When Green Wombat sat down for a chat with Ausra founder David Mills back in September 2007, he allowed that it was not unreasonable to expect the Silicon Valley solar startup to soon be building several massive megawatt solar power plants a year. The optimism was not unwarranted. After all, in the space of 12 months Ausra had relocated from Sydney to Palo Alto, raised $40 million from A-list venture capitalists and was about to ink a deal with utility PG&E for a 177-megawatt solar power project.
That was then. This month Ausra laid off 10% of its 108 employees amid a move to stop building Big Solar projects – for now – to focus on providing its solar thermal technology to other power plant developers and to industries that use steam. (Ausra’s compact linear fresnel reflector technology deploys flat mirrors that sit low to the ground and concentrate sunlight on water-filled pipes that hang over the mirrors. The superheated water creates steam which drives an electricity-generating turbine.)
“I think our competitors will figure this out sooner or later but nobody’s going from a five-megawatt project to a 500-megawatt project. No one’s going to finance that,” Ausra CEO Bob Fishman told Green Wombat. “If you look at the amount of money it takes to be involved in the project development business, that’s not something a startup can do.”
At least any time soon. Ausra last year opened a robotic factory in Las Vegas to make mirror arrays and other components for the many power plant projects it had on the drawing boards. Just three months ago the company flipped the switch on its five-megawatt Kimberlina demonstration power plant outside Bakersfield. But as the credit crunch hit, financing for billion-dollar solar power projects evaporated. Then in October, Congress passed legislation allowing utilities like PG&E (PCG), Southern California Edison (EIX) and San Diego Gas & Electric (SRE) to claim a 30% investment tax credit for solar projects. As the only well-capitalized institutions left standing in the energy game, utilities are stepping forward as investors.
PG&E CEO Peter Darbee says he’s prepared to make direct investments in solar power plants – projects the utility needs to comply with a California mandate to obtain 20% of its electricity from renewable sources by 2010 and 33% by 2020. Under pressure to meet those targets, California utilities have signed more than four gigawatts worth of power purchase agreements with solar power plant startups like BrightSource Energy, Solel, Stirling Energy Systems and eSolar. Utilities also have begun signing deals for electricity produced by smaller scale photovoltaic power plants built by companies like First Solar (FSLR) and SunPower (SPWRA).
Fishman said Ausra will complete the 177-megawatt Carrizo Energy Solar Farm in San Luis Obispo County on California’s central coast to supply electricity to PG&E. “If Peter Darbee wants to own Carrizo rather than buy the electricity, we’re willing to do it. It makes sense,” he says.
Ausra will also will complete a second big solar power plant planned for Arizona. But the company has quietly let drop a Florida project for utility FPL (FPL) and is negotiating to offload lease claims it filed on federal land in Arizona and Nevada for solar power plants during the solar land rush.
“Other projects in the pipeline we’ll be selling to utilities or developers for a modest amount of cash with a commitment that those developers must use our technology,” says Fishman.
Fishman notes that the cost of licensing a solar power plant can be $5 million to $10 million a year – and in California it’s a multi-year process – so Ausra will realize some immediate savings by morphing into a technology provider.
Customers for Ausra’s technology include oil companies that could inject solar-generated steam in oil wells to enhance recovery of thick petroleum as well as food processing plants and other heavy users of steam. Fishman just returned from a trip to the Middle East where he says he held talks in Kuwait, Qatar and Dubai about using Ausra’s technology for oil recovery and desalinization.
Going forward, he says Ausra’s focus will be on medium-sized power plants. “Maybe next year we’ll do four projects of 50 megawatts a year. It’s a walk before you run situation,” says Fishman. “The financial customers and financial community are going to insist we do medium scale before we do large scale. We’ll still want to do very large projects but given the project finance market, it’ll be a few years from now.”