Posted by Gena Gibson, Consultant: Energy and Climate Change on 22 June 2012
Back in 2007 Larry Page, CEO and co-founder of Google, declared that the company would get involved directly in energy research, with the ambitious aim to wean the US off fossil fuels. Moreover, Google believed they could make renewable energy cheaper than coal. However, the internet giant recently announced that it was abandoning this project despite having invested $915 million in clean energy projects to date. That is a lot of money, even for Google.
Google believed their creativity in the computing realm could also be used to solve the problem of generating large-scale renewable energy. However, the speedy world of software - where projects can be turned around in weeks – is very different to the energy industry where time horizons typically stretch over decades. When Google announced that it was scrapping its “renewable energy cheaper than coal” project, many thought it was the end of their green ambitions.
Far from it. These days, Google is putting their software-based tools to new uses, such as in trials of driverless cars, which were the stuff of science fiction a few years ago. The Google Earth teams will be at the Rio+20 to show how their mapping software can be used to track deforestation and surface water.
But perhaps the more important shift, and one that is less well-publicised than their active involvement at the frontiers, is their support for innovation outside of the company. Instead of getting directly involved, Google is now financing renewable projects through tax equity investments – i.e. ones that become eligible for offsets against federal corporate tax obligations. Tax equity investments are increasingly important because other federal subsidies have expired or are in danger of being phased out.
As government austerity bites this is where Google can fill an important financial gap. And other companies could too – Apple is sitting on $97 billion cash, General Electric $78 billion and Toyota $48 billion. Companies benefit because renewable energy projects help diversify cash, and earn steady returns from businesses that aren’t correlated to other investments. Renewables benefit from greater deployment, which tends to reduce costs. With more support from the corporate sector, they might even become cheaper than coal.