For nearly a decade, coalitions of tech giants have worked together to green the grid. The acknowledgement that corporate energy footprints were a significant part of the evolving conversation on climate change brought Google, Microsoft, Amazon, and others together in pursuit of market structures, policies, and deals that would push utilities to modernize.
But Google’s $4.75 billion cash acquisition of energy and data center developer Intersect Power, a few days before Christmas, may signal the end of that era — and a fundamental shift in the customer-builder relationship between hyperscalers and the power sector.
The acquisition is limited in scope. Google will only absorb Intersect’s development capabilities, rather than any of its existing operating assets, which the pair said will be spun out as a separate company to serve existing customers. And it’s relatively small in scale, given the company’s massive data center projections. But it’s an important indicator of how the country’s largest power consumers think about the current electron race, said Caroline Golin, Google’s former global head of energy.
“Five years ago [vertical integration] didn’t make sense… now it does, because there is no way to procure the option on power in this country unless you own it,” Golin explained on a recent episode of Open Circuit.
In today’s landscape, the most valuable asset isn’t energy itself, she added, but rather the strategic flexibility for a buyer to claim uncommitted, grid-ready power where and when they need it.
“If you can create that contract structure through exclusivity, then you know you’re able to be fungible across your portfolio, and that is something that is priceless right now,” she said. The energy plus renewable energy credits strategy that hyperscalers have been following is a thing of the past, Golin added: “Any developer going to the market trying to sell 30-year PPAs that look like the same thing we were buying in 2021 have sort of missed the alarm clock.”
Intersect’s opportune moment
The deal also illustrates a structural change playing out inside Google: a few years ago, the company’s energy team, led by Golin, was focused on meeting sustainability goals. But energy is now a competitive advantage for all of the big tech companies, and that outweighs the prior bonds of shared climate goals, Golin said.
Many major tech companies have been grappling with how to balance vertical integration with reliance on expert third parties — and Google has come down on the vertical integration side of that equation.
“At first everyone thought [vertical integration] was a terrible idea,” Golin said. “But I think that after the last couple of months, that thesis has played out played out for Google.”
For more of Caroline Golin’s take on the Intersect acquisition, listen to the Open Circuit podcast:
Intersect, which expects to have around 10.8 gigawatts in operation and under construction by late 2028, is uniquely positioned to take advantage of that change.
While major developers, like Brookfield and NextEra, operate by purchasing projects from smaller players and signing power purchase agreements (including with Google), Intersect’s approach is to create “naked projects” without those agreements, explained Golin’s Open Circuit co-host Jigar Shah, an early investor in Intersect and former head of the DOE Loan Programs Office.
Intersect’s approach meant the company didn’t get any money up-front for projects, which were instead financed via debt and equity. That structure came with risk, but really started to pay off in 2022, when the conflict in Ukraine caused massive spikes in oil and gas prices, Shah said. Most developers weren’t able to take advantage of those higher prices, because their assets were tied up in existing contracts. Intersect wasn’t locked into PPAs, leaving founder and CEO Sheldon Kimber free “to sign contracts at much higher prices to hyperscalers.”
The end of the PPA?
The question of what exactly Google’s decision to in-house energy and data center development capabilities will mean for other developers competing for hyperscaler business remains to be seen. Notably, Intersect was already working with Google, which was an investor, prior to the acquisition, including on a co-located data center and an energy storage project near a Google data center campus in Texas. The fact that Google had an existing offtake relationship makes the pivot to full equity owner of projects “not a meaningful surprise,” Jeffries analyst Julien Dumoulin-Smith wrote in late December.
“If anything, this emphasizes the quantum of capital needed by project developers, and the appeal of simply raising this with the hyperscalers rather than via [infrastructure funds]/public markets,” Dumoulin-Smith added.
That said, in the wake of the Intersect deal, there will be a lot of focus on NextEra Energy, which has bet heavily on a strategic partnership with Google that it announced late last year. For now, the company doesn’t appear to be competing with Intersect for territory; Intersect is largely focused on California and Texas, NextEra is seemingly focused on the midwest and central U.S., Dumoulin-Smith wrote.
The key question now is whether NextEra, under increased scrutiny and pressure, can match Intersect’s speed and deliver on contracts promised in 2026.
Intersect, meanwhile, will have its own challenges. Golin also pointed to the geographic limitations of the Intersect/Google “energy park” approach, in which data centers draw power from co-located solar or batteries.
“It’s a model that only works in Texas right now,” Golin explained. ERCOT, which has established protocols to allow companies to offset their power use with onsite generation, but most other markets in the country don’t. “I think that’s going to be the real test for Google and Intersect moving forward: how do you take that model and then interject an IOU in the middle of the sleeve?”
Despite that challenge, Golin expects the Intersect deal to be the first move in an emerging trend — albeit one that may take a while to materialize. “I can’t say that there are going to be a stream of acquisitions after this,” she acknowledged, given that to integrate or not is a constant question at Google and other tech companies. “But this one makes sense for operational flexibility. And anything that does, I think you’ll see increasing investment in.”
