Tuesday, 12 October 2010

Google Changes the Economics of Offshore Energy

Google has announced a huge investment in energy infrastructure off the East coast of the USA with US$5 billion to be put towards an offshore energy transmission line. It will be situated approximately 10 miles off the coast, will be 350 miles long and could provide power to approximately 1.9 million homes.

This could change the economics for wind power in the United States, particularly on the East coast. Grid connection is one of the biggest costs and most complex issues for wind farms, even on land, so for investors in wind energy it will make the business planning and financing of projects much easier.

It is interesting to see that Google thinks the project will provide a strong financial return (that may not mean profit). Perhaps this represents a viable way to develop this type of basic infrastructure - someone invests in the underlying infrastructure and then sells access to other investors.

It will be especially exciting if this project is able to be used in the same way as the highway system where the basic idea is to move people, the products used to move those people can (within certain parameters) be anything. That would enable innovators and engineers to come up with new ways of generating energy provided it is compatible with the infrastructure.

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