Every year, Google Inc. invites a group of global A-listers to its own Davos-style conference to think big thoughts. The event, called Zeitgeist, tends to be as pretentious as its name—captains of industry, finance, and government chattering onstage in front of about 400 of Google’s friends and customers about the fate of the internet and the world.

The 2008 version bordered on the surreal. The stock market was tanking, the bond market had flatlined, and the price of gold was surging to its biggest one-day jump in nearly a decade, an indication that investors everywhere thought the global economy was going to hell.

Yet here was Eric Schmidt, Google’s chairman and CEO, on a sparse stage at the company’s Mountain View, California, headquarters, in a green-energy love-in with his counterpart at General Electric Co., Jeff Immelt. The pair bathed in the glow of each other’s affirmation, convinced that the two companies, working together, can save the planet. ( View a graphic showing how much energy Google's own data centers use.)

“I don’t think this is hard,” Immelt said in response to a question from Al Gore, a Google groupie. “I’d say health care is hard. Solving the U.S.’s health-care system is actually quite difficult. Energy actually isn’t hard. The technology exists; it doesn’t have to be invented. It needs to be applied.… We make the gadgets—smart electric meters, things like that. People like Google can make the software, which makes the system. That’s the key to renewable energy.”

Schmidt and Immelt are betting big that green energy will become the steam engine of the Obama age—the driver of a new industrial revolution that can generate untold amounts of jobs and economic growth while rescuing the earth from global warming. For GE, with its massive energy division, including investments in windmills, air conditioners, and power plants, an interest in grabbing part of the renewable-energy business is a no-brainer. As Immelt tells me in an interview, GE doesn’t need Google’s technology so much as it needs its cachet. “Google has a special brand around consumer-user interface, around software and the internet,” he says. “I think that there’s clearly a halo about two great brands when they get together.”

It is Google—with a thinner résumé but an enormous bank account—that is the curiosity. Schmidt’s ambition is to turn Google into the, well, Google of the renewable-energy economy. Just as it imposed order on an unruly Web, Google is hoping to make sense of an always-on electricity grid and help consumers decide when to power up appliances and plug-in cars and when to turn them off. The company is investing tens of millions of dollars—with plans for hundreds of millions more—to reorganize America’s antiquated energy infrastructure in the image of the internet: decentralized, distributed, disembodied. “If you do this right,” says Schmidt, “it sure sounds a lot like the internet: a set of cooperating networks where the traffic and power flow, where people can connect with anything they want. They can be consumers as well as producers. The internet created a tremendous amount of wealth for America, and I think we can do it here too.”

Google’s higher calling comes directly from co-founders Sergey Brin and Larry Page, both ardent environmentalists. But it’s made real by the same moxie that has driven Google to create digital editions of 7 million books, with scant concern for copyright issues, and to amass satellite images of almost all of the earth’s nooks and crannies. “We only hire people who really, genuinely believe that big change is possible and the right thing to do,” says Erik Teetzel, a 34-year-old Google engineer who heads a team of researchers looking for ways to produce cheap renewable energy.

Still, now doesn’t seem like an ideal time for Google to be making such an ambitious move. Oil prices are down, eradicating much of the demand for alternatives to fossil fuels. A global economic downturn means many companies now consider green technology a luxury they can’t afford. Spending on green projects is being delayed while companies wait for the economic storm to pass. Even Google itself has had better days. Its internet-advertising franchise is under more strain than ever, and its stock price, once stratospheric, is down about 50 percent over the past year.

The truth is, Google has never been very successful at diversifying its business; 97 percent of its revenue still comes from online ads. Yet prospecting for new opportunities, at great expense and effort, remains as much a part of company lore as free gourmet meals. “Nine years ago, people said, ‘How can you charge people to do searches on the internet,’ ” says Teetzel. “Larry and Sergey said if you solve the big problem, you can figure out how to make money off it. The same idea applies to energy. If we solve the big problems, we’re going to figure out how to make money.”

Don’t put it past them, says Immelt, who signed an agreement at Zeitgeist to collaborate with Google on technology development and to jointly lobby Washington for green-energy projects. “I’ve never seen a company in my career do as many things well as quickly as Google has done,” he says.

Google’s goal in energy is twofold: First, it wants to make your home energy-smart, so that appliances know when to power up and power down, and heating and cooling systems respond automatically to changes in the price of energy. The company views this as essentially a software problem, akin to making sense of the torrent of information on the Web. But before Google can transform your home, it’s pushing for a revolution in the way energy is produced.