Why Google would want to back a huge wind farm in Africa
After investing close to $2 billion into solar and wind farms, mostly across the U.S., Google is now taking that strategy to Africa. Google is investing potentially tens of millions of dollars into the largest wind farm in sub-Saharan Africa.
The news was first published this Summer in a report in CNBC, and confirmed by Google on October 20.
It wouldn’t be Google’s first investment in clean energy on the continent. In 2013, the web giant backed a large, 96 megawatt, solar panel farm that is now operating in South Africa.
But this latest wind farm will be massive. Called The Lake Turkana Wind Power Project, the wind farm is under construction across 40,000 acres in Kenya between Lake Turkana and the South Horr Township.
The remote, desolate area — described as looking “like the surface of the moon” by a developer — is supposed to have some of the strongest winds in the world. An idea to build a wind farm there has been discussed for decades.
While the wind farm development has faced a series of hurdles in recent years, the farm is supposed to be completed in 2017 and deliver 300 megawatts to the Kenyan grid. That amount of electricity represents 20 percent of all the electricity produced in the country.
Despite a rapidly developing economy in Kenya, widespread use of cell phones, and the home to one of the most successful mobile payment systems in the world, more than three quarters of Kenyans don’t have regular access to electricity. The country needs both more grid-tied power generation, like this wind farm, as well as off-grid power generation like home solar panels.
The wind farm is expected to cost close to $1 billion, and is being billed as the largest private investment in Kenyan history. Committed funders include the African Development Bank (Africa’s equivalent of the World Bank), the European Union’s European Investment Bank, the development agencies of Finland and other organizations from European countries.
And now perhaps Google. But why would the web giant want to do this?
Google has become increasingly interested in investing in, and buying power from, clean energy projects. Google has ponied up close to $2 billion in more than 20 clean energy projects, and has committed to buy another 1 gigawatt worth of clean energy from various farms.
When Google invests in the construction of a solar or wind farm, it works with other investors and offers project financing to the developer. In this way Google can use its large balance sheet to make these investments and make a decent return on the money over time.
For example, Google is an investor in one of the world’s largest wind farms with General Electric in Oregon, and in a large solar thermal farm outside of Las Vegas. This is likely the way that Google would invest in the Kenyan wind farm.
So yes, solar and wind farm backers usually make money. It’s a big and growing international business with traditional investors like Warren Buffett. Clean energy development has in recent years become much cheaper and more competitive with fossil fuel power, particularly large wind and solar panel farms.
Clean energy development is also a growing business in Africa, despite some of the limitations. The International Energy Agency says clean energy could deliver half of the growth of power generation in sub-Saharan Africa by 2040. Big private equity groups like Blackstone Group and Carlyle Group are investing in power generation on the continent.
The other main way that Google works with clean power is that it can commit to buying clean energy from a project once it’s completed. Often when it does this it’s because some of its data center infrastructure is in the same region as the clean energy farm.
Whichever model Google chooses, a big part of its motivation is its power-hungry data centers. Google both wants to make these energy sources cleaner, but it also wants more control over, and flexibility with, the energy options for its infrastructure.
In addition, Google is a well-known consumer-facing brand, and wants to maintain a good image. It also uses its environmentally-focused initiatives as a way to be a “mission-driven” organization and recruit and keep its employees.
But why Africa? Google has been interested in Kenya and greater Africa for awhile, and has offices across the continent. As many developed countries have brought almost their entire populations online, Google is keen to help connect the future of its Internet users who lack access to the Internet. The major resource that drives an Internet connection is an energy source.
This strategy informed Google’s Loon idea, which uses solar-powered balloons to create a floating Internet for off-grid Internet users. And it also leads into Google’s interest in energy in Africa, like this potential wind farm deal and its investment in the South African solar panel farm.
At an event earlier this year, Google’s vice president of energy John Woolard said that his “whole team is looking at the developing world and the 1.3 billion who don’t have access to electricity.” These are future Google customers and they need energy to access Google.
Woolard also noted at that event that when it comes to Google investing in clean energy projects, it can be “fairly forward leaning and take on some risk.” Some clean energy projects are riskier than others given the geography, partners and technology. Because Google isn’t a traditional energy investor, and has so much money, it can act a little differently and back riskier projects.
That applies to the Kenyan wind farm. At times the region has been under turmoil, and the project has faced a lot of issues as it’s been developed. One of it’s biggest needs right now is, not surprisingly, funding.
In that way, Google could also act as a lever for U.S. funding for the Lake Turkana wind farm. According to the report, Google’s investment could also help unlock a $250 million investment guarantee from the U.S. government’s development finance institution. President Obama has been encouraging U.S. investors to support 10 gigawatts of new energy for sub-Saharan Africa, but the U.S. funds can only be used if U.S. private investors are actively involved.
Updated at 7AM PST on October 20, with the official confirmation from Google.