Some people involved directly with the projects said it proved challenging for Google to guide energy research either directly or through startups. “We were aiming for some home runs. I think we got some doubles,” says one senior manager who has since left Google. “It’s difficult for a company whose sole focus is not innovating in energy to drive really substantial innovation in energy systems.”
Still, Google has hardly given up on green energy. The $880 million worth of investments in renewables that it disclosed in 2011 amounted to about 10 times the level it spent in 2010, putting it among the companies that spend most in the area (BP, by contrast, invested around $1.6 billion).
Whereas its earlier engineer-led work aimed to push new technology forward, Google’s strategy now is largely focused on financing the deployment of commercial solar panels and wind turbines through so-called tax equity investments. Such investments, typically used by banks or large energy companies, provide a financial return as well as federal tax breaks that can total as much as 30 percent of what’s invested.
The funding is no longer coming from Google’s philanthropic arm but from its treasury, which is sitting on $44 billion in cash. Google’s energy and sustainability director, Rick Needham, says the company’s motivations are multilayered. As an investor, he says, Google is looking to make money. But it still wants to have a transformational impact on the “great American challenge” of securing carbon-free energy, as Google chairman Eric Schmidt once put it.
Google’s largest single investment to date is the $280 million it agreed provide to SolarCity, a company based in San Mateo, California, that installs residential solar arrays. Lyndon Rive, SolarCity’s CEO, says the money is important because his customers pay only small monthly fees. Google’s financing—in effect, a loan to the project—is what pays for the initial cost of installing the solar panels on homes.
Google still works with new energy technology. A number of outside companies pilot or test their technologies at its facilities, and Google continues to invest in some early-stage companies through Google Ventures. It also buys renewable power for its own use. At its Mountain View headquarters, Google has installed one of the world’s largest corporate solar installations and even obtained an energy-trading license from federal regulators so it could directly buy 20-year power contracts with wind farms to power its data centers.
“They tried a bunch of things. Some things worked and some things didn’t,” says Stanford’s Koomey. While being a silent partner in a residential solar panel business isn’t quite as exciting as solving the world’s problems, it’s progress. Says Koomey: “What works is the most cost-effective way to deliver the end result, which is reduced emissions.”