Last year, Google invested more than $915 million in clean energy projects–solar, wind and transmission.

That’s a lot of money, even for Google, which had $38 billion in revenues in 2011. The investments don’t appear to be core to the company’s mission of organizing information, and they have attracted criticism, as well as some careless reporting, implying that the Internet giant is exiting the alternative energy business.

Does Google have an energy policy? Does it need one?

To find out,  I recently went to see Rick Needham, Google’s director of green business operations, at the company’s fabled headquarters (well, fabled for a 13-year-old company, anyway) in Mountain View, CA.

I came away not merely persuaded that Google’s energy investments make sense, but thinking that other companies that consume lots of electricity and have a pile of cash on their balance sheets  — Apple, Microsoft and GE come to mind — should consider deploying some of their cash in the clean energy sector.

Clean-energy investing isn’t philanthropy for Google. It’s business. In fact, it’s a classic double-bottom line investment, one that is intended to deliver environmental as well as financial benefits.

“We originally came at this by asking how we can make ourselves a more sustainable company,” Needham told me. But Google executives have come to believe that the company can generate  healthy, long-term returns by investing in wind farms, utility-scale solar plants and even solar photovoltaic panels on the rooftops of homes and businesses. “It’s a way of helping us to diversify our cash, put it into businesses that can earn good returns and that aren’t correlated to other investments,” Needham said.

Rick Needham

Needham, who is 41, has an interesting background. He’s a graduate of the US Naval Academy, has a master’s in aeronautical engineering from MIT and an MBA from Harvard. He spent eight years as a submarine officer, and then worked for Dean Kamen at DEKA Research on a project to develop a cleaner burning combustion engine. He’s been with Google since 2008.

Press reports last fall indicated that Google was dropping its clean-energy initiatives. Wrong. What happened was that the company shut down a small group of engineers who were researching solar power, among other things. The company is still working aggressively on data-center efficiency, procuring clean power for its data centers and investing in clean-energy projects elsewhere, as Needham explained.

These are big investments. Google put $100 million into Shepherd’s Flat, an Oregon wind farm that is expected to be the world’s largest, with 845MW of capacity. The company put $168 million into the Ivanpah Solar Electric Generating System, a solar thermal plant being operated by BrightSource Energy. It has invested in distributed, rooftop solar, through a $280 million project with Solar City and a $75 million fund with Clean Power Finance. Most recently, it invested $94 million, alongside private equity fund KKR, in a portfolio of four solar PV projects being built by Recurrent Energy.

Google isn’t betting on any one kind of renewable power because its executives believe that wind, solar thermal and solar PV all have a role to play in generating electricity. “The source of energy in the future is going to be clean energy,” Needham said, but no single source will dominate. “You wouldn’t put a solar on the windy planes plains of North Dakota if you could put a turbine there,” he noted.

While clean energy deployment still depends on government subsidies, he said: “We’re getting to the place where the technology will allow you to have a low cost of power.
Costs of wind turbine have come down. Costs of PV have dropped, just 40 percent in the last year. It’s amazing how the cost curves have come down.”

All of Google’s large-scale energy investments (as opposed to its smaller, venture-like bets on startup companies) have two things in common. First, they are tied to specific projects which should deliver a steady stream of long-term revenues; utilities, businesses or individuals (in the case of rooftop solar) have agreed to purchase the power that these projects produce for a decade or two. Second, they are tax equity investments, under which the lenders–Google in this case, but typically big financial institutions–invest in renewable energy projects and become eligible for credits that offset their federal corporate tax obligations.

Tax equity investments are important to the future of renewable energy because other federal subsidies, notably a U.S. Treasury cash grant, have expired or are in danger of being phased out. According Bloomberg New Energy Finance, which researched tax equity finance for the Reznick Group, a big accounting and tax firm with a clean energy practice, the wind industry alone will require about $2.4 billion of third-party tax equity financing in 2012. The Bloomberg report [PDF, download] says:

Incorporating other renewable generation sectors, the total tax equity financing need could be more than $7bn. That requirement exceeds the investment appetite of the established tax equity providers, according to a clean energy trade group. Yet there is a vast pool of potential incremental tax equity supply: the 500 largest public companies in the US alone paid $137bn in taxes over the past year.

This is where Google is filling an important financial gap. Other companies could, too. Apple recently reported eye-popping earnings which left it with $97 billion cash and short-term investments (although much of it is parked overseas). GE has $78 billion. Toyota has $48 billion. Microsoft has $43 billion. Here’s a list from the WSJ of the companies with big cash hoards.

Solar panels at a Recurrent Energy project

Interestingly, Google had a partner in its most recent clean energy investment: KKR, the big private equity firm,  formed a new venture called SunTap to invest in US solar projects, including the projects being developed by Recurrent Energy in northern California. That’s because these deals make financial sense, as the Bloomberg New Energy Finance report says:

For relatively good but not necessarily exceptional renewable projects, the internal rates of return (IRR) and net present values (NPV) for most of these structures can meet hurdle rates for both developers and investors.

So why aren’t more companies investing in clean energy? Hard to say. Maybe they’re risk averse, or they find it hard to think outside the box. Maybe they’re saving their cash for acquisitions, or hoping that interest rates will rise.

For his part, Needham says about Google: “We’re lucky to be working at a company that instead of asking why, asks why not?”

Building a low-carbon economy requires bold ideas and long-term thinking on a scale that matters.

Ideas like The Atlantic Wind Connection.

The Atlantic Wind Connection,  you may recall, is a company that has embarked on a multi-billion dollar, decade-long project to build an undersea transmission cable stretching about 350 miles from northern New Jersey to southern Virginia. (See my 2010 blogpost, Google’s Atlantic coast wind deal.)

It will bring down the cost of offshore wind projects, create a more reliable electricity grid along the east coast and create thousands of jobs. The Atlantic Ocean is well-suited for offshore winds because its relatively shallow waters extend for miles out to sea, so turbines can take advantage of stronger winds and they are barely visible from land.

“It’s a scalable platform that literally creates a superhighway for offshore wind,” said Michael Terrell, who leads energy policy at Google, a major investor in Atlantic Wind.

But like most big, bold ideas, this one is risky,  and so to assure the public that the project is alive and well, its executives and financial backers held a briefing yesterday (Nov. 30) at the National Press Club.

Mostly they talked about the economic impact of offshore wind. “Here is an opportunity to create an entirely new industry,” declared Bob Mitchell, the CEO of the Atlantic Wind Connection and a transmission-industry veteran. Chet Culver, the former governor of Iowa who is now an energy and infrastructure consultant, described how Iowa has become a manufacturing and distribution hub for the midwest wind-power industry, generating thousands of jobs. Mid-Atlantic states, he said, now have the same opportunity, if they embrace offshore wind. “We went from five percent to 20 percent renewable energy in Iowa in just five years,” he said. Keith Frederick, a political pollsters, said that nearly four out of five people in the region support wind power, and would be willing to pay $2 a month extra on their utility bills to pay for it.

But the Atlantic Wind Connection  — which is a transmission line, not a power-generation project — won’t go forward without an offshore wind boom along the Atlantic Coast.. This is not a case of “if you build it, they will come.” Until wind farms are developed, financed and approved, the transmission line can’t go forward.

And, for now, the state of the mid-Atlantic offshore wind industry is, well, uncertain at best. The most advanced project between Virginia and New Jersey is a 450 megawatt farm begin developed by NRG Bluewater Wind off the coast of Delaware, which has been in development since 2006. According to NRG, the project needs to clear dozens of regulatory approvals from the state and federal governments, under such laws as the Clean Water Act, the Rivers and Harbors Acts of 1890 and 1899, the Archaeological and Historic Preservation Act of 1974 and the Abandoned Shipwreck Act. Who knew the wind business was so good for lawyers?

To put that 450 MW farm into context, the Atlantic wind people would like their transmission to be capable of integrating 7,000 MW of offshore wind generation into the mid-Atlantic power market. The more turbines that are connected, the more the project makes economic sense, obviously, because its costs can be spread over a broader base of consumers.

Offshore wind is, unfortunately, very expensive–more expensive that solar photovoltaic energy, more than twice the costs of ground-based wind, and three to four times more expensive than power plants that burn natural gas, at least at today’s low natural gas prices, according to the U.S. Energy Information Administration. Although Delaware, Maryland and New Jersey all have renewable portfolio standards that require their utilities to bring on more wind and solar power, offshore wind projects are tough to sell to state regulators and electricity consumers. While the Atlantic Wind Connection is expressly intended to bring down those costs, it’s hard to know by how much.

With all those obstacles arrayed against the Atlantic Wind Connection, why pay attention at all?

Essentially, because of the backers. Google isn’t known for being dumb. Rick Needham, green business operations director at Google, says the company invested because the project “offers a solid financial return while helping to accelerate offshore wind development.” Google has invested roughly $850 million in a variety of clean energy projects in recent years. Says Needham: “We’re willing to take calculated risks on early stage ideas and projects that can have dramatic impacts while offering attractive returns.”

The other investors are heavyweights, too. Originally, they included  Good Energies, a global investment firm that focuses on renewable energy and energy efficiency, and Marubeni, a publicly-traded Japanese conglomerate. Last summer they were joined by Elia, a transmission company based in Belgium whose CEO, Daniel Dobbeni, said at yesterday’s briefing that Elia has built transmission lines for offshore wind farms in the Baltic Sea.

Patience will be required from all. Bob Mitchell told me that if all goes well, construction of the transmission line could begin in 2014.

The folks at Google, not surprisingly, have enormous faith in the power of technology. So a group of them set out to see what technology breakthroughs in clean energy will mean to the economy, the environment and the typical American household.

They found good and bad news.

The good: Energy innovation could pay off big, benefiting GDP, jobs, energy security and reducing carbon emissions. It’ll even save homeowners money, over time.

Specifically, as Bill Weihl and Charles Baron write on the Google blog, here are the benefits of energy breakthroughs, when compared with a business as usual scenario. In their parentheses is even better news; those numbers reflect what clean energy technology can do when combined with stronger U.S. policy to promote clean energy and discourage the burning of fossil fuels:

• Grow GDP by over $155 billion/year ($244 billion in our Clean Policy scenario)
• Create over 1.1 million new full-time jobs/year (1.9 million with Clean Policy)
• Reduce household energy costs by over $942/year ($995 with Clean Policy)
• Reduce U.S. oil consumption by over 1.1 billion barrels/year
• Reduce U.S. total carbon emissions by 13% in 2030 (21% with Clean Policy)

The not-so-good news is the last bullet: Reducing U.S. carbon emission by 13% by 2030, or even 21% under the more favorable clean policy scenario, won’t do much to reduce the threat of catastrophic climate change. The report also found that by  2050, innovation in the modeled technologies alone reduced CO2 emissions by 55% and by 63% when combined with policy. Those are under best-case assumptions.

But, while there’s lots of disagreement about all this, many reputable scientists, using respected climate models, say the world needs to reduce CO2 emissions by 70 to  80% by 2050, and that the U.S. share should be close to 80%. Here’s the argument, as articulated by the Union of Concerned Scientists.

So, yes, by all means, let’s invest in clean energy technology because it will be good for the economy in the long-term but let’s also be clear-headed about how terribly difficult it is going to be to head off something that looks like a climate catastrophe.  As White House science advisor John Holdren has said, there are fundamentally three ways to deal with the climate threat–mitigate, adapt and suffer–and this report suggests that we (more likely, our children or grandchildren) need to prepare for all three.

The report “highlights how hard the problem is,” Google’s clean energy czar Bill Weihl told me by phone last week. “Coal plants last a long time.”

Yes, they do, and they will even if the costs of clean energy drop sharply. Here’s a chart showing the U.S. power generation mix in 2030 under a variety of scenarios modeled by Google, using McKinsey’s Low Carbon Economics Tool (LCET). Notice that even under the most optimistic scenario, a substantial portion of electricity generation will come from fossil fuels coal (the gray) and natural gas (the dark blue). You can click on the chart o enlarge it:

I asked Weihl what else he learned from the report.

“We were surprised,” he said, “to see the extent to which aggressive innovation combined with modest policy gives you a kind of triple word score benefit—economic gains, job gains and very significant emission reductions.”

Bill Weihl

He wasn’t trying to say that this is a “free lunch” solution. In the short run, he said, both government and the private sector will need to invest in research and development, and the scaling of newer, cleaner technologies. The government policies embodied in the models either put a price on carbon for the utility industry, which would raise the costs of coal-powered electricity, or they would mandate renewable energy generation for electricity, which would also mean that homeowners and businesses would initially pay more.

“In the short term, there are costs to these policies but they are relatively modest,” Weihl said. “In the longer term, there are significant benefits.”

Washington policymakers are one of the target audiences for the Google study. The company wants to see investment in research.

“If there is one bottom-line recommendation in the short term, for the current budget discussion, it would be, ‘don’t cut R&D,’ ” Weihl told me.

There’s lots more in the report, and Google has made the raw data available on a website that will occupy energy-policy geeks for hours.

Several other findings struck me.

First, reaching tipping points in electric-car battery technology “could be transformative.” Rapid decreases in battery costs and increases in energy density could lead to electric cars and hybrids achieving 90% of new vehicle sales by 90%. This is great news for those who want to reduce America’s depending on oil imported from repressive regimes.

Second, cheap grid-storage creates both significant opportunities and unintended consequences. Grid-scale storage makes it easier to bring large numbers of intermittent, renewable energy sources like solar and wind onto the grid. But, in the short run, if the costs of wind and solar power do not come down, low-cost utility scale storage could actually drive an increase in coal consumption because coal is so cheap.

Third, and this is obvious but worth saying, cheap natural gas could reduce GHG emissions in the short term by replacing coal but it is also likely to slow the deployment of clean energy sources in the long term.

Put simple–and you knew this–getting the change we need, when it comes to energy and climate, isn’t going to be easy.

The U.S. offshore wind industry got a boost last week when Interior Secretary Ken Salazar signed the lease for Cape Wind. Today brings word of a big new project that also could help jump-start the industry–a 350-mile offshore transmission line, running about 10 to 15 miles off the Atlantic coast from New Jersey to Virginia.

The Atlantic Wind Connection, as it’s being called, will grab attention because it has backing from Google. Google previously invested in North Dakota wind farms and backed a startup called Makani Power that is developing airborne wind turbines.

Trans-Elect Development Co., an independent developer of transmission lines, will announce the project today. Besides Google, its investors include Good Energies, a global investment firm that focuses on renewable energy and energy efficiency, and Marubeni, a publicly-traded Japanese conglomerate. Google and Good Energies will each take a 37.5 percent equity stake, according to this report by Matt Wald in The New York Times.

The first stage of the project alone will cost $1.3 to $1.4 billion to build, says Bob Mitchell, the CEO of Trans-Elect, who briefed me yesterday on the idea. That doesn’t include another $300 million or more in financing, legal and regulatory costs. Overall costs could top $5 billion. Construction could begin by 2013, and the entire 350-mile line would not be completed until 2020 at the earliest.

The project will require federal, state and local regulatory approvals. The PJM Interconnection, which operates the electricity grid in the mid-Atlantic states, and the Federal Energy Regulatory Commission (FERC) will both take a close look–since the costs would ultimately be passed along to electricity consumers.

Assuming all the regulatory hurdles are cleared, the project could have a big impact. A major obstacle to the growth of  wind power (as I wrote recently in this story in Wired) is that the strongest wind resources tend to exist in rural areas like the Dakotas, Iowa and west Texas, which are far from cities, where electricity is needed, or offshore. In both instances, transmission is badly need to link supply and demand.

Mitchell says the construction of  a high-capacity backbone transmission line offshore would lower the costs and speed the development of offshore wind. It’s a bold “if-you-build-it-they-will-come” approach.

“This will remove the biggest barrier that offshore wind faces,” Mitchell told me, “by enabling wind farms to connect to shore in the most efficient way possible. Rather than having every individual wind farm build its own transmission line to shore, and link up at several places up and down the cost—they’re affectionately referred to as spaghetti lines—this will enable them to enter the transmission grid through a superhighway.”

“We want to create a super grid that will be in place and simulate the development of wind farms far faster than if they would each have to solve their own transmission issues,” he said.

Because the wind usually blows somewhere off the coast, if not everywhere at once, Mitchell said the transmission line also would help solve what’s known as the intermittency problem with wind or solar power–that is, the fact that wind and solar plants can’t be counted on to generate electricity round the clock, as coal, nuclear and natural gas plants do.

When complete, the Atlantic Wind Connection project would be able to connect 6,000 MW of offshore wind, enough power to serve approximately 1.9 million households. The developers said the concept from a Washington lawyer named Markian Melnyk, while researching a book on offshore power.  The project will use High Voltage Direct Current which, its backers say,

allows for easier integration and control of multiple wind farms while avoiding the electrical losses associated with more typical High Voltage Alternating Current (HVAC) lines. With this strong backbone in place, larger and more energy efficient wind farms can connect to offshore power hubs further out to sea.  These power hubs will in turn be connected via sub-sea cables to the strongest, highest capacity parts of the land-based transmission system.

Launched in 1999, Trans-Elect previously acquired and sold transmission lines in Michigan and in Alberta, Canada, and it built a new transmission line in California This would be by far the biggest undertaking for Trans-Elect, which is based in Bethesda, Md.  Mitchell previously worked as chief of staff for Alaska Sen. Mike Gravel and in the cabinet of James Blanchard, Michigan’s governor from 1983 to 1991.

Google became involved after Mitchell arranged a meeting with Dan Reicher, a former Clinton administration official and energy investor who is now director of climate change and energy initiatives at Google. “They very quickly came to see the impact on renewable energy that a transmission line like this could have,” Mitchell said. To reduce global greenhouse gas emissions, Google.org, the company’s philanthropic arm,  is working on developing utility-scale renewable energy that is cheaper than coal.

Two final observations…

Just last week, the U.S. energy department released a comprehensive report on offshore wind power that found that

harnessing even a fraction of the Nation’s potential offshore wind resource, estimated to be more than 4,000 gigawatts, could create thousands of jobs and help revitalize America’s manufacturing sector, reduce greenhouse gas emissions, diversify U.S. energy supplies, and provide cost-competitive electricity to key coastal regions.

You can download the the Executive Summary and the full NREL report.

What’s more, if offshore wind ever becomes a big business in the U.S., it will likely be concentrated off the Atlantic Coast, as Matt Wald explains in the Times:

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 damage a tower.

Besides, many more people live along the Atlantic Coast than along the Pacific or the Great Lakes. Demand for electricity in the northeast and mid-Atlantic regions is already stressing the transmission lines that carry it.

Let me count the reasons why I love Google: its speedy search engine, the oodles of free storage on Gmail, Google Maps that get me where I need to go, YouTube for video sharing and time-wasting and Google Analytics, to obsess over my blog readership.

But seriously folks—Google’s decision this week to withdraw from China, rather than accept censorship, is a breathtaking example of corporate values at work, and a landmark moment in the history of corporate responsibility. It’s the biggest and boldest statement any American company has ever made about doing business in China.

As Rebecca MacKinnon, an Open Society fellow and expert on both China and Internet freedom put it:

They are sending a very public message – which people in China are hearing – that the Chinese government’s approach to Internet regulation is unacceptable and poisonous. They are living up to their “don’t be evil” motto – much mocked of late – and living up to their commitments to free speech and privacy as a member of the Global Network Initiative.

Because Google is one of the world’s best-known and most-admired brands, its action will also create pressure on Microsoft, GE, Wal-Mart and others to deal in a more ethical way with a country whose economic potential is so great that businesses typically turn away when China imprisons political activists, restricts religious freedom and strictly controls what its 1.3 billion people can read and see.

Remember that in China, censorship is literally a matter of life and death. This government won’t tell its people about the safety of their air and drinking water, the pollution in their rivers, workplace accidents, tainted foodstuffs or children who die in schools because building codes aren’t enforced. Imagine living in a place like that.

Google’s top managers have struggled since 2005 about whether to enter China, and how. How could the company operate in a country with the world’s most pervasive Internet censorship apparatus while remaining to its mission to “organize the world’s information and make it universally accessible and useful?” China did more than block access to content online; it used the Internet to monitor, track down and punish dissidents. In 2005, a journalist Shi Tao was sentenced to 10 years in prison, based in part on information provided by Yahoo! (In 2006, I  wrote  Yahoo’s China problem for fortune.com.) At about the same time, Microsoft at the government’s request abruptly shut down a blog on MSN by writer and activist Michael Anti. So these aren’t new issues.

Until now, Google reasoned that it was doing more good than harm in China. Its search results provide a marginally more diverse menu of ideas than those of Baidu, its big Chinese competitor, which has close ties to the government. To its credit, Google at least informs people who use its Chinese language search enginer, www.google.cn, that they were getting incomplete results.

But what Google’s announcement described as a “highly sophisticated and targeted attack on our corporate infrastructure originating from China” was evidently too much for the company to bear.

Make no mistake: Google’s decision to reject censorship in China, which in all likelihood will mean that it will no longer be able to do business there, is going to cost the company a lot of money in the short run. Internet research firm EMarketer estimates the size of the search-related advertising market at about $1 billion, according to this analysis in PC World. Google has about a 30% share of the search business, which would give it $300 million in revenues. The potential, as China’s economy grows, is much greater, of course.

Conventional wisdom is that no company can walk away from that kind of money. Here’s a venture capitalist, in a revealing quote from The Times:

“I don’t think anybody is going to run away from China,” said Joe Schoendorf, a partner at Accel Partners, a Silicon Valley venture capital firm with a major presence in China. “Google has Microsoft on the ropes, and China is arguably the world’s most important market outside of the U.S. You don’t walk away from that on principle.”

Of course, that’s exactly what Google is doing.

Similarly, The Journal today quotes Hal Sirkin, a senior partner at the Boston Consulting Group, saying:

China is such a huge growth opportunity that few U.S. companies will want to shut that door completely when there’s money to be made.

But you know what? I think Google’s get-tough stance with China will be good for its business.

Here’s my thinking. While others may scoff, Google takes its “don’t be evil” motto seriously. Part of its identity is being a good company. The company is consistently at or near the top of FORTUNE’s Best Places to Work list. Google takes global warming more seriously than most companies; it has invested in solar, wind and geothermal energy companies as part of its efforts to bring down the costs of renewable energy. Just a few weeks ago, I wrote about how Google Earth helps indigenous people and environmental groups preserve forests. Sergey Brin, who grew up in Russia, knows first-hand what it means to live in a dictatorship, and has always been uneasy about Google’s China operations.

So by taking China, Google is reinforcing its identity as a different kind of company. It will attract and engage better employees. It has already enhanced its image and brand. All this is good for business. And in the long run–maybe the long, long run–Google may find itself able to do business in China on its terms because freedom eventually will trump repression.

In the meantime, some Chinese are laying wreaths outside of Google’s headquarters in Beijing.

As humans, we’re wired to focus on the now. I want a new gadget now. I want a slab of pie now. I’m busy now, so I don’t have time for politics. The consequences—consumer debt, a sagging waistline, a Congress beholden to special interests–all arrive later.

You can think about global warming as a now-and-later problem. Governments need to take unpopular actions now to deal with a problem that will do most of its damage later. Businesses need to look beyond the next quarter to the next quarter century.

This evening in Elsinore, Denmark, top executives from such companies as Coca-Cola, Duke Energy, Goldman Sachs and Google took the long view in a fitting venue: Kronborg Castle, a 15th century castle best known as the setting for Shakespeare’s Hamlet. Sitting in a magnificent castle that’s been preserved for six centuries makes you wonder what impact the goings-on on Copenhagen this week will have on the world in 60 or even 600 years.

In that context, it seems prudent to invest now to insure against a climate catastrophe, no matter how distant–even if the short-term result is  a slight drag on short-term economic growth

As Tracy Wolstencroft, global head of environmental markets for Goldman Sachs, put it: “The economy is a wholly owed subsidiary of the environment, not the other way around.” That is, if we ruin the environment, there’s no economy left.

Or, as Muhtar Kent, the CEO of Coca-Cola said: “It is absolutely imperative that our voices be heard and our commitments to low carbon be fully understood.”

It turns out there’s a big contingent from corporate America in Copenhagen.  Among the high-profile companies here: GE, Microsoft, Cisco, DuPont, Johnson Controls, Nike and North Face. (Here’s a column by Mindy Lubber, president of Ceres, about efforts by some companies to lobby for a strong climate deal.)  Not surprisingly, most favor a global agreement to regulate carbon emissions.

A strong agreement, they said, will drive companies  to make the investments needed to usher in low-carbon economy.

As an example, Wolstencroft recalled that China’s five-year released in 2005 made a commitment to low-carbon energy. What followed, he said, was a $5.4 billion acquisition by Toshiba of Westinghouse’s nuclear energy business and capital investments  of another $5 billion in Chinese solar power companies, which have since emerged as world leaders.

“What we hope comes out of Copenhagen,” Wolstencroft said, “are even clearer rules that help give investors the confidence…to put money into clean technology.”

Clean tech, he said, is “one of the largest emerging markets the world has seen.”

Duke Energy’s CEO, Jim Rogers, also said that China has the ability to both plan long-term and act rapidly. “They lead in the production of solar panels and wind turbines,” he said. “They’re building 13 nuclear panels with more on the drawing board. They’re ahead in battery technology.”

Duke has a joint venture with a Chinese firm to build a coal plant that, if all goes according to plan, will capture and store carbon emissions.

“The Chinese can scale and deploy this faster than in the U.S.,” Rogers said. Duke’s investment in so-called clean coal won’t pay off in the short run, he said, “but we need a full-court press to make that a reality.”

Google, too, is investing in energy and climate projects with long-term horizons, said Dan Reicher, the firm’s climate guru. Its engineers have reconfigured Toyota Priuses into plug-in electric cars, and they are deploying Google Earth software to track deforestation.

Google’s Power Meter, which is being tested with utilities around the world, gives consumers real-time information about their electricity use, to incentivize them to conserve energy. Waving his cell phone, Reicher said: “I can get information about electricity use at my home in California on this smart phone.”

Several of the execs noted that many low-carbon technologies are available today, albeit at a price. Denmark gets 20% of its electricity from wind turbines, but wind-powered electricity costs more than coal-fired power. Denmark also has big plans for electric cars, but they require just-as-big government subsidies.

In theory, at least, there’s a future payback for those current outlays. Anders Eldrup, president and CEO of Copenhaven-based Dong Energy, which has 1 million customers in northern Europe and is shutting down many of its coal plants, says clean energy technology has surpassed agriculture as Denmark’s leading export.

While there’s no way to know for sure, my sense is that the companies here in Copenhagen don’t reflect the mainstream of corporate America, where big lobbies like the U.S. Chamber of Commerce and the National Association of Manufacturers oppose the climate bills pending in Congress. They’d rather pay later than pay now.

That’s a big a gamble, of course. It’s been a long time since I studied Hamlet but, to the best of my recollection, at the end of the play, just about everybody dies.

Let's hope the Copenhagen climate talks are not much ado about nothing

Today, President Obama travels to Arcadia, Florida, home to one of the nation’s biggest solar power plants, to announced 100 grants providing a total of $3.4 billion in recovery-act funding for the smart grid. The federal money will unleash $4.1 billion of private investment that, according to the government, that will bring smart meters to about 18 million American homes, or 13% of homes. It’s a big deal.

What would a smart grid mean to you? In theory, you could save money by running appliances like dishwashers or dryers at night when electricity is cheaper. You’d know how much it costs you to watch that big-screen TV. (Care to take a guess? Read on.) If you installed solar panels on the roof, you could sell electricity back to the grid. Or recharge that electric car you may buy in 2010 or 2011.

The laudable goal is to empower consumers to buy electricity the way we buy groceries or gasoline or airplane tickets –where we know what we are getting and what it costs when we make purchasing decisions. Right now, we consume electricity without knowing how much we are using, understanding where it’s going or knowing the price until an unintelligible utility bill arrives in the mailbox once a month.

The trouble is, layering intelligence and transparency into the electricity grid requires action by two of the slowest-moving entities in all of America–the federal government and the regulated utilities. So you can be certain this won’t be an overnight transformation.

In fact–irony of ironies–the news that Uncle Sam was going to be subsidizing smart-grid rollouts has inadvertently slowed down the process, albeit temporarily. About 570 applications were filed seeking a total of $14 billion in grants. While waiting to see who got the grants and who didn’t, some utilities put their plans on hold.

Last night, Carol Browner, the White House climate czar, Jared Bernstein, an economic advisor to Vice President Joe Biden and Matt Rogers, a senior advisor to Energy Secretary Chu and brainy alum of McKinsey & Co., held a conference call to talk about the smart-grid grants. Browner and Bernstein said spending stimulus money on smart grid projects would “create or save” tens of thousands of jobs, and enable the growth of domestic renewable energy—claims that may well be true but weren’t backed up with either data or logic. Of course, giving the electricity industry billions in subsidies will help create or save jobs; the more important question is  how many of those  jobs would have been saved or created anyway had the government chosen to sit on the sidelines.

The DOE won’t release a list of all the grant recipients until today, but Rogers offered these examples on the media call. They went by in a hurry so don’t hold me to every specific:

Baltimore Gas & Electric will get a $200 million grant, to be matched with $251 million from the utility, to deploy 1.1 million smart meters. They will include displays in customers’ homes showing real-time energy use, which will be accompanied by time-of-day pricing. That’s key to enabling people to shift their discretionary energy consumption away from times of peak demands. That, in turn, will smooth out peaks in the demand curve, reducing the need for additional, costly power generation.

Cobb Electric Membership Corp., based in Marietta, Georgia, will get a $16.9 million grant, to be matched by the nonprofit cooperative, to deploy 190,000 across its network, to all of its customers. Deployments like this one should help determine whether the smart grid can deliver on its promises.

San Diego Gas & Electric will get a $21 million grant, matched by $31 million from the utility, to deploy an advanced wireless communications project, making it possible for two-way data exchange between customers and the utility. SDG&E is working with a variety of partners, including GE, Cisco and Google; it’s one of eight utilities in the U.S., India and Canada that is enabling customers to access their daily energy use online by using Google’s PowerMeter.

While all of this activity will speed up deployment of the smart grid, most consumers will have to wait some time before the glories of the smart grid are revealed. One problem will be breaking utility companies of old habits–in many states, the more more power they sell, the more money they make–so conservation is not in their economic interests. For another, deployment of the smart grid depends upon a patchwork of state regulatory schemes. (To learn more, read this excellent overview from ClimateWire on The New York Times website.)

But a lot of smart and powerful companies are pushing hard for the smart grid, so it’s on its way. You can see what GE is up to here, you can read Google’s view here, you can see what IBM is doing here. Just yesterday, I visited Best Buy, where key execs told me they think that networking the smart home to communicate with the smart grid will become a good business for them.

And if you’re wondering what’s driving your utility bill, check out the chart below, from the IBM website, citing DOE statistics. It’s not the typical TV, but the clothes dryer–good reason to invest in a clothesline, at least until the grid gets smarter.

]]> http://www.marcgunther.com/2009/10/27/smart-grid-on-its-way-slowly/feed/ 2 http://www.marcgunther.com/2009/08/05/bill-grosss-solar-breakthrough/ http://www.marcgunther.com/2009/08/05/bill-grosss-solar-breakthrough/#comments Wed, 05 Aug 2009 13:58:40 +0000 Marc http://www.marcgunther.com/?p=1476

“We are producing the lowest cost solar electrons in the history of the world,” Bill Gross is telling me. “Nobody’s ever done it. Nobody’s close.”

Bill Gross is nothing if not an enthusiast, which makes him a great salesman for whatever it is he happens to be selling. A lifelong entrepreneur, a longtime evangelist for solar energy and the CEO of eSolar, a Google-funded startup that designs and develops concentrating solar power (CSP) projects at utility scale, Gross is one of the most interesting business people I’ve known.  I met Bill in 2002, when I wrote a critical story about him for FORTUNE – investors in Idealab, his Internet incubator, were suing him after the dot-com bubble burst – and although he and his wife, Marcia Goodstein, were more than mildly irritated with me then, we’ve reconciled and I now count myself as an admirer of Bill’s. He’s always got a million things going on, some of them slightly nutty, but all of them interesting.  He’s in the robot business with a company called Evolution Robotics and he’s the founder of Aptera, a very cool electric car company (in which Google has invested) that I wrote about last spring.

Today, Bill and eSolar are staging a grand opening for eSolar’s first plant, called the Sierra SunTower, located in the southern California desert near Lancaster. Below are a couple of photos, taken by Bill, from a helicopter ride over the plant on July 3. He sent them to me via Picasa, the photo sharing site now owned by Google, which he founded back in the 1990s. Like I said, he’s a serial enterpreneur. (Bill also invented the idea of paid search, but that’s another story.)

In any event, this eSolar plant is a big deal, according to Bill, because it is producing solar energy at a lower cost than other solar thermal plants and at a much lower cost than utility-cale solar photovoltaic arrays. Concentrating solar power (CSP), also known as solar thermal power, produces energy by using mirrors or lenses to focus the sun’s heat and boil liquids that become a heat source for a steam turbine. Climate-change expert Joseph Romm, writing in Salon, opined last year that solar thermal

will be the most important form of carbon-free power in the 21st century. That’s because it’s the only form of clean electricity that can meet all the demanding requirements of this century.

Solar thermal technology has been deployed commercially for decades, but Gross tells me that eSolar has been able to drive costs down by mass-producing and deploying thousands of small mirrors across fields that track the sun and reflect its heat back at a thermal receiver mounted on a tower. ”Our breakthrough is lots and lots of small mirrors, and lots and lots of software to control them,” he says. The Sierra SunTower alone uses 24,000 mirrors, made by a contract manufacturer in China. You can read about the technology and see pictures here on eSolar’s website.

Through a power purchase agreement with Southern California Edison, the Sierra SunTower plant will supply 5 MW of clean energy to the grid. That’s not a lot, but it’s just the start of big things to come, Gross says.

While Google is eSolar’s best-known investor, two other big backers of the company—an Indian energy and telecom firm called the ACME group and Princeton, N.J.-based NRG Energy—are ready to step up their commitment to solar thermal, now that they can measure the cost and efficiency of eSolar’s technology under real-world conditions.

Acme, which invested $30 million in eSolar, has agreed to invest another $20 million, Gross told me. ACME has said it plans to build, own and operate up to 1 GW of solar thermal plants over the next 10 years using eSolar’s designs and mirrors. Construction will begin this year.

NRG, meanwhile, plans to start building a 92 MW plant in New Mexico as soon as it wins regulatory approval, Gross says.  NRG has agreements with eSolar to develop solar power plants with a total generation capacity of up to 500 MW at sites within California and across the southwest.

I emailed David Crane, the chief executive of NRG, to ask him about eSolar. He was on his way to today’s ceremony and emailed back:

Bill Gross is the kind of can-do visionary–with the innate ability to find the “winning” disruptive technology of the future–who we, at NRG, want to work with as we seek to deploy a new generation of sustainable and climate-friendly power technology in this country.

It’s impossible for me to evaluate Gross’s claims for his technology. But the fact that big companies are willing to invest capital in eSolar—at a time when capital is scarce—leads me to believe that Bill is, once again, onto something big.

“We have a cost-effective, no-subsidy solar power solution and it’s for sale, anywhere around the world,” he says.

Bill Gross and David Crane are regulars at FORTUNE’s Brainstorm: Green conference about business and the environment, which I co-chair, and I’m pleased that they’ll both be back as speakers next year.

eSolar's Sierra Sun Tower plant

Today I’ve been blogging for Greenbiz.com from the 20th annual Energy Efficiency Forum in Washington, D.C., a day-long event sponsored by Johnson Controls and the United States Energy Association. Here are some highlights:

Google: making consumers smarter about energy

Imagine if you walked into a grocery store, chose the food you want (no price tags), took it home and then, at the end of the month, got the bill in the mail. “That’s essentially what we are doing with electricity and natural gas right now,” says Dan Reicher, who heads energy and climate policy at Google, which is aiming to change that.

Instead giving energy consumers a monthly bill that arrives after the fact and is hard for even a geek to decipher, Google wants to give them a way to track their electricity use in real time, or close to, through a free, open-protocol piece of software called Google’s Power Meter. The Power Meter being rolled out in cooperation with eight utility companies, six in the U.S., one in Canada and one in India; they feed the software data through smart meters or other devices.

“Just the simple act of getting people information can really change the way they use energy,” Reicher says. The software tracks electricity use for now, but there’s no reason it can’t be adapted to meter natural gas or water in the future. The software can be installed on a Google home page (alongside stock prices or sports scores) or on a mobile device. “You get data, numbers, graphics, all kinds of interesting things,” Reicher said.

Making consumers smarter about energy will change habits, especially when combined with time-of-day pricing. If utilities can induce people to use less electricity during summer days when it is expensive and more during off peak hours, they won’t have to build as many new power plants to meet peak loads and everyone will save money.

Google employees have been testing the Power Meter for some time, with amusing results. One tenant in a San Francisco apartment saw unusual spikes in his usage and learned that he was paying for the washer and dryer for his entire building. Another found that her her swimming pool pump never turned off. A third replaced old refrigerators in the kitchen and garage and cut his utility bill by 45%.

The scope of Google’s work around energy and climate is quite remarkable. (Reicher, who’s been to FORTUNE’s Brainstorm Green, is a typically smart Google exec, a former energy investor and a policymaker during the Clinton administration.) Google is investing in geothermal energy, doing its own research on solar thermal power, pushing hard for plug-in hybrids and “greening” its data centers. I’m hoping to dig deeper into Google’s energy initiatives in a future post.

No shortage of brainpower at DOE

Energy Secretary Steven Chu has gotten a lot of attention as s the first cabinet member with a Nobel Prize–Henry Kissinger’s doesn’t count, because he got it after leaving the government–but his deputy at DOE, Kristina Johnson, is no slouch in the smarts department, to put it mildly.

Johnson is an electrical engineer with a Stanford PhD, a winner of the John Fritz Medal (said to be the highest award in the engineering profession), the former dean of engineering at Duke, the holder of 129 US and foreign patents or patents pending, author or co-author of more than 142 peer-reviewed publications and a co-founder of several startups in the field of photonics and microdisplays. She made her first public appearance at the Energy Efficiency Forum, focusing on the “how” of bring change to the energy economy more than the “what.”

Johnson laid out three principles that will guide her work as undersecretary at DOE. “First, we have to have the best science and engineering inform our policy,” she said. Second, she said, DOE needs to “take a systems perspective” rather than looking a policy from a narrow view. Third, solving the problems will require “an open, collaborative workforce” and breaking down silos both inside the government and among government, business and academia.

Getting a bit more specific, Johnson says DOE believes that the energy use of buildings can be reduced by 60 to 70% over time and that the balance of the electricity needed can be generated by renewable sources. Lighting, which accounts for about 18% of the energy use in buildings, is an easy target. “It’s estimated that about 70% of our (energy use) for lighting is wasted,” she said. CFL and LED fixtures offer dramatic improvements over conventional fluorescent lighting.

She was also bullish about ground-source heat pumps as an energy source. This month, Chu announced that nearly $50 million in stimulus funds will be made available to advance the commercial deployment of geothermal heat pumps. “They use the stable temperature of the earth to heat homes in the winter and cool homes in the summer more efficiently,” Johnson said. “This is a very exciting opportunity for us.”

Dallas, of all places, is going green, its mayor says

To a lot of people, including yours truly, Dallas still brings to mind images of J.R. Ewing and oilmen in cowboy hats. Forget that—the current mayor of Dallas, Tom Leppert, is an environmentalist and a very savvy businessman.

He’s the former CEO of Turner Construction, one of the largest construction management companies in the United States (with a construction volume of $10.6 billion in 2008). He’s a Harvard MBA. And since being elected mayor of Dallas in 2007, Leppert, a 55-year-old Republican, is widely seen as headed for bigger things in politics.

The energy-efficiency issue has never gotten anyone elected to anything, but Leppert pushed it with the Dallas City Council. The city passed a strong new building code last year that gradually requires commercial and residential buildings to meet energy-saving and water-saving standards.

By 2011, Leppert told the forum: “All buildings will have to meet LEED or similar certification standards, if they are going to be in the city of Dallas…We’re doing it to position our city as a leader in this industry.” He said the city wants to go further, changing living and working patterns to encourage more density around rail stations and mass transit.

Greener cities will attract more business development, as well as more people, he argued. Looking out at the crowd where everyone was toting a laptop and cell phone, he said: “You get to make the decision where you live. And more of those decisions are going to be based on what environment you want to live in.”

An impressive guy, worth watching.

The paradox of energy efficiency

Some provocative talk came from Roger Cooper, the executive vice president of the American Gas Association, about Jevons paradox,
an economic theory you don’t normally hear about an energy and environment meetings. Writing about coal in the 1860s, William Stanley Jevons observed that England’s coal consumption soared after James Watt introduced his coal-fired steam engine which was more efficient that its predecessor. (But you knew that, right?) Jevons paradox which is sometimes called the “rebound effect” has been used to oppose energy conservation or government-mandated efficiency standards.

Cooper did not go that far, but he did say that policy makers should be aware that efficiency can be a double-edged sword. If energy prices stay constant, he said: “You increase energy efficiency, you make the resource cheaper and you lead to an increase in energy consumption.”

U.S. cars, for example, have become far more efficient since the 1970s but we burn more gasoline today in part because people drive twice as far. When we buy an energy-efficient air conditioner, we are prone to run it more. Or, think about what’s happened in communications, as bandwidth has gotten much cheaper–we make a lot more long-distance phone calls and think nothing of talking on a cell phone.

This would suggest that pricing, more than mandates, is the way to drive down energy consumption.

Think about the aerodynamics of jet plane, a sailboat and a minivan. When we build things to fly through the air or propel us through the water, we design efficient vehicles. Not so with cars.

Aptera, an auto company startup, aims to change that. In just three years, the Carlsbad, Ca.-based firm  has designed and built a remarkably sleek and snazzy three-wheeled, two-seat electric car.

“If a plane looked like an SUV, it wouldn’t take off, “ says entrepreneur Bill Gross, who is a founder and board member of Aptera. “Dophins don’t look like SUVS for a reason. Cars need to look like dolphins, not SUVs.”

Here are a couple of videos showing the car, one from ABC News and another from Popular Mechanics.

The Aptera is “the most aerodynamically efficient vehicle ever,” says Gross. By contrast, according to the company, an average car traveling at 55 mph uses half of its energy just to push air out of the way.

If you pay attention to business, you’ve heard of Bill Gross. He’s a lifelong entrepreneur and the CEO of Idealab, the incubator for new businesses in Pasadena, CA. Bill has birthed spectacular successes and  big flops, among them Knowledge Adventures (educational software, now part of Vivendi), Picasa (photo sharing software, acquired by Google), eToys (an online toy store that overextended itself and failed) and CitySearch (local directories.) Idealab’s GoTo.com introduced the idea of paid search to the Internet, and as such is the underpinning of the $20-billion search market now dominated by Google.

So it’s fitting that Gross is currently doing lots of business with Google. Google is an investor in eSolar, a utility-scale solar thermal power company that recently announced big projects in India and in the Southwest. (You can listen to an interview that I did with Bill Gross about the solar projects and about Aptera at Greenbiz Radio at www.greenbiz.com.) Google has invested in Aptera, too, and it turns out that the company’s beginnings go back to a  Google search.

As Bill tells the story, he was doing some casual research on the Stirling Engine a few years ago when he stumbled across a web page created by Steve Fambro, the founder and now chief technology officer of Aptera. Fambro, an electrical engineer, had posted a design for a vehicle that would be safe, comfortable and fuel-efficient; his initial idea was to make kits so people could build the car themselves. Gross was impressed by the idea of a super-efficient car. “Your dream is my dream,” he recalls saying.“Let’s get together and start a company.” They joined forces with Chris Anthony, who is CEO of a company called Epic Boats (they build wake boats) and an expert in composite materials.

Using computer-assisted design, Aptera’s engineers went on to design a car that weighs just 1,700 pounds with a body made from an impact-resistant material that is lighter than steel but three times as strong.  The car will run 100 miles on a single charge and it’s got some nifty features, including butterfly-styled doors that pop open and a solar-assisted climate control system. Its top speed is 90 mph and it goes from zero to 60 in less than 10 seconds.

“The car is very unusual looking,” Gross says.  “It looks like a futuristic Jetson  vehicle.  But we feel that that’s what it takes to actually make an impact on our energy use and transportation.”

Aptera, which is based in Vista, CA., began taking orders for the cars from California residents at the end of 2007. “Very quickly, we got 4,000 pre-orders,” Gross says. Buyers put down a $500 deposit. The entry-level price for the car is expected to be about $25,000.

Last summer, Google.org announced that it had invested a total of $2.75 million Aptera and a company called ActaCell that makes lithium ion batteries for plug-in hybrids and electric cars. Google didn’t say how much money went into each company but it’s not a lot of dough in any event. Aptera has also raised money from Idealab, Esenjay Petroleum, The Quercus Trust and from Donald R. Beal, the retired chairman and CEO of Rockwell, about $30 million in total. But the company obviously needs a lot more to go into production. Last year, Paul Wilbur, a career automotive executive who worked for 26 years at Ford, Chrysler and a sunroof maker called ASC, was brought in as president and CEO.

Only five of the cars have been built, so far.

Gross tells me he expects to raise the cash in a few months. “Most people would not want to invest in a new car company at a time like this,” he says, “but investors are quite warm to this.” We’ll see.

The U.S. government is a potential source of funding for electric car and battery companies, through the Department of Energy’s advanced technology loan fund. But Aptera has run into a brick wall in Washington. Apparently the government has classified the Aptera’s vehicles as motorcycles, and they aren’t eligible for loans.

I’m delighted that Bill Gross (below) will be at FORTUNE’s Brainstorm Green conference about business and the environment in April, to talk about both eSolar and Aptera. Here’s a chart comparing Aptera’s aerodynamic drag to other vehicles. It’s hard to see, I know, but the company says Aptera is more aerodynamic than a 10-speed bike and 2.86 times more aerodynamic than a Prius.