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Google Invests in Offshore Electricity

Google already has a license to buy and sell its own power


There are a lot of problems that need to be solved when a company wants to build an offshore wind generation project. One of the less visible issues is how to get the electricity onshore, to the homes and businesses that will use it. Because there is no electricity grid offshore, every project needs to spend time, effort, and money developing its own transmission system.

A small privately-held firm, Trans-Elect Development Company, has proposed building a backbone along the Atlantic Coast of the US for wind energy projects to tie into. The 350-mile backbone, called the Atlantic Wind Connection, would run from Virginia to New Jersey and shuttle up to 6,000 megawatts from offshore wind farms to four onshore distribution points. The estimated cost of the project is $5 billion, and if all the regulatory issues are solved and the onshore connection points identified, construction could begin in 2013 with completion of the entire project in 2021.

Google Inc. (NYSE: GOOG) and a private investment firm, Good Energies, have each agreed to take 37.5% of the equity in the initial development stage of the project. According to the official Google blog, the development stage “requires only a small part of the total estimated project budget, [but] it represents a critical stage for the project. The New York Times reports that Trans-Elect’s CEO said that would amount to an intial investment of about $200 million each.

On its blog, Google explains its decision to invest in this project:

“We believe in investing in projects that make good business sense and further the development of renewable energy. 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.”

Google does have some history in the renewable energy sector, having received a license to buy and sell its own power. The plus side for the project is that it doesn’t require any significant technological innovation.

The downside is mostly political. Electricity costs more in New Jersey than it does in Virginia, and if a planned wind farm offshore of Virginia would sell cheaper power to New Jersey while raising prices in Virginia, that’s going to be a tough sell to Virginia politicians. East coast governors have already put up opposition to building a high-voltage grid from the windy northern plains of North Dakota.

Google’s interest in providing venture capital for projects like the Atlantic Wind Connection probably drives some investors either nuts or away from the company’s shares. But since its IPO in 2004, the company has never shied away from providing a private sandbox for either its engineering or its finance talent. This investment is another example of that.

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