Google joins $5 billion U.S. offshore wind grid project

BOSTON (Reuters) - Google Inc has thrown its financial clout behind an ambitious $5 billion proposed electric transmission line aimed at jump-starting investment in new wind farms off the heavily populated U.S. East Coast.

The search giant, which has about $30 billion of cash on its balance sheet, has come under criticism from some investors for investing in ventures outside its core Internet business, such as solar energy and a car that will drive itself.

It declined to say how much it had invested to acquire an 37.5 percent stake in the project, the Atlantic Wind Connection, but the developers said the entire initial round of funding came to tens of millions of dollars.

About a dozen wind projects have been proposed off the eastern United States but none has been built, largely due to the complicated process of securing regulatory approval. The project would help developers of offshore wind farms surmount a major cost challenge -- connecting their turbines to the grid in a way that allows them to sell to multiple customers.

Japan’s Marubeni Corp and New York investment firm Good Energies are joining Google in financing the planned 350-mile underwater electric cable project, which would be led by transmission-line developer Trans-Elect.

“This will serve as a clean-energy superhighway, with on-ramps for wind farms and the ability to be intelligently expanded,” Rick Needham, Google’s green business operations director, told a news conference in Washington. “We can help kick-start an industry that can provide thousands of jobs.”

Trans-Elect expects the first segment of the project, whose construction should begin in 2013, to cost $1.8 billion.

Google described its investment as “early stage,” leaving open the possibility that other investors or lenders could be brought in to finance construction, which will account for the bulk of the total $5 billion cost.

While the renewable energy industry welcomed the move, some pointed out that transmitting power from offshore turbines to the coast is only one of the many roadblocks facing developers. They also face a complex permitting process, which has dragged on for almost a decade for one proposed wind farm off Cape Cod, Massachusetts, and unclear energy and environmental policies in Washington, where Congress looks unlikely to pass a comprehensive climate bill for the rest of President Barack Obama’s current term in office.

“Certainly, transmission is one of the major challenges for offshore, but in the long term a bigger challenge is long-term stable policy,” said Matt Guyette, global strategy leader for renewable energy at General Electric Co, one of the top producers of wind turbines. “The one thing that will grow investment the most is a long-term renewable energy standard.”

Renewable energy standards are regulations that require utilities to buy a certain percentage of their electricity from renewable sources like wind and solar installations. Several eastern states have them but there is no national standard.

Surfboards lean against a wall at the Google office in Santa Monica, California, October 11, 2010. REUTERS/Lucy Nicholson

“We are pleased to see the private sector taking steps to develop offshore transmission capacity that will help grow the offshore wind and renewable energy industries in the years to come,” said Cathy Zoi, acting undersecretary of energy efficiency and renewable energy at the U.S. Department of Energy.


Some investors have raised concerns that Google will misspend its hefty reserves as it expands beyond its core businesses.

“I don’t think there’s a significant amount of money being spent by Google on these projects, but I do think it gets at investor concerns about the use of the company’s cash,” said Clayton Moran, an analyst at The Benchmark Co who follows Google. “The energy initiatives and the car initiatives are pretty insignificant today, but it’s symbolic of potential for them to spend somewhat recklessly and that’s a real concern of investors.”

Google shares closed up less than 1 percent at $541.39 on the Nasdaq.


The project, which would enable offshore wind turbines to transmit their electricity to the coast, would stretch from Virginia to New Jersey and could serve as a backup for the onshore transmission grid.

It could help grid operators avoid or more quickly recover after incidents such as the major blackout that plunged parts of the northeastern United States and Canada into darkness for days in 2003, Trans-Elect Chief Executive Bob Mitchell said.

Current U.S. wind farms can generate 35.6 gigawatts of electricity, according to the American Wind Energy Association. Texas, Iowa and California have the most installed capacity.

The densely populated East Coast has fewer turbines, in part because of a lack of open space for them. Offshore installations, advocates argue, could generate electricity close to major population centers without also producing the greenhouse gases associated with global climate change.

The cable would be able to transmit about 6 gigawatts of electricity, which would meet the needs of some 1.9 million households. The project is only a transmission line, meaning other investors would have to finance and build the offshore wind farms it would serve.


The proposed cable would be installed under the seabed, 15 miles to 20 miles offshore. At that distance from the shoreline, turbines would be all but invisible from the coast. Visibility of turbines is an issue that has dogged Cape Wind, the Cape Cod wind farm first proposed in 2001.

Opponents of Cape Wind have raised concerns that the turbines could mar the views from the tourist-dependent Cape Cod region of Massachusetts, as well as interfere with fisheries and injure migrating birds.

“Having this transmission backbone fairly far offshore means that the wind farms can be put far enough out there that they will be mostly out of sight, barely visible from shore, which I think will eliminate a lot of the objections that people had to things like Cape Wind,” Bill Weihl, Google’s green energy czar, told the Reuters Climate and Alternative Energy Summit in San Francisco.

Offshore wind on the East Coast could generate about 127 gigawatts of power, enough to meet half of those states’ current electric demand, according to a recent study by ocean conservation group Oceana. The sea floor off the West Coast drops away too quickly to make offshore turbines practical.

The grid would save developers who build installations near it the cost and complexity of building their own transmission lines that reach all the way to shore.

“It could be a game-changer for offshore wind,” said Sheeraz Haji, managing partner at the Cleantech Group, a San Francisco-based research firm. “Offshore transmission is an area that has been very difficult for many investors to get their heads around.”

Reporting by Scott Malone, additional reporting by Tim Gardner in Washington, Alexei Orsekovic in San Francisco and Risa Maeda in Tokyo; Editing by Phil Berlowitz, Gerald E. McCormick and Steve Orlofsky