what i learned today

Google’s at it again! This time in the energy department. Google plans to invest hundreds of millions of dollars to create renewable energy, an initiative dubbed “Renewable Energy Cheaper Than Coal.”

This is awesome! It wants to make renewable energy to combat global warming. Google participates in offsetting its own carbon footprint by buying carbon credits, but now it wants to address the problem directly. It plans to hire 20-30 energy engineers and plans to leverage its “creativity and innovation to the challenge of generating renewable electricity at globally significant scale, and produce it cheaper than from coal.” It’s goal is to create 1 gigawatt of renewable energy capacity, which is enough to power all of San Francisco.

Co-founder Larry Page: “We have gained expertise in designing and building large-scale, energy-intensive facilities by building efficient data centers.” Now Google thinks it can use that expertise to create energy-intensive energy centers. Google will not become a green power company, but will instead license out its technology or partner with businesses in the field. “We don’t feel we need to own every piece,” co-founder Sergey Brin said. “We just want to have this problem solved. We think it will be good for business as well.”

Just so happens I’m writing a strategy paper on Google. Also just so happens one of my team’s recommendations to the firm focuses on this issue. My strategic analysis of this issue: What the heck is Google doing?! It’s interesting that though it’s a really cool idea, and would be amazing and extremely profitable if the goal is achieved, it does not make any sense from a shareholder or strategic perspective. A firm should not leverage its “creativity and innovation” as a means to diversify. Google is an internet search and advertising firm; it does not have the necessary R&D in energy production to move into this arena. Its justification is that it has the expertise in building efficient data centers, but this has no relation to the necessary expertise in creating renewable energy. As a strategic advisor to Google, I would not recommend that it pursue this avenue. Though as both a Google and environmental enthusiast (and sadly, not a shareholder), I say go for it!