How Much Electrical Power Does The Internet Require?

What do search engines and wind energy have in common? That’s the question a lot of investors were asking earlier this month, when Google made an almost US$40 million investment into NextEra Energy Resources, a North Dakota wind energy firm. The simple answer: more than you think.
It’s not surprising that the Internet search-engine superstar needs energy. Companies like Google own massive computer frameworks, known as server farms, to store all that digital data floating around in cyberspace. While Google is quite hush-hush about how many computers it owns, estimates put it at about 1,000,000 servers (almost 2% of the world total), and an enormous amount of power is needed to keep them running constantly. And as cyber-information grows – almost 24 hours of video footage is uploaded onto YouTube every minute – more and more computers are required to store and distribute it.

And where does all that power come from?

Driving down the interstate through the Midwest, it’s amazing to see all of the Windmills, in places previously determined to be uneconomical for Wind Energy.

What’s happened?

2 things:

  1. Advancement in Technology
  2. Government subsidies

Let’s hope it can learn to stand on its own (ugly) pedestal soon, without Uncle Sam taxing us to pay for it.

Why Google Should Subscribe to Casey Research

By Marin Katusa, Chief Investment Strategist, Casey Research Energy Division
What do search engines and wind energy have in common? That’s the question a lot of investors were asking earlier this month, when Google made an almost US$40 million investment into NextEra Energy Resources, a North Dakota wind energy firm. The simple answer: more than you think.

It’s not surprising that the Internet search-engine superstar needs energy. Companies like Google own massive computer frameworks, known as server farms, to store all that digital data floating around in cyberspace. While Google is quite hush-hush about how many computers it owns, estimates put it at about 1,000,000 servers (almost 2% of the world total), and an enormous amount of power is needed to keep them running constantly. And as cyber-information grows – almost 24 hours of video footage is uploaded onto YouTube every minute – more and more computers are required to store and distribute it.

But where does their power come from? Most server farms are located near coal-fired generating plants. Good for efficiency, but that adds up to a pretty big carbon footprint. Naturally, this has environmental groups fuming and lobbying the corporations for clean energy alternatives. Given Google’s avowed sensitivity on this issue, investing in wind turbines in North Dakota makes good public relations sense.

However, it is usually the company’s philanthropic arm, Google.org, that handles such good-citizen initiatives. Thus the unprecedented move to make a first-time direct investment into NextEra Energy suggests that Google is expecting something further.

It seems logical to assume that the company’s motivation also involves saving money by slashing its dependence on coal-fired generators. After all, when your electric bills approach that of a small country, it’s hard not to jump on a company that could potentially produce enough power to light up 55,000 homes.

But if this is, in part, an exercise in cost-cutting, Google made a big mistake: it chose the wrong renewable energy.

Wind Farms vs. Geothermal Power

The main problem with wind farms: they don’t work when it’s not windy.

But that’s not all. Wind energy is plagued by high capital costs, a weak power transmission system, and low output, making its success heavily dependent on government subsidies. Load factors for wind energy – that is, the difference between how much power a generator can produce and how much it actually produces, which determines how much money a utility will make – are also quite low. The large physical footprint – the amount of land required to build wind farms – is another downside, as is the threat they pose to birds and the noise pollution they generate.

Add this all up and you’ve got the biggest loser when it comes to going green. In reality, the best renewable energy bet Google could make, especially in the United States, is on geothermal. Leaving everything else aside, geothermal beats wind energy on the most important factor: it is not dependent on weather. That means there is no need for backup power generation facilities, something wind farms must have for the days when the turbines won’t turn. Nor are government subsidies absolutely necessary for geothermal energy; they’re more of an added bonus. And geothermal power plants require the least amount of land: they can hum away contentedly even in the middle of farmland or a park.

Geothermal also wins on the numbers, with the highest load factor of all renewable energies and the biggest profit margin. Take a look at the cost breakdown of renewable generating technologies in the U.S. – it’s clear that geothermal is miles ahead:

Generating Technology* Load Factors Revenues per plant (US$0.10/kWh electricity) Costs of Operations** (US$) Profit From Operations (US$) Capital Costs 2009
(US$ per KWH)
Geothermal 90% $39,420,000.00 $8,416,500 $31,003,500 $1,749.00
Hydroelectricity 45% $19,710,000.00 $696,500 $19,013,500 $2,900.00
Wind – Onshore 25% $10,950,000.00 $1,549,000 $9,401,000 $1,966.00
Wind – Offshore 40% $17,520,000.00 $4,346,000 $13,174,000 $3,937.00
Biomass 90% $39,420,000.00 $30,336,620 $9,083,380 $3,849.00
Photovoltaic 25% $10,950,000.00 $597,000 $10,353,000 $6,171.00
Solar – Thermal 15% $6,570,000.00 $2,902,500 $3,667,500 $5,132.00

* Numbers are on a comparable per-plant basis   ** Costs are exclusive of subsidies.

Once Bitten, Twice Shy

Perhaps the reason Google decided to go with wind energy this time is because it gave geothermal a chance in the past. Two years ago, through Google.org, the company became the biggest investor in enhanced geothermal research, beating even the United States government. Unfortunately, that time around, Google picked the wrong company.

Google invested US$6.25 million into AltaRock Energy in August 2008, to help the company make a success of its promising Geysers project in northern California. AltaRock was using the latest technology – Enhanced Geothermal Systems (EGS) – in an attempt to harness some of the energy locked far beneath the earth’s surface. As Google discovered, though, making a sound investment is not as simple as picking a company just because it has a great project location and the finest in tech. A host of pitfalls faces any geothermal developer – including inexperienced crews, insufficient financial backing, and the lack of a good power purchasing agreement.

But most formidable of all are the challenges of very deep drilling. While EGS represents a breakthrough, it’s still new, and it’s tricky to use. To properly exploit its potential, companies need to learn how to drill that deep, and to do so despite the hot corrosive fluids and unfriendly intervening layers of rock that can ruin a well in short order. And as if that weren’t enough, users have to work extra cautiously. Geothermal activity is generally found around seismic fault lines, and fracturing deep rocks using hydraulic pressure has linked EGS to earthquakes.

As AltaRock Energy (and its investors) found out, it’s going to take more than just fat corporate and government checks and tweaks to conventional techniques for EGS projects to work. The Geysers project came to an abrupt halt just over a year after drilling began. Barely a third of the well’s planned 12,000 ft depth had been reached before drillers encountered a layer of fibrous rock that caused the holes to collapse.

Getting on the (Right) Green Bandwagon

Renewable energy is essentially still in its infancy, with plenty of barriers to surmount. At the same time, there’s no mistaking politicians’ growing desire to climb onto the bandwagon. Which means more and more companies are jumping at the chance to join in. But this is still relatively unexplored territory, and the market has some hard lessons yet to teach. Not every company… or idea… is cut out for this.

It would be wrong to say wind energy doesn’t have a future, because it does – a very distant and windy one. One that won’t be materializing anytime soon, at least not until the capital costs of wind development drop and transmission techniques improve.

Geothermal isn’t easy. The Geysers failure demonstrates that. But it’s proven, it’s cost effective, and it runs 24/7… so for now, it’s our favorite renewable energy.

Our research is focused on finding the best geothermal companies out there and, because Google is our favourite search engine, we’ll be happy to share that research with CEO Eric Schmidt and his band of merry men. So come on Google, feel lucky and click here – we’ll give you a free three-month trial with our Energy newsletter, including our #1 geothermal recommendation.

Not just for Google, you too can get access to Casey’s Energy Report today and start profiting from the green energy movement, as well as from oil, gas, and other energy trends. Start your 3 month risk free trial today.

Natural Gas Seen As Alternative To Coal

Natural gas is now back in the spotlight. The now plentiful from within our own borders fuel is environmentally friendly with half the green house emissions of coal, and as such is being looked at to replace coal for electricity generation in the U.S.

A decade ago natural gas was shunned because it was seen as supply unreliable leading to wild swings in the price.

New technology, however, has unlocked vast quantities of natural gas previously thought to be uneconomic.

Exxon Mobil’s recent announcement to acquire XTO Energy makes Exxon the biggest natural gas supplier (the market punished Exxon shareholders over the ensuing few trading days by clipping about 5 points off the stock’s price, an almost 7% haircut).

Natural gas could become one of the more reliable ways to play the green energy movement as an investment. After all, natural gas is economic WITHOUT massive government subsidies, something wind, wave and sun technology cannot boast.

The other promising area of green energy is geothermal energy; now becoming a reality in many places around the globe.

If you want an investment newsletter that will give you specific buy and sell advice on how to profit from green energy including not just wind, wave and sun but also natural gas and geothermal energy, then take a risk free trial look at the Casey Energy Report.

The Future For Geothermal And How To Invest In Geothermal

A Hot Future for Geothermal

Co-Written by Marin Katusa & Marc Bustin, Editors of Casey’s Energy Report

Capturing energy from the earth’s heat is pretty easy pickin’s for geologically-active areas of the world like Iceland, Indonesia, and Chile. In some locations, hot fluids are so near the earth’s surface that heat from naturally-occurring hot fluids can be directly circulated through buildings for heating. Iceland, in particular, takes advantage of this low-hanging energy fruit.

However, in most areas of the world where geothermal energy is captured, the heat is used to generate electricity.

Conventional Geothermal Energy

Unlike some of the more common alternative energies — hydro, solar, and wind — geothermal is impervious to weather conditions. This independence means it provides excellent base load electricity.

Currently all commercial geothermal electricity is generated by so-called conventional systems, whereby naturally- occurring hot water or steam is accessed at comparatively shallow depths in areas of very high geothermal gradient. Wells are commonly drilled to depths on the order of 2 km. The water or steam they produce is used to spin turbines that in turn generate electricity.

The success and sustainability of a geothermal reservoir in large part depends on managing the reservoir. For a reservoir to be sustained, the natural and induced recharge of fluids must balance the produced fluids. Almost all reservoirs require the produced water to be re-injected in order to maintain reservoir pressure. Because naturally-occurring water and steam are necessary, potential development is generally restricted to areas near volcanic activity.

But the geographic limitations of geothermal energy may be about to change — and create a much rosier picture for the future of geothermal energy.

Enhanced Geothermal Systems (EGS)

Conventional geothermal systems are possible only in relatively limited geographic areas. The real prize in accessing geothermal energy – and at a much larger scale – is through enhanced (or engineered) geothermal systems.

In EGS, hot rocks are artificially fractured, commonly at great depths. Water is injected to contact the hot rocks and then produced back to the surface; the energy captured is used to generate electricity. These are very expensive ventures, with costs in excess of $10 million dollars as a starting point — ten times the cost of a geothermal well. Current EGS projects are still experimental, and most have substantial government backing.

Geothermal Power Plant Diagram

A relatively advanced EGS experimental system is currently underway in Australia. Here, granites producing high heat due to radioactive decay at depths greater than 3 km are seen as viable geothermal reservoirs. In South Australia alone, some 23 companies have filled licenses covering 110,000 sq km where suitable hot granite is believed to exist at accessible depths.

Once such a plant is built, it will be tapped into a virtually limitless supply of energy that’s available without cost, 24/7. Successful implementation of EGS plants will be the break-out technology for geothermal energy.

Is Geothermal Economically Viable?

A workable technology is one thing, and economic viability is something entirely different. As you can see from the chart below, not all energy sources are created equal when it comes to cost per kilowatt-hour.

Alternative Energy Generation Costs

In terms of production cost, geothermal certainly holds its own at 6.5 cents per kilowatt-hour — about the same as wind. Coal and nuclear power are still powering the way ahead with their 4-5 cent/kWh generation costs, but with natural gas at 7 cents and petroleum topping 10, geothermal has already proven itself to be a viable alternative, not only on the economic front but on the environmental front as well.

In terms of current worldwide energy production, geothermal — along with solar — is a drop in the bucket:

Worldwide Alternative Energy Generation 2008

Given the fact that geothermal energy is only a minor player in the worldwide picture for energy, why are we still bothering with it?

Because in terms of economics, geothermal energy trounces solar and wind.

Here’s what we mean:

1. Geothermal energy does not depend on weather. The sun doesn’t shine around the clock or even every day; neither does the wind blow all the time. In contrast, hot rocks are there 24 hours of the day, seven days a week. The predictable amount of electricity makes it easy for geothermal companies to sign long-term energy contracts without worrying as much about underproduction or “wasted” production.

  1. Lower capital costs. Even though solar panels have gotten much cheaper to make, the construction costs of a large solar farm are still extremely high. Recent estimates place the cost of solar energy to be upwards of US$10,000 per kilowatt-hour (kW) whereas wind is around $1,700-$3,000/kW. Geothermal is similar to wind at US$1,600-$2,800/kW depending on location, though due to reasons 1 and 3, geothermal is economically superior to solar and wind. In fact, these numbers put geothermal on par with building a coal plant under the new requirements for carbon capture.

Geothermal capital costs are relatively low for two reasons. First, there’s no need to sequester, or capture and stash, any carbon emissions. This requirement alone can add 40-60% to fossil fuel projects. Second, geothermal power plants enjoy the best of both worlds: they require less land than wind and solar projects, and fewer permits than coal and nuclear because they’re less hazardous.

3. Higher load factor. Utility companies, and anybody buying power from them, have to consider load factor: the difference between nameplate capacity (how much the generator is designed to produce) and actual production. The smaller the difference, the higher the load factor, and the more money the utility will make. For a wind farm, the load factor is generally 30-40%, and even lower for solar farms. In contrast, geothermal power plants can generally operate near 90%, since, as we said before, hot rocks are always available.

On an economic basis, geothermal has a virtually unique advantage among the “green” energies. Its power plants can compete with those fired by coal or natural gas even before any government subsidies. For geothermal operating companies in the United States, the government subsidies that Obama is showering upon the alternative energy sector are pure icing on the cake.

And best of all, geothermal companies are virtually off the radar of most investors. For those keeping an eye on geothermal technology and geothermal companies, a window of great opportunity will open.

This kind of research is typical of Casey’s Energy Report and its research team, led by Marin Katusa. And with a stock pick record of 19 winners in a row — a 100% success rate over 11 months — Marin’s insightful research has made a great deal of money for his subscribers.

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