28 November 2007

Google Plans to Develop Cheaper Solar, Wind Power

By Ari Levy

Nov. 27 (Bloomberg) -- Google Inc., whose corporate motto is ``don't be evil,'' created a research group to develop cheaper renewable energy sources, focusing on solar, wind and other alternative forms of power.

Google, the owner of the most-used Internet search engine, said today that it's hiring engineers and energy experts to lead a process that may cost hundreds of millions of dollars.

The project, called Renewable Energy Cheaper Than Coal, is meant first to help Google cut its energy costs and then to offer customers cheaper power. It follows initiatives this year to maximize the efficiency of its data centers, which account for most of the energy Google consumes.

``We're a large consumer of energy due to our data centers, so we're a natural customer,'' Larry Page, Google's co-founder, said in an interview. ``We see opportunities to make significant investments that generate positive returns.''

Investors might worry about the company's ``long-term focus'' and questioned whether the project was a good fit for the company, said Jordan Rohan, an analyst at RBC Capital Markets in New York. Mountain View, California-based Google makes 99 percent of its revenue selling advertising.

`What the Heck?'

``What the heck are they doing? It boggles the mind,'' said Rohan, who advises buying Google shares. ``The company is blessed with the best business model on the Internet. This makes me worry about Google's priorities.''

Google rose $7.57 to $673.57 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have gained 46 percent this year.

Through internal development and investments in other companies, Google expects to generate revenue in the alternative- energy market. Its philanthropic arm, Google.org, will make grants to companies, laboratories and universities working on related projects, the company said in a statement.

The goal is to create a gigawatt of renewable energy, enough to power a city the size of San Francisco for less than it would cost using coal, in ``years, not in decades,'' Page said. Coal accounts for more than 50 percent of all U.S. power and is one of the biggest sources of carbon emissions.

A typical data center consumes 300 megawatts to 400 megawatts of energy, according to Sandeep Aggarwal, an analyst at Oppenheimer & Co. in San Francisco. Google probably has 10 to 15 data centers, he said. One gigawatt equals 1,000 megawatts.

Large Consumer

``If Google is consuming between 3,000 to 5,000 megawatts of energy, they might be one of the largest consumers of energy,'' said Agarwal, who recommends buying the shares, which he doesn't own. ``If they can figure out how to save money in their energy consumption, this sounds like a positive to me.''

Google is already working with Pasadena, California-based ESolar Inc., a solar-power company, and Alameda, California-based Makani Power Inc., a developer of wind energy.

``Climate change is a very important reason for this announcement but it's not the only reason,'' Google co-founder Sergey Brin said today on a conference call. ``There's a lot of demand'' for cheaper energy, he said.

The company plans to hire 20 to 30 people over the next year for the project, Bill Weihl, the head of Google's environmental programs, said on the call. In June, Google and five partners including Microsoft Corp. started the Climate Savers Computing Initiative, a plan to save electricity in personal computers.

To contact the reporter on this story: Ari Levy in San Francisco at levy5@bloomberg.net .

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