Of all the trendy announcements coming out of Google these days (do you really need a new pair of glasses?), one of the most potentially consequential is not getting nearly the attention it deserves. The Internet search behemoth announced last week it would be working with Duke Energy Corp., its North Carolina electricity provider, to purchase renewable energy directly through the power grid.
The plan, laid out by Google in a white paper, calls for the company to be able to purchase power through "renewable energy tariffs." Essentially, these would allow Google to purchase renewable energy directly from the utility company, in this case Duke Energy. (Under the current arrangement, Google basically acts as a broker, buying power from a local renewable-energy provider and then selling it back to the grid.)
The deal coincides with Google's plans to double the original investment in its $600 million data center in the state. Data centers are notorious energy hogs, so if Google and Duke figure out a way to make its energy use more sustainable and efficient, it could have implications for environmentally conscious power users the world over.
Google likes the new arrangement because it would allow the company to still bill itself as an industry leader in green energy consumption while not having to act as an energy broker. Duke Energy likes it because it would have a customer to absorb the additional cost of producing renewable energy on the grid.
The interested parties' motivations aside, the real winners in this deal could be smaller, innovative alternative-energy companies. Most of the issues facing renewable-energy delivery are related to engineering, not to supply.
For example, one issue limiting the size of wind farms is the computer models they use. Current design models can handle only certain number of turbines (about 1,000) before they break down under their own inefficiencies. If a high-usage facility, like a server farm, wants to rely exclusively on green energy, problems like this have to be solved. Huge companies such as Google have more resources to drive engineers to solve them.
Renewable energy is a high-growth market, and investors are taking notice. Onshore wind energy could reach grid parity -- that is, on par with fossil fuels -- by 2015. When the cost of bringing power from renewable sources to market is the same as the cost of bringing power from traditional sources to market, renewable energy tariffs are going to be pretty valuable. And that's an innovation that sounds a lot more appealing than a funny looking pair of glasses.
(Alex Bruns is on the staff of Bloomberg View. Follow him on Twitter.)