23Oct

Investing Big In Green Business, Google Will Now Help Power East Coast

Saturday | Filed in: Green Technology| Wind Turbines

Google recently signed an agreement investing in electrical generation on a utility-scale in the Mid-Atlantic coast region. Wind and solar development is good for business and good for the environment were the key reasons Google cited. The Atlantic Wind Connection project will create thousands of jobs while improving consumer access to clean energy while decreasing our dependence on fossil fuel electricity generation.

The ownership is split between Google (37.5%), an investment company called Good Energies (37.5%), and the Japan trading company Marubeni (15%).

When completed, the new wind generators will stretch 350 miles off the coast of New Jersey to Virginia and will give 6,000 MW of offshore wind turbines. That equals 60% of the wind energy that was installed in all of America in 2009 or enough electricity to serve about 1.9 million households.

The news of Googles investment of AWC is interesting on several levels, says Joel West a professor of innovation and entrepreneurship at San Jose State University in an article Seeking Alpha. If for no other reason that it will make a relatively small contribution to increasing California’s use of renewable solar and wind energy it was hard to miss news this week of Google’s investment in a planned $5 billion wind transmission line off the Mid-Atlantic coast.

One of the reasons this is so interesting is this is a sizable bet among a series of ongoing renewable energy investments by Google. It appears that it fits nicely with the founders’ philosophical support for solar and other forms of renewable energy, as announced by Larry Page three years ago (and reflected in their personal investments in Tesla among other clean technologies startups.)

The announcement also reflects Google’s strengths at mass communications in web-enabled world, as much of the press coverage was just a paraphrase of the key details provided by Google and its partners in its posting and press conference.

The second point is that, as the Heritage Foundation noted, this is a rare example of a large renewable energy project being funded by private investors rather than hefty government subsidies. We believe in investing in projects that make good business sense and further the development of renewable energy like wind and solar power generation. We’re willing to take calculated risks on early stage ideas and projects that can have dramatic impacts while offering attractive returns. This willingness to be ahead of the industry and invest in large scale innovative projects is core to our success as a company.

Third, this is a reminder of the importance of transmission infrastructure for any large-scale renewable energy projects wind or solar, where the power is generated is not where it needs to be consumed. The 350 mile transmission line would be built about 22 miles offshore, and come ashore in four places: Northern NJ, Southern NJ, Delaware and Southern Virginia. It would eventually have a capacity of 6 gigawatts of power. The project construction would take from 2013-2021.

Fourth, as an April paper in the Proceedings of the National Academy of Sciences points out, a wide geographic dispersion of wind farms can ameliorate one of the biggest disadvantages of wind power dramatic fluctuations in output by smoothing that output over a broader geographic base. The law of averages may make large scale wind generation more useful than the existing wind farms concentrated in a few localized areas like the Tehachapis and the Altamont Pass.

Fifth, the unique advantages of the Mid-Atlantic region point out the limitations of offshore wind more broadly. As the NYT article summarized:

The lure of Atlantic wind is very strong. The Atlantic Ocean is relatively shallow even tens of miles from shore, unlike the Pacific, where the sea floor drops away steeply. Construction is also difficult on the Great Lakes because their waters are deep and they freeze, raising the prospect of moving ice sheets that could inflict damage or broken tower.

So if the plants have to be located far enough offshore to avoid objections over aesthetics but in shallow enough water to operate a fixed platform, there are limited opportunities to do so.

Sixth, it appears that local and state governments have conflicting motives between NIMBYism and a desire for local jobs to the point of discouraging East Coast use of renewable energy generated in the Midwest. (A similar dynamic has occurred here in California). Again the NYT captured it nicely:

Nearly all of the East Coast governors, Republican and Democratic, have spoken enthusiastically about coastal wind and have fought proposals for transmission lines from the other likely wind source, the Great Plains. From Massachusetts down to Virginia, the governors have signed appeals to the Senate not to do anything that would lead to a high voltage grid that would blanket the country and bring in wind from the Dakotas,” said James J. Hoecker, a former chairman of the Federal Energy Regulatory Commission, who now is part of a nonprofit group that represents transmission owners.

Finally, the construction of a transmission line does nothing to solve the daunting cost problems of offshore wind energy. Parochial governors aside, the cost of building and operating wind turbines in the ocean is higher than on flat dry ground: 50% higher is the estimate provided by the NYT.

More generally, the prices of wind generation are not falling as quickly as solar, and in fact ticked up last year at the height of a deep recession. Blogger Tom Fuller argues that wind has a fundamental problem of lack of competition where a cartel of a few large manufacturers controls the supply of generating equipment and predicts an eventual triumph for solar.

There are a lot more solar panel manufacturers, and they are increasing capacity continuously. Each new generation of fab provides 20% performance gains, and the next generation of wafers is longer, wider, and thinner. Innovations for solar balance of system peripherals come from a variety of outside companies in their supply chain, and the inexorable march to grid parity is nearing its goal.

They both get the same level of subsidies, which amount to a pittance overall. So what’s the difference?

Solar sells to consumers, too. Residential, small business, offices and plants. Solar scales down as well as up, and their customers are you and me cranky and demanding if things don’t work, unwilling to sign long term contracts, wanting to see bottom line improvements rather than brochures showing acres of installations.

So solar will win. Not because they’re nicer guys, but because their industry is more fragmented and they have more demanding customers. Which, I believe, is the way the system is supposed to work.

So perhaps offshore wind will be the only local supply of renewable solar and wind energy available to the Northeast, but as with everything else over the past 40-50 years the region will remain an expensive place to live and work. In other words, not a good place to put a Google server farm.