The opportunities for the Internet and clean power

As more and more of our devices connect to the Internet — the trendy tablet, the standard laptop, heck, even our cars — data centers that keep the web up and running are consuming significant amounts of energy.

It’s this energy consumption growth, along with other factors, that has been putting Internet companies in a unique position to consume, promote, educate and get involved with clean power not only by directly buying it to run their power-hungry servers, but also through their intimate access to millions of Internet users. Let’s take a look at a couple examples.

Using the web connection

Japan has been at the forefront of energy efficiency and solar technology for years, and in the wake of the country’s nuclear disaster — the worst since Three Mile Island — the Japanese government, utilities and consumers have been rejecting nuclear power and beginning to double-down on solar projects and initiatives. At the head of this trend, Japanese Internet giant Rakuten (think Amazon for Japan) has become a chief promoter of solar rooftop projects for Japanese consumers.

Rakuten’s president, Hiroshi Mikitani, announced after the company’s recent earnings report that Rakuten plans to not only start selling solar panels online through its site, but also plans to offer financing options for customers. While Rakuten’s plans still need to be worked out, the company could, in theory, help consumers connect with banks and solar project developers to assist with financing services like leases or 20-year power-purchase agreements (where consumers don’t pay the tens of thousands of dollars for a solar system in an upfront fee, but pay for the cost of solar electricity over two decades).

Helping consumers overcome the high initial costs of solar is one of the chief hurdles to getting more home solar systems deployed. Mikitani says that promoting home solar through online sales is a more efficient way to popularize solar than by directly building solar power plants. Japan is already one of the top solar installers in the world, and the Japanese government is mulling over whether it will mandate solar panels on all new buildings by 2030.

Clean power as a way to make money

Google — the most aggressive advocate of clean power among Internet companies in the U.S. — might not agree with Mikitani’s statement that developing projects is less efficient than promoting them via the web. Google has been dreaming up various novel ways to fund and directly build solar, wind and geothermal technologies, but so far has yet to use its dominance on the web to promote solar.

As of late June Google had invested $780 million into clean power projects and technologies, with $700 million of that being invested this year. Google has been backing both utility-scale centralized solar and wind farms as well as home solar rooftop projects. Along with solar installer SolarCity, Google created a $280 million fund to provide the up-front costs for solar projects and also to make a return on that investment.

Google is interested in making a direct return on these investments — an estimated 12 percent, according to analysts I’ve interviewed — and also could one day use the clean-power projects as a direct source of power for its data centers. In that way, Google could control the acquisition of its growing electricity footprint and also hedge against the cost of electricity rising in the future.

Google isn’t the only one that is interested in making money off solar. Japanese investors that helped fund the Internet in Japan certainly see solar as a strong investment in the country this year. Softbank, which invested in Alibaba and Yahoo, has embarked on a whirlwind plan to spend hundreds of millions of dollars building 10 solar power plants in the country. In an era of unpredictable greentech investments, solar is actually considered a somewhat conservative assured investment with a decent longterm return as the fixed rate of the electricity is steady and valuable.

A cleaner Internet

Whether Internet firms are looking to connect directly with consumers to promote clean energy, like Rakuten, or use their balance sheets to fund clean energy projects, like Google, these companies are in an important position to push the next-generation of solar and wind technologies. Google and Rakuten connect with hundreds of millions of web users on a daily basis, and have, like most web companies, have high margins with which to make these types of investments.

The electricity consumption footprint of Internet companies will only grow as more and more devices become connected and more people in the world adopt broadband. According to a recent report, Google had 900,000 servers in 2010 — more than double the estimated amount it had in 2005 of 350,000. At the same time, Google used a total of 1.9 billion kilowatt-hours of electricity in 2010, from its combined servers, storage, communications, and infrastructure, up from .7 billion kilowatt-hours of electricity in 2005. If a much larger portion of that electricity can come from cleaner sources, then that’s a good thing.

Question of the week

How can companies with a large digital footprint invest in and utilize more clean power?
Relevant analyst in electricity
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