Can Google Find Success in the Utility Sector?

The U.S. Environmental Protection Agency (EPA) recently proposed new guidelines for the utility industry to trim carbon emissions by 30% by 2030. The guidelines also aim at shrinking electricity bills by 8%.

Industry insiders like Xcel Energy (NYSE: XEL  ) and NRG Energy (NYSE: NRG  )  may benefit with their policies to reduce carbon emissions. Though the advertising sector is the big driver at Google (NASDAQ: GOOG  ) , the company also looks poised to make gains. How can this technology juggernaut achieve this objective? Its partnership with SunPower Corporation, along with its acquisition of Nest Labs, may make the utility sector the next big thing for Google.

A new era in power generation
The federal government is pushing for the development of greener, cleaner power supplies. President Barack Obama mounted a second-term drive to combat climate change. His plan aims to help move the U.S. into a future fired by wind and solar power. That's good for companies investing heavily in the renewable power sector.

What is Google doing?
Google has announced an initiative with SunPower Corporation to help finance residential rooftop solar systems. The goal is to make it easier for homes to adopt solar energy products. The fund is comprised of $100 million from Google and $150 million from SunPower. Google buys the solar panels systems and then leases them to the homeowner at a price lower than their normal electricity bill. Google hopes the project will generate attractive financial returns in the future.

Google also acquired Nest Labs for $3.2 billion earlier this year. Nest Labs makes a smart thermostat. The product is a crucial piece toward the reduction of carbon emissions. The EPA plans to give states broad opportunities in how they cut down on carbon emissions. The plan will also apply to the demand side. People may have to upgrade their homes to consume less power. Google's acquisition will take advantage of the situation.

Is this the next big thing?
A major growth area in the renewable energy space is the solar energy sector. According to the Solar Energy Industries Association, home owners and developers installed 1.33 gigawatts of solar panels in the first quarter. Installations increased 79% from the same quarter a year earlier. Total installations may reach 6.6 gigawatts this year, said GTM Research.

Google's gain
Google is slowly turning itself into a major funding source for renewable energy companies. So far, Google has committed over $1 billion to wind and solar power plants. Acquisitions like Nest Labs are helping the tech giant enter an aging but vital industry. The solar power initiatives will allow Google take a key seat at the table with companies such as NRG. In time, Google's utility business may become a major source of income for the company.

The peers are not resting
NRG made a $1 million commitment to bring solar power to rural areas of Haiti. It is doing this through the Clinton Global Initiative. The plan is to demonstrate the flexibility of solar power and demonstrate how it could create business opportunities in the Caribbean for NRG.

Xcel Energy is trying to be proactive on the carbon front. Minnesota regulators approved 29 renewable energy projects to receive $42 million in grants from Xcel Energy Renewable Development Fund. The owners of the projects sell the generated electricity to Xcel Energy.

Foolish takeaway
Although Google is an outsider in the utility sector, it may actually benefit from the EPA mandate to trim carbon dioxide emission by 30% by 2030. Its partnership with SunPower Corporation, along with its purchase of Nest Labs, may make the utility sector the next big thing in the near future.

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