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The solar land rush

Posted in Abengoa Solar, alternative energy, Ausra, BrightSource Energy, climate change, endangered species, environment, global warming, OptiSolar, PG&E, renewable energy, solar energy, solar power plants, Solel, tagged , , , , , , , , , on July 15, 2008| 2 Comments »

For those readers who missed Green Wombat’s feature story on the solar land rush in the July 21 issue of Fortune – available here at Fortune.com – I reprint below.

The Southwest desert’s real estate boom

From California to Arizona, demand for sites for solar power projects has ignited a land grab.

By Todd Woody, senior editor

(Fortune Magazine) — Doug Buchanan grins with relief when he sees the carcasses. He has just driven up a steep dirt road onto a vast, sunbaked mesa overlooking the Mojave Desert in western Nevada. There, a few feet from the trail, lie the corpses of two steers. A raven perches on one, the only object more than three feet above the ground on this pancake-flat plateau. Cattle, dead or alive, qualify as good news in Buchanan’s line of work. If cattle are present, that means grazing is permitted, and that in turn means that this land is most likely not protected habitat for the desert tortoise.

Buchanan, 53, is scouting sites for a solar power company called BrightSource Energy, an Oakland-based startup backed by Google and Morgan Stanley. The blunt, fifth-generation Californian, who used to survey the same area for natural-gas power sites, knows that the presence of an endangered species such as the tortoise could derail BrightSource’s plans to build a multibillion-dollar solar energy plant on the mesa.

BrightSource badly wants these 20 square miles of federal land on what is called Mormon Mesa. The company was in such a hurry to stake its claim with the U.S. Bureau of Land Management that it applied for a lease sight unseen. That’s an expensive gamble for a startup, given that application fees alone run in the six figures. “I usually like to go out and kick the tires before filing a claim,” Buchanan says, “but there’s a lot of competitive pressure these days to move fast.”

That’s putting it mildly. A solar land rush is rolling across the desert Southwest. Goldman Sachs, utilities PG&E and FPL, Silicon Valley startups, Israeli and German solar firms, Chevron, speculators – all are scrambling to lock up hundreds of thousands of acres of long-worthless land now coveted as sites for solar power plants.

The race has barely begun – finished plants are years away – but it’s blazing fastest in the Mojave, where the federal government controls immense stretches of some of the world’s best solar real estate right next to the nation’s biggest electricity markets. Just 20 months ago only five applications for solar sites had been filed with the BLM in the California Mojave. Today 104 claims have been received for nearly a million acres of land, representing a theoretical 60 gigawatts of electricity. (The entire state of California currently consumes 33 gigawatts annually.)

It’s not just a federal-land grab either. Buyers are also vying for private property. Some are paying upwards of $10,000 an acre for desert dirt that a few years ago would have sold for $500.

No doubt the prospect of potential riches is overheating expectations. But California and surrounding states have mandated massive increases in renewable energy in the next few years. That has led some experts at Emerging Energy Research of Cambridge, Mass., to predict that Big Solar could be a $45 billion market by 2020.

Meanwhile, the land rush is setting the stage for a showdown between solar investors and those who want to protect a fragile environment that is home to the desert tortoise and other rare critters. The Southwest is on the cusp of what could be a green revolution. And the biggest obstacle of all may be … environmentalists.

***

Over the past year a parade of executives bearing land claims have made the trek to a stucco BLM office just off the interstate in the dusty city of Needles, Calif., a 110-mile drive south from Las Vegas. (It’s the town where the late “Peanuts” cartoonist, Charles M. Schulz, briefly lived as a boy; in the comic strip, Snoopy’s brother Spike is a resident.) The Bush administration has instructed the BLM to facilitate renewable-energy projects (along with nonrenewable ones). But Sterling White, the BLM’s earnest Needles field manager, is also concerned about what could happen if they transform the Mojave into a collection of giant power stations. “One of our biggest challenges is the cumulative impact of these projects,” he says.

Nearly 80% of the land that White’s office oversees is federally protected wilderness or endangered-species habitat. That leaves about 700,000 acres for solar power plants, only some of which are near transmission lines. Land leases are handed out on a first-come, first-served basis, but White is also supposed to weed out speculators from genuine solar developers based on loose criteria such as who is negotiating with utilities and who is applying for state power licenses. White has yet to approve a single lease, but he has summarily rejected four because they lie in protected-species habitat.

***

Solar prospectors tend to be as secretive about their land as forty-niners were about the veins of gold they discovered. Most bids are placed by limited-liability corporations with opaque names that conceal their ownership. And no one has been as quick to move into the Mojave – or as tightlipped about it – as Solar Investments.

That entity, it turns out, is Goldman Sachs’s solar subsidiary. The investment bank’s designs on the desert are a topic of intense interest and speculation. Goldman declined to comment. But here’s what we know:

Solar Investments filed its first land claim in December 2006 and within a month had applied for more than 125,000 acres for power plants that would produce ten gigawatts of electricity. Many of the sites lie close to the transmission lines that connect the desert to coastal cities. (Goldman has also staked claims on 40,000 acres of the Nevada desert.)

Nobody expects Goldman to begin operating solar plants. It will probably either partner with another developer or sell its limited-liability company (and its leases) outright. The firm has been making the rounds of solar developers. “The conversation’s been pretty wide-ranging, primarily as an investor interested in financing deals,” says one solar energy executive approached by Goldman. “But there’s clearly an element of interest in our technology.” Goldman has requested permission to install meteorological equipment on its sites and is evaluating “competing technologies, including solar dish systems, power towers, and large-scale photovoltaic arrays,” according to a letter Goldman sent to the BLM in August 2007.

Competitors are lining up behind Goldman, staking claims on some of the same sites in hopes the bank will abandon them. PG&E and FPL, for instance, are in the queue after Goldman on one site. Solel, an Israeli solar company that last year scored a contract to deliver 553 megawatts to PG&E, is third in line behind Goldman on another.

“I view Goldman as a very interesting indicator of things to come,” says Brian McDonald, PG&E’s director of renewable-resource development. “They’re usually ahead of the curve – you can extract a huge amount of value if you get in early.” There’s other smart money here too. A Palo Alto startup called Ausra received $40 million from the elite green venture capitalists Vinod Khosla and Kleiner Perkins Caufield & Byers. Ausra has signed a deal with PG&E and announced its intention to construct a gigawatt’s worth of projects a year.

Most of the power production contemplated for the Mojave will rely on solar thermal technology – the common approach in large-scale generation projects – in which arrays of mirrors heat liquids to produce steam that drives electricity-generating turbines. But a secretive Hayward, Calif., startup called OptiSolar has filed claims on 105,300 acres to build nine gigawatts’ worth of photovoltaic power plants, which employ solar panels similar to those found on residential rooftops. (The company also has applied for leases on 21,800 acres in Arizona and Nevada.) To put those ambitions in context, the biggest photovoltaic power plant operating today produces 15 megawatts. Says OptiSolar executive vice president Phil Rettger: “We have a proprietary technology and a business approach that we’re convinced will let us deploy PV at large scale and be competitive with other forms of renewable energy.”

***

With the prime BLM sites quickly being snapped up – recently the agency temporarily stopped accepting new land claims while it develops a desertwide solar policy – competition is growing for private land. Here, too, the emphasis on secrecy borders on the obsessive. A request to view a piece of desert that is up for sale is treated as if I had asked to visit Area 51.

Waiting outside a roadside diner in southwestern Arizona – I’ve promised not to say where – with BrightSource senior vice president Tom Doyle, I expect to see a weather-beaten farmer come chugging up in a battered pickup. Instead, a pale-green Volvo SUV driven by a physician glides into the parking lot. The doctor, who wishes to remain anonymous, acquired the land two years ago as the renewable-energy boom got underway. “We thought we’d put solar on it – that’s the reason we bought it,” the doctor says as we pile into the Volvo and head into the desert to visit the site. After about five miles we turn off the road and come to a stop in a rocky patch of desert framed by low-slung mountains and buttes. Doyle quizzes the physician about water rights, endangered species, and access to transmission lines before moving out of earshot to talk dollars. The whole process takes only about 20 minutes – the two sides ultimately decide not to do a deal – and then Doyle is on to visit the next potential property.

Such is the land frenzy that farmers in Arizona were paid $45 million for 1,920 acres by Spanish solar company Abengoa so that it could build a 280-megawatt power plant; the land had an assessed value of a few hundred thousand dollars. The company also plunked down $30 million for 3,000 acres in the California Mojave that had traded hands for $1.25 million nine years earlier. That prompted developer Scott Martin to put his adjacent 300-acre parcel – land he had bought only a few months earlier for $457,500 – on the market for $3 million. Also for sale: a $15 million, 3,000-acre tract near Palm Springs, which Martin began shopping around to solar executives like Ausra’s Perry Fontana. When I join Fontana to check out the site, a onetime World War II air base outside the Mojave ghost town of Rice, he says, “I probably get three calls a day from brokers or landowners.” As if on cue, his Bluetooth earpiece lights up with a cold call from a broker peddling some land near Needles.

***

Green energy is not about to get a green light from all environmentalists. “We’re going to challenge these big solar projects, and there’s going to be tremendous environmental battles,” says veteran California activist Phil Klasky, a member of several green groups who helped lead a campaign in the 1990s that scuttled a radioactive-waste dump planned in tortoise territory in the Mojave. “Large solar arrays will have an impact on surrounding critical habitat for the desert tortoise and other threatened species. We have to fight global warming, but just because it’s solar doesn’t make it right.”

The developers are worried about resistance. “I remember the spotted owl,” says Fred Morse, a former Department of Energy official who is a senior advisor to Abengoa’s U.S. operations. The widespread logging of ancient forests, home to the northern spotted owl, set off epic environmental fights in the 1980s and ’90s. As Morse puts it, “The Mohave ground squirrel or the desert tortoise – any one of them could become a cause.”

Solar energy companies may make for less tempting targets than timber barons, but development of the desert has never been attempted on such a scale. The result is that some environmentalists find themselves anguished over which side to take. “We’ve had our share of conflicts over endangered species in this state, no doubt about it,” says Kevin Hunting, a biologist and a deputy director of the California Department of Fish and Game, which enforces the state endangered-species laws. “We’re actively looking to strike that critical balance between the state’s renewable-energy goals and conserving species that are vulnerable. It’s challenging.”

California wildlife regulators, for instance, have peppered Ausra with requests for more biological surveys on the site of a 177-megawatt solar power plant to be built in San Luis Obispo County. The feds could also require Ausra to prepare a plan to protect the San Joaquin kit fox, a process that could take years and shred the project’s economic viability.

Worse for developers, state and federal law require wildlife officials to consider the total impact of multiple projects when weighing whether to approve any individual facility. Next door to Ausra’s solar farm, for example, is OptiSolar’s planned 550-megawatt power plant, which would cover 9 1/2 square miles of potential endangered-species habitat with solar panels. Will the regulators approve one? Both? Nobody knows.

In the meantime, the solar land rush is unlikely to cool down. Which is why Morse wants to keep quiet Abengoa’s $30 million real estate deal. The company is applying to build a 250-megawatt solar power plant on the site, and it may be in the market for more land. “We don’t want to publicize that purchase,” he says, “as the speculators will be coming out of the woodwork.”

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Putting the big in Big Solar

Posted in alternative energy, Ausra, BrightSource Energy, endangered species, PG&E, renewable energy, solar energy, solar power plants, Solel, Southern California Edison, Stirling Energy Systems, tagged , , , , , , , , on July 10, 2008| 7 Comments »

Nearly three years ago, two Southern California utilities caused a stir when they announced deals to buy up to 1.75 gigawatts of electricity from massive solar farms to be built by Stirling Energy Systems of Phoenix. The company had developed a Stirling solar dish – a 38-foot-high, 40-foot-wide mirrored structure that looks like a big shiny satellite receiver. The dish focuses the sun’s rays on a Stirling engine, heating hydrogen gas to drive pistons that generate electricity.

Plans called for as many as 70,000 solar dishes to carpet the desert. For Southern California Edison (EIX) and San Diego Gas & Electric (SRE) – both facing a state mandate to obtain 20 percent of their electricity from renewable sources by 2010 – it was a big gamble. As the years ticked by and Stirling tinkered with its technology, competitors like Ausra, BrightSource Energy and Solel came out of stealth mode and stole the limelight, signing deals with PG&E (PCG) and filing applications with California regulators to build solar power plants. By the time I visited Stirling’s test site in New Mexico in March 2007 for a Business 2.0 feature story, industry insiders were telling me – privately, of course – that Stirling would never make it; Stirling dishes were just too complex and too expensive to compete against more traditional solar technologies.

That may or may not end up being true, but Stirling has moved to silence the naysayers by filing a license application with the California Energy Commission for its first solar power plant – the world’s largest – a 30,000-dish, 750-megawatt project to be built 100 miles east of San Diego on 6,100 acres of federal land controlled by the U.S. Bureau of Land Management. (A energy commission licence application – an extremely detailed and expensive document; Stirling’s runs 2,600 pages – is considered a sign that a project has the wherewithal to move forward.)

The first phase of the SES Solar Two project will consist of 12,000 SunCatcher dishes generating 300 megawatts for San Diego Gas & Electric. While the Stirling solar dish is more complex and contains more moving parts than other solar thermal technologies – which use mirrors to heat liquids to generate steam to drive a standard electricity-generating turbine – or photovoltaic panels like those found on rooftops, it also offers some distinct advantages. For one thing, it’s the most efficient solar thermal technology, converting sunlight into electricity at a 31.25% rate.  Each 25-kilowatt dish is in fact a self-contained mini-power plant that can start generating electricity – and cash – as soon as it is installed. Stirling will build 1.5-megawatt clusters of 60 dishes that will begin paying for themselves as each pod goes online. A conventional solar thermal power plant, of course, must be completely built out – which can take a year or two depending on size – before generating electricity.

The 750-megawatt Stirling project will also use relatively little water – no small matter in the desert – compared to other solar thermal plants. According to Stirling, SES Solar Two will consume 33 acre-feet of water – to wash the dishs’ mirrors – which is equivalent to the annual water use of 33 Southern California households. In contrast, a solar power plant to be built by BrightSource Energy that is nearly half the size is projected to use 100 acre-feet of water annually while a 177-megawatt Ausra plant would use 22 acre-feet, according to the companies’ license applications.

Still, there’s some big hurdles for Stirling to overcome. While it did score a whopping $100 million in funding in April from Irish renewable energy company NTR, the company will need billions in project financing to build Solar Two. And the project’s second 450-megawatt phase is dependent on the utility completing a controversial new transmission line through the desert called the Sunrise Powerlink. Depending on how fast the project is approved, construction is expected to begin in 2009 and last more than three years.

The other big unknown is what environmental opposition may develop. Within 10 miles of the SES Solar Two site are proposals to build solar power plants on an additional 51,457 acres of BLM land. Then there are the wildlife issues. Several California-listed “species of special concern” have been found on the Stirling site, including the burrowing owl, flat-tailed horned lizard and the California horned lark.

Regardless it’s a big step forward for Stirling. As California Governor Arnold Schwarzenegger said in a statement, “This groundbreaking solar energy project is a perfect example of the clean renewable energy California can and will generate to meet our long-term energy and climate change goals.”

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News of Big Solar’s death premature

Posted in alternative energy, BrightSource Energy, energy, environment, investment tax credit, PG&E, renewable energy, solar energy, solar power plants, tagged , , , , on July 2, 2008| 9 Comments »

In a sign that solar industry and its political allies are starting to flex some real power, the federal government reversed course Wednesday and announced it would continue to accept new applications to build solar power plants on government land while developing an environmental policy for assessing the projects.

Green Wombat had been off the grid on holiday the past week and so was surprised to log back on to find the mainstream media and blogosphere ablaze over the Bush administration’s supposed move last month to halt big solar power plant projects in California’s Mojave Desert and elsewhere.

“Citing Need for Assessments, U.S. Freezes Solar Energy Projects,” read the headline on The New York Times story about the Bureau of Land Management’s decision to temporarily stop accepting new applications for solar power plants until it studies the environmental impact of industrializing the desert. “How to strangle an industry,” proclaimed Grist, a respected green policy blog about the move. Solar executives and politicians meanwhile slammed the BLM and predicted dark days for renewable energy. “This could completely stunt the growth of the industry,” the Times quoted Ausra exec Holly Gordon.

Problem is, those stories were dead wrong: The feds did not freeze a single solar power plant project currently under review. What was left unsaid, or just briefly mentioned, was the fact that the BLM is continuing to process the 125 solar power plant proposals already in the hopper. Those lease applications cover nearly a million acres for solar power plants that would produce 60 gigawatts of electricity if all are built, which they won’t be. Those projects alone will keep companies like Ausra, BrightSource Energy, FPL (FPL) and PG&E (PCG) busy for years to come, moratorium or not.

“We don’t even like to call it a moratorium,” says Alan Stein, a deputy district manager for the BLM in California. Stein called me on my mobile just as I was about to step into a kayak at Elkhorn Slough near Big Sur. I had spent several months talking to Stein and other BLM officials while criss-crossing the Mojave with solar energy executives for a forthcoming Fortune story and he seemed taken aback by the tone of the media coverage.

But the higher-ups in Washington got the message. “We heard the concerns expressed during the scoping period about waiting to consider new applications, and we are taking action,” said BLM Director James Caswell in a statement. “By continuing to accept and process new applications for solar energy projects, we will aggressively help meet growing interest in renewable energy sources while ensuring environmental protections.”

The head of the solar industry’s trade group, the Solar Energy Industries Association, declared victory. But SEIA president Rhone Resch complained in a statement that, “BLM has only resolved half the problem. They have yet to approve a single solar energy project. Expediting the permitting process is the next step in developing solar energy projects on federal lands.”

He’s right that the process – which is intertwined with California’s extensive environmental review of projects in that part of the Mojave – takes far too long. But developing a desert-wide environmental policy is absolutely essential for huge power plants that in total would cover hundreds of square miles of a fragile landscape home to protected wildlife and rare plants. Otherwise, watch each individual project get bogged down in endless environmental challenges.

What really threatens the nascent solar industry right now is not the BLM. Rather it’s the imminent expiration of the 30 percent investment tax credit that all these solar energy startups and their investors – which include companies such as Google (GOOG) and Morgan Stanley (MS) – are depending on make Big Solar economically viable. Congress has failed several times in recent months to extend the tax credit, which expires at the end of the year. If only solar energy execs and their supporters in Washington could exert the same influence on recalcitrant Republicans as they have on the BLM.

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First U.S. solar power plant factory goes online

Posted in alternative energy, Ausra, energy, environment, PG&E, solar energy, solar power plants, tagged , , , , , on June 30, 2008| 15 Comments »

LAS VEGAS – Hard by the Las Vegas airport, the industrial infrastructure of the solar economy is rising in a former furniture factory. Phalanxes of orange robots swivel and dip as they practice assembling components for solar power plants to be built by Silicon Valley startup Ausra.

It’s North America’s first solar power plant factory and it went online Monday when Ausra CEO Robert Fishman and U.S. Senate majority leader Harry Reid, D-Nevada, flipped the switch to start the production line. Ausra’s automated 130,000-square-foot factory is key to the Palo Alto company’s aim of cutting manufacturing costs to make solar energy competitive with fossil fuels.

A large robot picks up 78-square-foot pieces of glass and places them on a conveyor belt so a machine can apply strips of adhesive. Other robots transfer the glass to another line where a dozen bots weld together 53-foot-long steel frames. The completed solar arrays will be trucked to California where Ausra is building a 177-megawatt solar power station for utility PG&E (PCG) on 640 acres of agricultural land in San Luis Obispo County. (To see a video of the robots in action, click here.)

The arrays focus sunlight on water-filled tubes to create steam to drive a turbine. Ausra manufacturing exec David McKay points to where standard-issue boiler pipe will be fed into a machine and treated with a proprietary coating that transforms it into a solar receiver. At peak production the plant will churn out more than 700 megawatts’ worth of equipment year to keep 1,400 solar power plant construction workers employed. “We can produce a lot faster than what we can install,” says McKay.

However, the future of those jobs – and billions in future investments in renewable energy – hangs on whether Congress extends a crucial investment tax credit that the solar industry and utilities are relying on to make large-scale solar power plants competitive with the carbon-spewing variety. The investment tax credit expires at the end of the year and several attempts to pass legislation extending the ITC have failed despite support on both sides of the aisle.

Green Wombat met with the chairman of the Solar Energy Industries Association, Chris O’Brien, last week when he was in San Francisco to get an update on the ITC’s chances. “It’s an election year and it has become part of the political stalemate,” says O’Brien, who heads North America market development and government relations for Swiss-based solar cell equipment maker Oerlikon Solar. “I don’t see an imminent breakthrough.”

The pending demise of the tax credit is “having a significant effect on the development of new business,” according to O’Brien. Solar energy executives, of course, are reluctant to admit that deals are getting dashed, but there’s no doubt the loss of a 30 percent tax credit gives financiers and utilities pause when considering whether to green-light solar power plants that can cost a billion or two to construct.

O’Brien thinks the best-case scenario for the long-term extension of the ITC will come after the presidential election during the lame-duck session of Congress. Otherwise, he says, don’t expect action until around September 2009.

In the meantime, Ausra will keep its robots busy cranking out components for its first California power plant, which is scheduled to start producing green electricity in 2010.

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PG&E signs deal for world’s first hybrid biofuel solar power plant

Posted in alternative energy, biofuels, energy, environment, global warming, PG&E, renewable energy, solar energy, tagged , , , , , on June 12, 2008| 9 Comments »

California utility PG&E will buy 106.8 megawatts of electricity from a hybrid biofuel solar power plant to be built by a Portuguese firm in the state’s Central Valley.

The hybrid technology will allow two 53.4 megawatt plants to tap the sun and agricultural waste produced in surrounding Fresno County to generate green energy around the clock, according to San Joaquin Solar, a subsidiary of Portugal’s Martifer Renewables. For PG&E (PCG), 107 megawatts is just enough to keep the air conditioners running for some 75,000 homes. But if the biofuel solar hybrid performs as billed and can be scaled up, it’s a win-win – recycling ag waste – a huge and expensive problem in California – into electricity.

The percentage of electricity to be produced by solar versus biofuel and other details of the project’s design are sketchy. Andrew Byrnes, an executive with Spinnaker Energy – the San Diego company developing the project for Martifer – told Fortune that such information is “confidential” as are images of what the hybrid plant will look like and the identities of the company’s U.S. investors.

Here’s what we do know: San Joaquin Solar 1 and 2 will be built on private land outside the farming town of Coalinga. They will use long arrays of curved mirrors called solar troughs to focus the sun on liquid-filled tubes to produce steam that will drive electricity-generating turbines. That’s a standard solar technology currently operating in California and elsewhere. The biomass component of the plant will use agricultural waste, green waste and livestock manure to create heat that will generate steam.

It appears the biofuel will be used to keep the plant running at night or on overcast days. “The technologies can run simultaneously,” said Byrnes in an e-mail. “And when a cloud passes overhead (and after the sun sets) the solar facility can still generate energy, since the generation process is dependent on heat rather than direct solar radiation.”

While there is a natural gas-solar hybrid power plant under development in Southern California – see Green Wombat’s “The Prius of power plants” – San Joaquin Solar 1 and 2 will apparently be the world’s first biofuel solar hybrid.

Each power plant will each need 250,000 pounds of biomass a year to operate. Finding that fuel shouldn’t be a problem: Byrnes says a study shows that Fresno County alone produces nearly 2 million tons of ag waste annually.

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Google, Big Oil invest $115 million in solar startup

Posted in BrightSource Energy, climate change, energy, enviro startups, environment, global warming, Google, green financing, green tech, PG&E, renewable energy, solar energy, solar power plants, Uncategorized, tagged , , , , , , , , , on May 14, 2008| 7 Comments »

The souring economy hasn’t dissuaded green tech investors from making big bets on renewable energy. On Wednesday, solar power plant builder BrightSource Energy announced it had raised $115 million from a group of investors that include Google.org, the search giant’s philanthropic arm, and oil giants Chevron and BP.

The investment in the Oakland, Calif.-based startup is Google’s (GOOG) second big solar energy play in the past two months. In April, Google.org joined a $130 million round for eSolar, a Pasadena solar power plant company whose chairman is Idealab founder Bill Gross.

BrightSource Energy, started by American-Israeli solar pioneer Arnold Goldman, has contracts to supply California utility PG&E (PCG) with up to 900 megawatts of solar electricity from power plants to be built in the Mojave Desert on the California-Nevada border. BrightSource has developed a new solar technology, dubbed distributed power tower, that focuses fields of sun-tracking mirrors called heliostats on a tower containing a water-filled boiler. The sun’s rays superheat the water and the resulting steam drives an electricity-generating turbine. (Artist rendering of BrightSource’s planned Ivanpah plant above.)

Given that a 500-megawatt solar power plant can cost more than $1 billion to build, $115 million is but a drop in the bucket. But it will allow BrightSource, which previously raised $45 million, to proceed with the development of its technology as it seeks project financing for construction of its first power plants.

And it can’t hurt to have such high-profile backers when you negotiate power purchase agreements with utilities. Besides Google, BP Alternative Energy (BP) and Chevron Technology Ventures (CVX), previous investors participating in the new round include Morgan Stanley (MS), VantagePoint Venture Partners, Draper Fisher Jurvetson and DBL Investors.

Another new BrightSource investor is Norweigan oil and gas behemoth StatoilHydro (STO). Apparently, even Big Oil has seen the light when it comes to hedging its bets with green energy.

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PG&E chief’s green crusade

Posted in Ausra, BrightSource Energy, climate change, corporate green, corporate sustainability, endangered species, energy, energy efficiency, environment, global warming, green policy, nuclear energy, PG&E, renewable energy, solar energy, solar power plants, Southern California Edison, Tesla Motors, Think Global, wave power, wind power, tagged , , , , , , , , , , on May 1, 2008| 6 Comments »

“Years ago we came to the conclusion that global warming was a problem, it was an urgent problem and the need for action is now. The problem appears to be worse and more imminent today, and the need to take action sooner and take more significant action is greater than ever before” — PG&E Chairman and CEO Peter Darbee

The head of one of the nation’s largest utilities seemed to be channeling Al Gore on Tuesday when he met with a half-dozen environmental business writers, including Green Wombat, in the PG&E (PCG) boardroom in downtown San Francisco. While a lot of top executives talk green these days, for Darbee green has become the business model, one that represents the future of the utility industry in a carbon-constrained age.

As Katherine Ellison wrote in a feature story on PG&E that appeared in the final issue of Business 2.0 magazine last September, California’s large utilities — including Southern California Edison (EIX) and San Diego Gas & Electric (SRE) — are uniquely positioned to make the transition to renewable energy and profit from green power.

First of all, they have no choice. State regulators have mandated that California’s investor-owned utilities obtain 20 percent of their electricity from renewable sources by 2010 with a 33 percent target by 2020. Regulators have also prohibited the utilities from signing long-term contracts for dirty power – i.e. with the out-of-state coal-fired plants that currently supply 20 percent of California’s electricity. Second, PG&E and other California utilities profit when they sells less energy and thus emit fewer greenhouse gases. That’s because California regulators “decouple” utility profits from sales, setting their rate of return based on things like how well they encourage energy efficiency or promote green power.

Still, few utility CEOs have made green a corporate crusade like Darbee has since taking the top job in 2005. And the idea of a staid regulated monopoly embracing technological change and collaborating with the likes of Google (GOOG) and electric car company Tesla Motors on green tech initiatives still seems strange, if not slightly suspicious, to some Northern Californians, especially in left-leaning San Francisco where PG&E-bashing is local sport.

In a wide-ranging conversation, Darbee, 54, sketched sketched a future where being a successful utility is less about building big centralized power plants that sit idle until demand spikes and more about data management – tapping diverse sources of energy — from solar, wind and waves to electric cars — and balancing supply and demand through a smart grid that monitors everything from your home appliances to where you plugged in your car. “I love change, I love innovation,” says Darbee, who came to PG&E after a career in telecommunications and investment banking.

Renewable energy

“On renewable energy what we’ve seen is the market is thin,” says Darbee. “Demand just from ourselves is greater than supply in terms of reliable, well-funded companies that can provide the service.”

PG&E so far has signed power purchase agreements with three solar startups — Ausra, BrightSource Energy and Solel — for up to 1.6 gigawatts of electricity to be produced by massive solar power plants. Each company is deploying a different solar thermal technology and uncertainty over whether the billion-dollar solar power stations will ultimately be built has prompted PG&E to consider jumping into the Big Solar game itself.

“We’re looking hard at the question of whether we can get into the business ourselves in order to do solar and other forms of renewables on a larger scale,” Darbee says. “Let’s take some of the work that’s been done around solar thermal and see if we can partner with one of the vendors and own larger solar installations on a farm rather than on a rooftop.”

“I like the idea of bringing the balance sheet of a utility, $35 billion in assets, to bear on this problem,” he adds.

It’s an approach taken by the renewable energy arm of Florida-based utility FPL (FPL), which has applied to build a 250-megawatt solar power plant on the edge of the Mojave Desert in California.

For now, PG&E is placing its biggest green bets on solar and wind. The utility has also signed a 2-megawatt deal with Finavera Renewables for a pilot wave energy project off the Northern California coast. Given the power unleashed by the ocean 24/7, wave energy holds great promise, Darbee noted, but the technology is in its infancy. “How does this technology hold up against the tremendous power of the of the Pacific Ocean?”

Electric cars

Darbee is an auto enthusiast and is especially enthusiastic about electric vehicles and their potential to change the business models of both the utility and car industries. (At Fortune’s recent Brainstorm Green conference, Darbee took Think Global’s all-electric Think City coupe for a spin and participated in panels on solar energy and the electric car.)

California utilities look at electric cars and plug-in hybrids as mobile generators whose batteries can be tapped to supply electricity during peak demand to avoid firing up expensive and carbon-spewing power plants. If thousands of electric cars are charged at night they also offer a possible solution to the conundrum of wind power in California, where the breeze blows most strongly in the late evenings when electricity demand falls, leaving electrons twisting in the wind as it were.

“If these cars are plugged in we would be able to shift the load from wind at night to using wind energy during the day through batteries in the car,” Darbee says.

The car owner, in other words, uses wind power to “fill up” at night and then plugs back into the grid during the day at work so PG&E can tap the battery when temperatures rise and everyone cranks up their air conditioners.

Darbee envisions an electricity auction market emerging when demand spikes. “You might plug your car in and say, ‘I’m available and I’m watching the market and you bid me on the spot-market and I’ll punch in I’m ready to sell at 17 cents a kilowatt-hour,” he says. “PG&E would take all the information into its computers and then as temperatures come up there would be a type of Dutch auction and we start to draw upon the power that is most economical.”

That presents a tremendous data management challenge, of course, as every car would need a unique ID so it can be tracked and the driver appropriately charged or credited wherever the vehicle is plugged in. Which is one reason PG&E is working with Google on vehicle-to-grid technology.

“One of the beneficiaries of really having substantial numbers of plug-in hybrid cars is that the cost for electric utility users could go down,” says Darbee. “We have a lot of plants out there standing by for much of the year, sort of like the Maytag repairman, waiting to be called on for those super peak days. And so it’s a large investment of fixed capital not being utilized.” In other words, more electric and plug-in cars on the road mean fewer fossil-fuel peaking power plants would need to be built. (And to answer a question that always comes up, studies show that California currently has electric generating capacity to charge millions of electric cars.)

Nuclear power

Nuclear power is one of the hotter hot-button issues in the global warming debate. Left for dead following the Three Mile Island and Chernobyl disasters, the nuclear power industry got a new lease on life as proponents pushed its ability to produce huge amounts of carbon-free electricity.

“The most pressing problem that we have in the United States and across the globe is global warming and I think for the United States as a whole, nuclear needs to be on the table to be evaluated,” says Darbee.

That’s unlikely to happen, however in California. The state in the late 1970s banned new nuclear power plant construction until a solution to the disposal of radioactive waste is found. PG&E operates the Diablo Canyon nuclear plant, a project that was mired in controversy for years in the ’70s as the anti-nuke movement protested its location near several earthquake faults.

“It’s a treasure for the state of California – It’s producing electricity at about 4 cents a kilowatt hour,” Darbee says of Diablo Canyon. “I have concerns about the lack of consensus in California around nuclear and therefore even if the California Energy Commission said, `Okay, we feel nuclear should play a role,’ I’m not sure we ought to move ahead. I’d rather push on energy efficiency and renewables in California.”

The utility industry

No surprise that Darbee’s peers among coal-dependent utilities haven’t quite embraced the green way. “I spent Saturday in Chicago meeting with utility executives from around the country and we’re trying to see if we can come to consensus on this very issue,” he says diplomatically. “There’s a genuine concern on the part of the industry about this issue but there are undoubtedly different views about how to proceed and what time frames to proceed on.”

For Darbee one of the keys to reducing utility carbon emissions is not so much green technology as green policy that replicates the California approach of decoupling utility profits from sales. “If you’re a utility CEO you’ve got to deliver earnings per share and you’ve got to grow them,” he says. “But if selling less energy is contradictory to that you’re not going to get a lot of performance on energy efficiency out of utilities.”

“This is a war,” Darbee adds, “In fact, some people describe [global warming] as the greatest challenge mankind has ever faced — therefore what we ought to do is look at what are the most cost-effective solutions.”

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Utility chief: we want to fuel the auto industry

Posted in environment, green cars, green tech, PG&E, renewable energy, Think, Think Global, Uncategorized, tagged , , , , , on April 22, 2008| 2 Comments »

PASADENA, Calif. — If you wanted a snapshot of the emerging alliance between utilities and automakers, the car park of the Langham hotel here was the place to be Tuesday morning. There was the CEO of one of the largest utilities in the United States putting the pedal to the metal of the battery-powered Think City with Think Global CEO Jan-Olaf Willums riding shotgun.

“I liked it a lot,” PG&E (PCG) Chairman and CEO Peter Darbee told Green Wombat after a few spins around the hotel in the electric coupe. “The acceleration was fast, it handled well and it has a European feel.”

We had just finished a Fortune Brainstorm Green session on electric cars (along General Motors’ (GM) executive Beth Lowery), where Darbee declared, “We want to replace the oil industry” as the fuel supplier to the automakers. Fuel in this case is electricity, though unlike Big Oil, regulated utilities such as PG&E and Southern California Edison (EIX) will not make windfall profits no matter how many electrons they push into Chevy Volts.

The topic at hand was the potential for vehicle-to-grid, or V2G, if electric cars go mass market. The big idea: electric cars are essentially mobile generators and rolling energy storage devices. When hundreds of thousands of them are plugged in, they can not only download electricity but return power to the grid from their batteries, allowing utilities to meet peak demand without firing up expensive fossil fuel power plants that often sit idle until everyone cranks up their air conditioners.

PG&E is working with Google (GOOG) to develop technology to allow a smart power grid to detect where an electric car is plugged in so the owner can be charged or credited with consuming electricity or returning it to the grid. The smart grid would also be able to detect power demand spikes and then tap the appropriate number of car batteries to smooth out the electricity supply.

Utilities like PG&E are eager to forge alliances with electric carmakers for other reasons. In California, electric cars could be charged at night when greenhouse gas-free power sources like wind farms tend to produce the most electricity but when demand otherwise falls off. Utilities are also interested in buying used electric car batteries (which retain 80 percent of their capacity even after they’re no longer good for transportation) to store renewable energy that can be released when electricity demand spikes.

Lowery, GM’s vice president for environment, energy and safety policy, said such interest from utilities is prompting the automaker to think how electric cars could spawn new markets. “We’re definitely looking at different business models for batteries,” she said.

On Monday, Think Global and venture capital powerhouses Kleiner Perkins Caufield & Byers and Rockport Capital Partners announced the formation of Think North America as a joint venture between the Norwegian company and the VCs that will bring the Think City to California next year.

Rockport managing general partner and acting Think North America president Wilber James was at the panel and suggested Think supply some cars to PG&E. As the session ended, Darbee, James and Willums headed to the parking lot where Willums showed off the car’s Internet-enabled interactive features, including a video screen with a button already labeled “vehicle-to-grid.”

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California utility to turn roofs into solar power plants

Posted in energy, enviro capitalism, environment, global warming, PG&E, solar energy, Southern California Edison on March 27, 2008| 42 Comments »

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Southern California Edison plans to install 250 megawatts’ worth of solar panels on commercial rooftops, generating enough electricity to power 162,000 homes.

It’s a potentially game-changing move, one that could lower the cost of solar cells as manufacturers ramp up production to meet the utility’s schedule of installing a megawatt-a-week of arrays until it reaches the 250-megawatt target. That alone is more than United States’ entire production of solar cells in 2006 and will generate as much electricity as a small coal-fired power plant, albeit with no greenhouse gas emissions. “This project will turn two square miles of unused commercial rooftops into advanced solar generating stations,” said John Bryson, CEO of the utility’s parent company, Edison International (EIX), in a statement Wednesday night.

The $875 million initiative also marks the first big foray into so-called distributed energy by a major utility. Instead of building a centralized power station and the expensive transmission system needed to transmit electricity to the power grid, Edison will connect clusters of solar arrays into existing neighborhood circuits. A significant hurdle for the massive megawatt solar power plants planned for California’s Mojave Desert is the need in some cases to build multi billion-dollar transmission systems through environmentally sensitive lands to bring the electricity to coastal metropolises.

Solar arrays of course only generate electricity when the sun is shining, but they produce the most power during the hottest part of the day when Southern Californians crank up their air conditioners. The arrays could help spare Edison from having to fire up a fossil-fuel power plant when demand peaks.

Edison spokesman Gil Alexander told Green Wombat that the utility expects the project’s scale to allow arrays to be placed on roofs at half the cost of a typical installation. Edison’s ambitions could prove a boon for solar cell makers like SunPower (SPWR) and Suntech (STP) as well as solar installation companies such as Akeena (AKNS). One unknown is whether the demand created by Edison will drive up costs in the short term, given ongoing shortages of polysilicon, the base material of solar cells. The Edison project could also help jump-start the market for thin-film solar panels, which typically use far less silicon than conventional solar cells.

Alexander says Edison is already negotiating with solar panel makers and installers. Needless to say, the project will up local hiring of green collar workers.

Here’s how the solar roofs initiative will work: Edison will lease 65 million square feet of warehouse rooftop space from building owners. (The target area is the fast-growing “Inland Empire” of Riverside and San Bernardino counties.) The utility will contract for the installation of the arrays and will retain ownership of the solar systems. California regulators appear inclined to approve the project, which will be financed by a hike in utility rates.

“This will be a utility-scale solar power plant, if one thinks of the 100 or so buildings on which the two square miles of solar panels will be installed,” Alexander wrote in an e-mail. “One advantage of this project is that we will tap unused rooftop real estate directly in areas we serve where demand is growing rather than securing a major plat of land in a remote area and then building transmission lines to bring the power to those areas of rising demand.”

Anyone who has driven through Los Angeles can attest to the endless acres of big-box stores, warehouses and strip malls and thus the potential to generate green power from sun-baked suburban sprawl.

Edison’s solar roof ramp up is likely to put pressure on California’s other big utilities, PG&E (PCG) and San Diego Gas & Electric (SRE), to follow suit. Like Edison, they face a state mandate to obtain 20 percent of their electricity from renewable sources by 2010 and 33 percent by 2020. California’s global warming law requires the state’s greenhouse gas emissions to be rolled back to 1990 levels by 2020.

The Governator himself gave a not-so-subtle nudge to Edison’s competitors. “These are the kinds of big ideas we need to meet California’s long-term energy and climate change goals,” said Gov. Arnold Schwarzenegger in a statement. “I urge others to follow in their footsteps. If commercial buildings statewide partnered with utilities to put this solar technology on their rooftops, it would set off a huge wave of renewable energy growth.”

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Clock ticking on crucial solar investment tax credit

Posted in Ausra, BrightSource Energy, climate change, environment, GE Energy Financial Services, global warming, green financing, green tech, investment tax credit, PG&E, renewable energy, solar energy, solar power plants on January 22, 2008| 11 Comments »

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When President Bush signed the energy bill into law last month, much was made of the legislation’s mandate that automakers dramatically boost the fuel efficiency of their fleets. Less noticed was that the bill dropped a provision that would have extended the solar investment tax credit — a measure viewed as essential to transforming solar energy from a niche business into a multi billion-dollar industry that can generate gigawatts of greenhouse gas-free electricity.

The timing couldn’t be worse. With the current solar credit set to sunset, as it were, at the end of 2008, Big Solar is at at a tipping point: Utilities and renewable energy companies are in the midst of negotiating massive megawatt power purchase deals whose financing depends on the 30 percent investment tax credit, or ITC.

“I think there is a major concern that this will stall all the beneficiaries of the ITC,” said Joshua Bar-Lev, vice president for regulatory affairs for solar power plant developer BrightSource Energy. The Oakland, Calif.-based startup is negotiating a 500-megawatt agreement with California utility PG&E and is proceeding with plans to build a 400-megawatt solar thermal power station on the Nevada border (artist rendering above).

Solar energy companies, utilities like PG&E (PCG) and Edison International (EIX) as well as financiers such as Morgan Stanley (MS) and GE Energy Financial Services (GE), had pushed for an eight-year extension of the investment tax credit to give Big Solar projects enough time to get off the ground and start to achieve economies of scale. The provision also would have allowed utilities to claim the credit for solar projects they build. The measure drew support from both sides of the aisle in Congress but died — by one vote in the Senate — when Bush threatened to veto the energy bill because the solar tax credit would be financed by repealing previous tax breaks given to Big Oil.

“The Congressional leadership is very strong in their support of the ITC; they will put this on the table In 2008,” said Chris O’Brien, a Sharp Solar executive and chairman of the Solar Energy Industries Association, in an e-mail. “The solar industry will continue to contact legislators in key states.”

House Speaker Nancy Pelosi and the Democratic leadership in the Senate have pledged to re-introduce renewable energy tax credit legislation this session. “Speaker Pelosi has said repeatedly that she hopes to address that this year,” Drew Hammill, a spokesman for Pelosi, told Green Wombat. “We’re just getting started but there’s bipartisan support for the tax credit.”

Publicly, at least, no one in the solar industry will say that the uncertainty over the tax credit is affecting planned projects. “Our expectation is that there will be another tax bill that will address this issue,” said Kevin Walsh, managing director of the renewable energy group at GE Energy Financial Services. “We’re working on a number of [solar thermal] deals but it’s too early to disclose them.”

In recent months, PG&E has signed deals for more than a gigawatt of electricity — enough to light more than 750,000 homes — with solar power plant developers. Such power purchase agreements can take more than a year to hammer out and the permitting and construction of a solar power station can take another three to five years.

“We’re continuing to move forward with negotiations and with contracts that have already been signed, but certainly the absence of the ITC could potentially impact future projects,” said PG&E spokesman Keely Wachs. “Without the credit, it does increase the cost of that energy and of course it also sends a very clear market signal as to our country’s energy priorities.”

Silicon Valley solar startup Ausra is building a 177-megawatt solar power plant on the Central California coast to supply electricity to PG&E and is pursuing deals with Florida’s FPL (FPL) and other utilities.

“Just like any business, the solar industry prefers a predictable system for the future,” wrote Holly Gordon, Ausra’s director of regulatory and legislative affairs, in an e-mail. “It will be more difficult to plan for our projects while the situation remains uncertain. While we are currently seeing excellent demand for solar energy at market prices, we need a long term extension of the renewable energy tax credits to ensure market stability and investor confidence as the market continues to grow.”

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