Mountain View, Calif.-based Google (Nasdaq: GOOG) said today it expects to invest hundreds of millions of dollars in renewable energy over the next few years, and that it's setting up a research and development initiative called Renewable Energy Cheaper Than Coal, or RE<C.

The new R&D division will be run in partnership with Google's philanthropic arm, Google.org, which will handle the investments.

Google has an ambitious target to produce a gigawatt of renewable energy that is cheaper than coal within the next few years.

"Our own consumption is likely to be a big part of that," said Larry Page, Google's co-founder and president of products, in a conference call.

The company does not disclose how much power it uses, but it's estimated to have over 450,000 servers in locations around the world.

Google has put out the call for engineers and energy experts to lead its new RE<C division, which it said will probably start out with 20 or 30 employees and focus initially on advanced solar thermal power, wind power and enhanced geothermal systems.

"The goal is not to have huge margins here, the goal is to really replace the dirty energy that is out there," said Sergey Brin, Google's other co-founder and president of technology.

Already on the inside track are Pasadena, Calif., solar thermal startup eSolar, and Alameda, Calif.'s Makani Power, which is developing high-altitude wind energy technologies.

Check out a rendering of eSolar's concentrated solar set up >>

"We're working very closely with both those companies," said Page. He wouldn't disclose how much, if anything, Google has invested in the two startups, but they're likely to get a piece of the Google.org investment windfall.

Google.org was initially funded by one percent of Google's outstanding shares after its initial public offering, and one percent of its profit. That amounts to 3 million shares, valued at $2 billion dollars based on Monday's close, plus $265 million in cash so far to establish the Google Foundation and for grants and investments.

For 2008, Google said it expects to spend tens of millions on research and development at its new RE<C group and on related investments in that year alone.

Google's green energy czar, Bill Weihl, said they want to accelerate the pace of technology development to drive down the costs. "We think we need to get in the range of 1 to 3 cents per kilowatt hour for solar or other renewables to be really competitive with coal."

It's possible there could be Gwindmills or Gsolar panels, or even Ggeothermal power in the future, but more than likely the group's research will be licensed out to others.

"In cases, for example, where it's been created as the result of an investment in a renewable energy company, it would be somewhat up to them, though I think we would encourage them to license it on fairly favorable terms to get it widely out there and perhaps on somewhat lower margins as a consequence," said Brin.

He said the group could also send people to build the technology and take a profit on setting up the infrastructure, or take some percentage of the cash pulled in by companies that sell the power.

The company has already developed energy efficiency technology to power and cool its data centers, and it generates electricity for its Mountain View campus from a 1.6 megawatt solar panel installation, one of the largest in the U.S., but that's not always enough.

"It's very hard for us to find places to locate that aren't, say, coal-based or other dirty technologies, and we don't feel good about being in that situation as a company, we feel hypocritical," said Page.

He said the company wants to make the investments happen so that there will be alternatives for Google to use down the road.

"We see investments that would pay back money on reasonable timescales that we can make now for our own datacenter use and to put onto the grid," said Page.

Google is likely to get flooded with interest from startups eager for some cash, as it did with its much smaller $10 million plug-in hybrid request for proposals in September (see Plug-in hybrids can Google for cash).

Larry Brilliant, executive director of Google.org, said, "I think we thought we'd get 20 or 30 responses — we got over 300. And some of them are quite innovative. I think it speaks to the, really the dearth of capital for some of these innovative ideas."