UPDATE 7-Google joins $5 bln US offshore wind grid project

* Undersea cable would carry power from offshore turbines

* Cable would run from New Jersey to Virginia

* Could also avert future blackouts

* Initial investment is tens of millions of dollars

* Some investors concerned about Google’s spending
(Adds quotes from stock analyst, Department of Energy
official)

By Scott Malone

BOSTON, Oct 12 (BestGrowthStock) – Google Inc (Read more about Google Stock Analysis) (GOOG.O: ) 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 (8002.T: ) and New York investment firm
Good Energies are joining Google in financing the planned
350-mile (563 km) 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. [ID:nN22275479]

“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 (GE.N: ), 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.

“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.

CONCERN ON SPENDING

Some investors have raised concerns that Google will
misspend its hefty reserves as it expands beyond its core
businesses. [ID:nN12185110]

“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.

For a related Breakingviews column, click [ID:nN12135015]

BACKUP TO GRID

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.

FAR OFFSHORE

The proposed cable would be installed under the seabed, 15
miles to 20 miles (24 km to 32 km) 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. [ID:nSGE69703J]

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)

UPDATE 7-Google joins $5 bln US offshore wind grid project