Images: BrightSource Energy
A ray of sunshine amid the economic gloom: While some solar companies struggle through the downturn, BrightSource Energy on Wednesday morning announced the world’s largest solar energy deal to date – a 20-year contract to supply utility Southern California Edison with 1,300 megawatts of greenhouse gas-free electricity.
That’s more than twice the size of the previous world’s-biggest-solar-deal, a 553-megawatt power purchase agreement in 2007 between California utility PG&E and Israel’s Solel. BrightSource itself last year inked a deal to provide PG&E (PCG) with 500-megawatts of solar electricity with an option for 400 megawatts more.
“This proves the energy industry is recognizing the role solar thermal will play as we de-carbonize our energy supply,” BrightSource CEO John Woolard said Wednesday at a press conference. “We believe now more than ever the time is right for large-scale solar thermal.”
Oakland-based BrightSource will build seven solar power plants for Southern California Edison (EIX) using its “power tower” technology. Thousands of sun-tracking mirrors called heliostats focus the sun’s rays on a water-filled boiler that sits atop a tower. The intense heat creates steam which drives a turbine to generate electricity. BrightSource has built a prototype power plant in Israel.
BrightSource has raised more than $160 million from a blue-chip group of investors that includes Google (GOOG), Morgan Stanley (MS) and VantagePoint Venture Partners as well as a clutch of oil giants – Chevron (CVX), BP (BP) and Norway’s StatoilHydro.
If all the solar power plants are built, BrightSource’s deal with Southern California Edison will generate enough electricity to power about 845,000 homes. The agreement is a vote of confidence in the solar industry at a time when the financial crisis has forced BrightSource rivals like OptiSolar to lay off workers while Ausra retools its strategy to focus on supplying solar thermal technology to power plant developers rather than building projects itself.
Given the economic collapse, why are these massive megawatt deals still being done? First, California utilities are under tight deadlines to ratchet up the amount of electricity they obtain from renewable sources – 20% by the end of 2010 and 33% by 2020. Second, it costs nothing to sign a contract – no money has yet changed hands, and won’t unless the plants are built and begin producing electricity.
In fact, not a kilowatt of juice has been generated from the more than 5,000 megawatts of Big Solar contracts signed over the past four years by California’s three investor owned utilities (the third being San Diego Gas & Electric (SRE) ). Still, a long-term utility contract is key for a startup like BrightSource to obtain the billions in financing required to build large-scale solar power plants. The terms of utility contracts – such as the cost of the solar electricity produced – are closely held secrets but are worth billions, if a 2008 power purchase agreement between Spanish solar company Abengoa and utility Arizona Public Service is any guide.
A significant hurdle for BrightSource – and many other solar developers – is the expansion of the transmission grid to connect remote power plants to cities. BrightSource spokesman Keely Wachs says the company has 4,200 megawatts of solar power plant projects under development.
The Southern California Edison deal is something of a homecoming for American-Israeli solar pioneer Arnold Goldman, BrightSource’s founder and chairman. In the 1980s, during the first solar boom, his Luz International built nine solar power plants in the Mojave. Those plants, most are now operated by FPL (FPL), continue to provide electricity to Edison.
The first BrightSource solar farm for Edison is expected to go online in early 2013. It’s a 100 megawatt power plant part of BrightSource’s Ivanpah complex to be built on federal land on the California-Nevada border in the Mojave Desert. That plant is currently wending its way through a complex state and federal licensing process.
Just how complex was illustrated by a meeting Green Wombat attended Tuesday in Sacramento, where a roomful of state and federal officials spent hours discussing the environmental impact of a 750-megawatt solar power plant to be built by Phoenix’s Stirling Energy Systems for San Diego Gas & Electric that would plant 30,000 solar dishes in the desert. A second Stirling solar farm will be built for Southern California Edision. When the deals were announced in 2005, they were the world’s largest at the time.
PG&E chief executive Peter Darbee recently said his utility will begin directly investing in solar power projects. On Wednesday, Southern California Edison renewable energy executive Stuart Hemphill said Edison would consider requests from solar power developers to take ownership stakes in their projects but prefers to sign power purchase agreements.
“We do see solar as the large untapped resource, particularly in Southern California,” said Hemphill.
Green Wombat 
Well it is good to see Brightsource get the contracts. I never worked with any of them on the original Luz projects but I know quite a few people who did. By most accounts they were very good engineers, if not great businessmen.
Here is the main reason I am not getting too excited about any of this right now. They are just contracts and don’t have much to do with the projects getting financed. Sure they may help but unless the finance people are sure they can get their money back they are not going to get funded. This is basically a new technology and there are lots of questions on how well it will work. I personally feel that Brightsource’s technology will be better because it is able to track the sun, not just east to west, but can also adjust for seasonal north to south sun movement. The current, more common trough technology, is not able to do this.
Now there are huge PR advantages for Edison to sign these contracts. Really all they are is a promise to buy power for such and such a price but there are so many ways out of these contracts they really don’t mean much in my book. In the mean time Edison gets to tell the whole world how green they are without actually having to spend the money. FPL’s Florida solar project with Ausra a few years ago was a great example of this. Also do you really think California will hold PG&E and Edison to renewable energy standards in 2010 if they have all these “signed” contracts? I am hopeful that some of these projects will eventually get built but I am not holding my breath right now.
It is indeed a smart move by Southern California Edison and by BrightSource Energy as well.
Certainly SCE is buying energy at a very, very low price, for mney that it will have to pay long time ahead, when the economy is already back on track.
BrightSource Energy will emerge as one of the strongest competitors at the time.
Gabriel McKinsey
Intercambio Cursos no Exterior
Over the course of last year we heard about a handful of energy farms sprouting up and I do believe that this year the trend will be for investors to take on these projects. I dont think there is any bigger growth sector in 2009-2010 than the green initiative, and there is no better cause, in my opinion.
Ryan
Eco Home Site
What productive, socioeconomically beneficial role might the venture capital industry play broadly in the upcoming economic stimulus/recovery efforts?
http://bgladd.blogspot.com/2009/02/what-now.html
Steve
Solar thermal or CSP is not new technology. 9 small pilot plants built in the late 80s – early 90s in the Mojave Desert are putting out 355 MW. And then there’s the Nevada pilot plants. It is way more proven than new nuclear technology or carbon capture and sequestration. No comparison in fact.
Solar thermal with heat storage is our best renewable choice because it can provide steady base load power day and night and replace coal fired plants.
And can be built much faster than coal or nuclear.
I don’t mean to imply that wind isn’t also an excellent choice for it’s own reasons, like price and being the greenest of all.
Having said that, I’m curious why this Brightsource project isn’t using heat storage as far as I know.
Solar thermal is so low tech it could have been done 100 years ago.
Check out the proposal (TREC) to build CSP around the Mediterranean and power Europe, the Mid East and North Africa, while supplying hot water and desalinization of sea water.
http://www.solarserver.de/solarmagazin/solar-report_0207_e.html
Richard I am very familiar CSP and the Mojave solar plants. I operated the two largest for over five years. I am also familiar with the Nevada “pilot” plant, having several friends who work there. I wouldn’t exactly call any of the plants you mentioned “pilot” plants. I also would not exactly call solar-thermal “low tech”.
Ok first I am going to say I am a fan of solar-thermal, especially when compared to other renewables. I will take exception with several of your statements though. There is no comparison to solar with more conventional sources of producing electricity simply because, even with the proposed storage systems, we can not run our country on them. With the limited number of plants that are going to be built, any time soon, this is not a problem. But we would need storage that lasts for weeks, not simply a few hours or couple of days. The limited proposed storage would be great for adjusting for daily load and would be something utilities would pay a premium for. Another thing that is misleading is saying that the Mojave plants are 355 Mw’s. They can only do this a couple of hours a day and then only for a month or two a year. The rest of the time it is less. They are only going to produce about 25% of rated capacity on any annual basis. Also, by contract, they are allowed to produce 25% of their power with natural gas. Most of the time they do not do this but with the low gas prices they are burning more of it now.
The reason Brightsource is not using storage is because the is no financial incentive for the to do so. There is also not a really proven system out there that I am aware of. There have been some work done with molten salt but that would add a lot of expense and complexity. For right now we need to be figuring out how to lower costs and then we can worry about storage. Hopefully we can figure out efficient long term storage and get a smarter grid and then maybe solar-thermal will become important.