Google's Urs Hoelzle posts on Google's Official Blog their Google Energy LLC renewable energy purchase. Reducing our carbon footprint with the direct purchase of renewable energy 7/20/2010 07:12:00 AM When we decided in 2007 to voluntarily become carbon neutral, our intent was to take responsibility for our carbon emissions and promote sustainable environmental solutions. We approach this goal in three ways. First, we minimize our energy consumption; in fact, we've built some of the world's most energy efficient data centers. Second, we seek to power our facilities with renewable energy, like we did in Mountain View, CA with one of the largest corporate solar installations. Finally, we purchase carbon offsets for the emissions we cannot directly eliminate. We just completed a substantial 20-year green Power Purchase Agreement that allows us to take responsibility for our footprint and foster true growth in the renewable energy sector. On July 30 we will begin purchasing the clean energy from 114 megawatts of wind generation at the NextEra Energy Resources Story County II facility in Iowa at a predetermined rate for 20 years. Incorporating such a large amount of wind power into our portfolio is tricky (read more about how the deal is structured), but this power is enough to supply several data centers. The wind farm, which began operation in December 2009, consists of 100 GE 1.5MW XLE turbines. Google is not buying this power for its data centers. Google is reselling the power on the spot market. In this case, we're buying renewable energy directly from its source - the wind farm. We cannot use this energy directly, so we're reselling it back to the grid in the regional spot market - but retiring the RECs associated with the power. By obtaining RECs through the purchase of green power, our deal has a greater impact on the renewable industry than simply buying "naked" RECs from third parties; our long-term commitment directly frees up capital for the developer to build more wind projects. With Google's cash reserves and long term view they have figured a better way to use their money than buying Renewable Energy Credits (REC). Buying renewable energy directly from the developer impacts the development of renewable energy projects in ways that are more meaningful than the purchase of Renewable Energy Certificates (RECs) from third parties. RECs allow energy consumers to identify and track power made from eligible sources of renewable energy. They have value and are typically bought and sold independently of the electricity from which they are generated. Most data center operators have discounted renewable energy as they look at the local availability. With Google Energy LLC, Google is changing the game in the same way that Southwest Airlines added fuel hedging to its strategy being an airline. Hedging fuel Southwest has a longtime program to hedge fuel prices. It has purchased fuel options years in advance to smooth out fluctuations in fuel costs.[citation needed] In 2000, Southwest said it had "adjusted its hedging strategy" to "utilize financial derivative instruments... when it appears the Company can take advantage of market conditions." Additionally, the company hoped to "take advantage of historically low jet fuel prices."[25] Southwest's decision proved to be a prescient and, for a time, an extremely profitable effort.[citation needed] To lock in the low historical prices Southwest believed were occurring at that time, Southwest used a mixture of swaps and call options to secure fuel in future years while paying prices they believed were low. The company also stated that with this new strategy, it faced substantial risks if the oil prices continued to go down. They did not. Previously, Southwest had been more interested in reducing volatility of oil prices. Now, they hoped to reap large gains from oil price appreciation.[citation needed] In 2001, Southwest again substantially increased its hedging in response to projections of increased crude oil prices. The use of these hedges helped Southwest maintain its profitability during the oil shocks related to the Iraq War and later Hurricane Katrina.[citation needed] Google can make a move few can do. The idea of long term renewable energy purchase allows Google to be a player in defining the future energy market. Would you bet against Google in this area? We depend upon large quantities of electricity to power Google services and want to make large actions to support renewable energy. As we continue operating with the most energy efficient data centers and working to be carbon neutral, we're happy to also be directly purchasing energy from renewable resources. Posted by Urs Hoelzle, Senior Vice President, Operations Urs Hoelzle is making his mark in the data center industry that hopefully many others will follow. How many of you think of the value of RECs you own and can resell? Urs knows the future value of Google Energy's REC portfolio. It will be interesting to see Google's next move.
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