BUSINESS:

Google CEO fires at critics, defends its energy plan

SANTA BARBARA, Calif. -- Google's chief executive defended his company's ambitious U.S. energy plan yesterday before a well-heeled crowd of industry veterans at an environmental conference hosted here by the Wall Street Journal.

Eric Schmidt, chairman and CEO of Google Inc., said the information technology giant has lately barged into the national energy policy debate because the issue is as crucial to its own economic success as it is to the nation's.

Google has made waves of late with its blueprint for enacting a national renewable portfolio goal of 30 percent by 2030. When combined with massive incentives for plug-in electric vehicles, Google says its plan would reduce U.S. greenhouse gas emissions 48 percent below baseline levels by 2030.

"We put up a proposal, and you can shoot at us, but at least we put up a proposal," Schmidt told a group of Fortune 500 executives, technology experts and entrepreneurs. "We needed to take a stand."

The pricetag for such an effort, in Google's view, would run about $3.5 trillion over the next 22 years -- a cost that has been dismissed in some quarters as far too steep for converting core engines of the U.S. economy: cars and electricity.

But Schmidt, in the face of direct questions from some executives, insisted the net benefit to the U.S. economy would be in the range of $4.4 billion. He also rejected "the old orthodoxies" that argue against a rapid conversion away from fossil fuels because the economy has stalled.

"Change does not occur when things are going well," he said. "Change occurs when people are scared. This is the time to have this conversation."

AEP vs. Google

Yet some critics point out that the search-engine giant, which is based in Mountain View, Calif., has its own internal energy dilemma. A study by the research firm Gartner suggested information technology is responsible for 2 percent of global carbon emissions, while a Harvard professor recently found that a typical Google search produces 7 grams of carbon dioxide.

While Google has dismissed such studies, Schmidt admitted the company's data centers are part of the problem, as their energy consumption rate has gone up in proportion to their ability to sift through vast amounts of information. This reality, he said, is what led the company to enter the policy arena and effectively get into politics.

"We're huge energy users," he said. "But green energy done right is more profitable than the old kind of energy."

So Google's main thrust in its energy plan is lowering its own carbon output (and others') by stopping coal-fired power and replacing it with solar and wind. The primary plank in its platform is to infuse the renewable sectors with cash and capital development to help them compete with the cheap cost of coal.

This point was not lost on Michael Morris, the president and CEO of coal-heavy American Electric Power Co. Inc. Morris was in attendance at a conference interview featuring Schmidt yesterday and brusquely told the computer executive his plan is less fact than fiction during a question-and-answer session.

Baseload power fired by coal, Morris said, is "the internal combustion engine" that is "going to be with us a long time." He went on to question Google's 30 percent target, saying that would mean shifting 12,000 megawatts of power generated by AEP out of 40,000 megawatts away from coal within two decades.

"I don't know how we get there," Morris told Schmidt.

The California model

Schmidt's answer was to point to California, where utilities are attempting to secure enough renewable power to meet a 20 percent renewable portfolio standard by 2010. Though the state's privately held power companies are not likely to meet that target by 2010, they have contracted enough renewable energy to meet that standard by about 2013, assuming they can get the power built during the credit crunch and move it to market.

The transmission problem, Schmidt said, is where the federal government should focus in the near term. Schmidt believes the Obama administration should assert federal rights-of-way for new power corridors to help transport renewable energy to populated areas.

Schmidt also wants to "compensate" utilities for efficiency, as the state of California has under its decoupling policy. Utilities like AEP have no incentive to not sell more and more power, he argued, which leads to fewer incentives to save.

As for nuclear and natural gas, Google's plan is to keep those sectors constant and not build new plants. And the company says other states should emulate California's feed-in tariff, which lets smaller, distributed generation units sell excess power back to the grid.

At least one executive was on board. Peter Darbee, president and CEO of San Francisco-based Pacific Gas & Electric Co., said decoupling is the reason his company's stocks lost just 10 percent of their value over the last year, as opposed to an industry average of about 50 percent.

"It has put in place the right incentives," Darbee said. "Mike [Morris] has an incentive to sell more kilowatt hours every day."

California's electricity consumption, he added, has been flat over the past 30 years on a per-capita basis, while the rest of the country continues to consume more and more power year after year.

"We think we can get to 33 percent [of renewables]," Darbee said. "Google is a catalyst for change."

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