On the one hand: GOOG is trying to build renewable that actually makes economic sense. Good for them. (I assume 'cheaper' means 'cheaper', not "cheaper when you factor in tax credits, gov't incentives, Renewable Portfolio Standards, RGGI, AB32, and so on". If it means the latter, this is a non-story.) Most renewable is a complicated ratepayer swindle.
On the other: 2007 wholesale electric power transactions (outside of Texas) look to be around $270B. So GOOGs investment comes to (very roughly) 0.1% of the market. Describing this as a 'cannonball' seems .... dramatic.
The industry is pretty hidebound, particularly on the T&D side. However, power is sold on relatively transparent spot markets in most of the country's ISOs (e.g. CAISO, PJM), and if generation technologies were sitting out there with significantly lower costs than what's in use today (renewable or no) I find it difficult to see how they could not have yet been deployed by some profit-seeking entrepreneur.
I-banks play heavily in this sector, so it's not as if, were the numbers to make sense, it would be hard to find someone with the capital to fund clever ideas.
I don't object to GOOGs actions: It's their money to spend, they sound like they're trying to come up with something innovative (though see my definition of 'cheap' above) and if they succeed, it will benefit everyone. I just think the odds are that the problem is a bit harder than they think, and that we're seeing a second prominent example of (slightly arrogant) SV s/w guys getting in over their heads. (Tesla is the first.)
Still, good luck to them.