green business operations and strategy at Google.

The company has invested $400 million in large scale renewable energy projects. “Also, these investments provide strong financial returns, and are a way to diversify our cash holdings with good returns given those risks,” Needham added.

And as a large energy consumer, Google has procured two 20-year long-term power purchase agreements for 250 megawatts of wind providing clean energy for its data centers.

But that only goes so far, as uncertain policy and recent history illustrate.

Ned Hall, AES executive vice president and AES Wind Generation president, said: “We have a lot of examples in our industry as to what hasn’t worked out well for us. In the late 90s we built 35,0000 megawatts of natural gas generation in our rush to excitement to what was viewed as a disruptive technology. That drove natural gas prices to $13. And that ended badly for a lot of businesses.”

The current mania over shale gas and the lack of a commitment to clean energy affects markets now.

Hall is the incoming chairman of AWEA, so he’s clearly in the space for the long haul, too.  But he’s seen this movie before, too.

“The disruptive nature of shale gas has changed the map again and there’s a rush back to gas. If we’re always chasing what we view as the current least-cost opportunity, we won’t get the diversity that I think we would benefit from,” Hall said.

He spoke approvingly of the market signals for renewables outside of the U.S.: “AES does business in 28 countries. Most of our time and effort on wind development is focused outside the U.S. because we don’t see what exists today as a motivator to come and put in the time and effort.”

Does Google want to lead by example? “We would welcome and encourage other companies that may not be investing or offtaking (procuring) to do something that makes business sense for them to drive the industry forward,” Needham said.

The uncertain regulatory environment is taking its toll. But some of that pain is being eased by the likes of Google and AES. 

Bill Opalka is editor of RenewablesBiz Daily

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Natural gas is a temporary fix

Wind will always be with us short of climate change destroying it. Natural gas is a transient that once burned is gone....leaving only GHG CO2 in its place. The idea that we use up the entire supply of future generations fossil fuels AND destroy their climate is tragically short sighted politics. We see instances of fracking destroying water table now as well as depleting a totally non-renewable non-replacable source of energy. What is the externalized cost of solutions like this? How can one look at just today's costs and ignore the realities that we set in place permanently by doing so?

Portugal continues to head to 100% renewable electric power primarily through wind. They have passed the 70% mark seasonally with an overall target of of 45% now left behind. Sadly, the childish mentality of convenience and denial rules the USA as we hasten our own downfall missing the energy revolution of the 21st century.

Beware of the Dangers of Over-Commitment to Natural Gas

If financial rating and investment institutions favor Natural Gas fired plants and Electric Utilities seek considerably lower (Capital, Operating) Costs for such plants (i.e. lower debt payments), the confluence of mutual interests support the growing trend of new and retrofit Natural Gas Power Plants. Should this paradigm change (Natural Gas volatility return to its previous decade’s history) then placing all “the eggs in the (Natural Gas) basket” will result in lower profit for regulated utilities with reduced credit ratings with concomitantly higher consumer energy costs.

Richard W. Goodwin West Palm Beach FL

Business Case? More Like BS Case.

The modern wind energy business got started in 1979-1980 timeframe but still needs significant subsidies or feed-in-tariffs to be economical.  Pretty tough to make a business case.  I wonder how much Google would be investing without the federal subsidies in place and/or tax credits in place?  Fossil power has to live with corporate taxes, standard depreciation strategies, and property taxes just like any other business without grants, subsidies, feed-in-tariffs etc but renewables get accelerated depreciation, property tax exemptions, and other special business breaks.  Wind in particular uses about 8 times the concrete and 10 times the steel per nameplate MW compared to conventional power.  That does not even consider that fossil plants can be built close to load centers and do not need hundreds of miles of transmission lines to be run.  When one considers that wind turbines have capacity factors of about 30% the amount of construction material (including the precious copper in the generators) on a per MW basis is multiplied over 3 times to come up with usage on a per MWh basis when comparing that consumption on a base-load basis.  Wonder what the effect is on construction material prices.  Try looking at the price history of concrete, steel, steel scrap, iron ore, and copper.

Wind energy's impacts in the US tend to be most felt in odd hours of the day--late night to early morning when usage is lowest.  The biggest impact has, from what I can see, been on base-load generation, causing base-load plants to have to cut back to accommodate subsidized energy.  This makes them less efficient, wasting fuel and increasing emissions per MWh.

The US needs an energy plan alright but one that looks at the system in total including the massive usage of construction materials (concrete, steel, and copper) on a per MW nameplate and per MWh basis), the hidden costs of having to run base-load, midrange, and peaking plants at part load to provide spinning reserve and stability to highly variable wind power, the costs of long distance transmission lines that run at reduced capacity most of the time and cross vast distances of wilderness where they are subject to being disabled by wildfires and ice accumulations.

When wind can compete fairly in the energy market, bring it on.  Otherwise do not saddle American taxpayers and American businesses with increased costs, especially at this critical time for our economy.