Green Wombat

photo: sudweeks
Macy’s will install rooftop solar arrays at 26 of its California stores that will produce 8-megawatts of green electricity. Coupled with an energy-efficiency overhaul, the retailer expects to cut its utility bill at the stores by an estimated 40 percent. Solar cell maker SunPower’s (SPWR) PowerLight subsidiary will install the solar energy systems. Macy’s will buy the arrays for 11 of the stores. For the other 15 stores, Macy’s will purchase the electricity produced by the solar panels from a third-party financier who will retain ownership of the systems. Macy’s is just the latest big retailer to go solar. Last month, Wal-Mart (WMT) said it will install solar arrays at 22 stores using third-party financing in deals with SunEdison, BP (BP) and SunPower.

But Macy’s move is notable on a couple of counts. First, it’s integrating solar power with an energy efficiency upgrade, installing electricity-conserving lighting, and heating and cooling along with energy management systems. The one-two punch is expected to eliminate 88,450 metric tons of carbon dioxide emissions over the course of the systems’ lifetimes. "By combining energy efficiency with solar power, Macy’s is taking the extra step to cut our peak load demand," said Macy’s vice chairman Tom Cole in a statement on Tuesday.

Of course, all this is great PR. But there’s also some serious green at stake. Macy’s will get all the state and federal tax breaks for the solar systems it owns as well as any potentially marketable renewable energy credits associated with the projects. The financier of the other solar arrays will retain the tax benefits and share any renewable energy credits with  Macy’s. SunPower and Macy’s will jointly manage the energy efficiency upgrades. SunPower spokeswoman Ingrid Ekstrom told Green Wombat that SunPower is still negotiating the third-party financing. But the Wombat can’t help noting that San Francisco solar banker MMA Renewable Ventures (MMA) just last week announced a new division that will finance and manage energy efficiency projects much the way it finances solar arrays for corporate clients.

The other point worth considering is the impact on the power grid and big utilities as more and more big box stores and warehouse operators pursue a solar solution. By cutting peak electricity demand, these massive solar arrays take the load off the grid and lessen the need for additional coal or natural-gas fired power plants. That also means that utilities sell less electricity. In a state like California, where investor-owned utilities’ profits are not tied to how much power they provide, that’s not a problem. In fact, PG&E (PCG), Southern California Edison (SCE) and San Diego Gas & Electric (SRE) will benefit as companies like Macy’s will make it easier for them to meet their state-mandated renewable energy targets if they don’t need to crank up so many fossil-fueled power stations. For utilities that make their money pushing as many electrons as possible, the rise of the distributed power grid is more problematic. But with a national greenhouse gas emissions cap all but inevitable, even the coal belt will benefit from the spread of the sun belt.

illustration: brightsource energy
Green Wombat’s story on the land rush to build utility-scale solar power plants appears in the June issue of Business 2.0 (online here), and this week I’m featuring bonus material on the blog. Today, the focus is on BrightSource Energy. The Oakland, California, startup is the latest incarnation of Luz International, an Israeli company that built nine solar trough power plants in California’s Mojave Desert in the 1980s that continue to produce some 354 megawatts of electricity. Luz went bankrupt after tax breaks for solar power evaporated and its American-Israeli founder, Arnold Goldman, went on to work as a consultant and software executive. In 2004, as global warming worries began to drive demand for renewable energy, he reassembled much of his old team – including some of their now-grown children – and hired Silicon Valley venture capitalist John Woolard, a energy and software veteran, as CEO. BrightSource has developed a solar technology that it calls a distributed power tower. Fields 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. Power plants will be built in 100-megawatt clusters, with a field of heliostats facing a tower. A future hybrid version of the technology will feature a turbine that can also be fired by natural gas so the plant’s operating hours can be extended and it can continue to generate electricity on cloudy days. BrightSource currently is negotiating a contract with California utility PG&E (PCG) to supply 500 megawatts of solar electricity beginning in 2010.

BrightSource itself is something of a hybrid itself – it’s a startup funded by venture capital – VantagePoint Venture Partners, Draper Fisher Jurvetson –  but carries the tech DNA of one of the world’s pioneering solar power companies. In conversations with Goldman and Woolard, it’s clear BrightSource aims to compete against fossil fuel-generated power by wringing greater efficiencies from solar power and supplementing sun with gas – natural or bio – to create on-demand power plants. "When I was at VantagePoint, I looked at everybody out there," Woolard tells Green Wombat at BrightSource’s sparsely-furnished offices in a downtown Oakland office tower. "And it’s a game where if you’re not careful you might  pick up 2 percent efficiency over here and you don’t realize you might lose 3 percent on the back end. And very few groups, if any, really understood that full optimization from the photon to the electron as did Luz."  Woolard says Goldman’s ability to deliver – Luz built nine power plants in between 1982 and 1991 – gives BrightSource a leg up. "In Israel, they have just this phenomenal R&D and engineering group that’s just incredible," he says. Within five months of securing funding last October, BrightSource had its first heliostat test field up in Jerusalem. A prototype power plant is set to begin operating in early 2008 in southern Israel.

Goldman says sophisticated software design and modeling tools have allowed BrightSource to test its technology virtually, speeding up the engineering process. "Once we got financed we’ve been able to move incredibly fast into structuring, implementation, to hardware, to  test systems," he tells Green Wombat. Showing potential investors hard data that the distributed power technology will work as advertised and deliver lower-cost solar power is crucial as BrightSource finds itself competing against the proven solar trough technology that it pioneered in the ’80s. (A solar trough power plant uses parabolic mirrors to heat tubes of synthetic oil, which create steam that generates a electricity. Goldman abandoned the technology because he believes it had reached the limits of its efficiency.)

The goal is to drive down the cost of solar-generated electricity so its competitive with natural gas-fired power plants. "We think achieving that is as fast as we can and at those levels is critical," he says. "We think if we’re in that range, then we’re basically competing in the southwest with combined cycle plants. They’ve shown themselves to have market opportunities in the tens of thousands of megawatts."  BrightSource plans to build solar power plants and sell them to operators in California and the Southwest. The company has not bid so far on projects for California’s two other big utilities, Southern California Edison (SCE) and San Diego Gas & Electric (SRE). But BrightSource is pursuing joint ventures in Spain and has formed a subsidiary, Luz II, to develop and license its technology.

photos: green wombat
The June issue of Business 2.0 is on the newsstands and features Green Wombat’s story on the coming boom in utility-scale solar power plants. The story is now online. I traveled around the American southwest, Portugal and Australia to report on the solar land rush unleashed by utilties’ demand for renewable energy. As usual, I accumulated way more material than there was space for in a print magazine feature story. So over the next few days, Green Wombat will be running bonus material on the solar startups and technologies I profiled for Business 2.0. Today, the focus is on Stirling Energy Systems, the Phoenix company that has secured contracts with utilties Southern California Edison (SCE) and San Diego Gas & Electric (SRE) to install as many as 70,000 Stirling dishes (photo above) in the Mojave Desert that could power as many as a million homes. The dish tracks the sun, its mirrors concentrating the sunlight on a hydrogen gas-filled Stirling heat engine. As the superheated gas expands it drives pistons, which generate clean, green electricity. The technology dates to the late 1970s, when Ford’s aerospace division
developed the Stirling dish in the wake of the oil shocks of the era.
McDonnell Douglas subsequently took up the effort in the 1980s and then sold the
technology to Southern California Edison, which in turn passed the dish
in 1996 to a startup called Stirling Energy Systems.

In March, I flew to Phoenix to meet with Stirling CEO Bruce Osborn –
who worked on the Stirling dish as a 22-year-old Ford engineer in the
’70s – and executive VP Bob Liden, both veterans of the auto industry. Although the Stirling dish is one of the most efficient ways to convert sunlight into electricity, the sheer sheer scale of the California utility projects – the contracts call for Stirling to provide up to 1.75 gigawatts of solar electricity – has prompted doubts among the company’s rivals about its ability to manufacture so many dishes and engines and keep them operating. “The rocket science part of it has been completed,” Osborn told Green Wombat at Stirling’s headquarters, tucked away in an office park north of downtown Phoenix. “What we�re doing now is taking the units that work well and perform well and making the changes so they�re amenable to high-volume manufacturing.”

Liden argues that scaling up from the six dishes the company currently operates in New Mexico to tens of thousands of dishes isn’t as daunting as it seems. “If you�re talking to a finance guy, he might take a look at it and say this going to be absolutely impossible to make happen,” says Liden. “But if you take someone who comes out of manufacturing, like at Ford or GM, they say, hey, we do this all the time. Yeah, you have to start some place, with some hand-built units. That�s what they do when they build a new car. Once you figure that out, you turn it over to the guys who know how to do the manufacturing engineering, the industrial engineering, and before long, bango, before long you can put these things out pretty darn fast.”

One of Stirling’s partners is investing $20 million to build a factory in Arizona that will manufacture the dishes on an assembly line, according to Osborn. “The ability to scale up is not difficult here at all,” he says. “I think the key factor is to get the cost out of it. There�s capacity now for building these but it’s really a cost issue.”

Stirling also been focusing on developing operation and maintenance programs for the power plants. “How do you do the mirror washing most efficiently, how do you make sure the equipment is all going to be up there for a very high availability rate,” says Liden. “The thing that is attractive to utilities is that if we have a 500-megawatt project it�s 20,000 dishes. If they have a few dishes that go out, that for whatever reason need to have some maintenance and repair, it�s hardly noticeable a tick on the needle.”

A week later I’m driving down a deserted desert road with Osborn, deep inside Kirtland Air Force Base outside Albuquerque. There’s an X-Files vibe to the place. Jets streak over the

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Silicon Valley’s nascent solar industry has formed an alliance called SolarTech that aims to make the San Francisco Bay Area the epicenter of alternative energy, much as it became the nation’s high tech capital two decades ago. The goal is to turn a niche business into a mass market source of electricity by standardizing solar panel installation, permitting, grid connection, power measurement and financing. "California is the leading adopter of solar power in the United States by far, representing over 75 percent of that market, thus making California the third largest market for solar power worldwide," SolarTech states in a white paper released today. "These embedded economic drivers point to a substantial economic and job growth opportunity for Silicon Valley if we adopt a similar path as the high tech industry in the late 1970s and early 1980s. Silicon Valley is uniquely well positioned to help drive this growth through our abundant resources of engineering talent, world-class educational system, and financial capital."

SolarTech members include solar-cell makers SunPower (SPWR) and Sharp, thin-film solar startup Miasole, concentrator photovoltaic firm SolFocus, installation firm REGrid Power, Northern California utility PG&E (PCG) and the Silicon Valley Leadership Group, the de facto trade arm of the valley’s tech industry.

The alliance’s white paper discusses the hurdles to widespread adoption of solar power by California homeowners and businesses – from a mishmash of municipal permitting requirements that can delay and drive up the cost of installing solar panels to a lack of statewide standards for connecting solar systems to the grid.  But one of the more innovative proposals from SolarTech involves financing solar energy systems. Even with the rebates offered through California’s solar program, it can still cost tens of thousands of dollars to install a rooftop solar array that won’t pay for itself in lower electricity costs for another eight to 12 years.

SolarTech proposes the widespread adoption of the power purchase agreement model used by companies like San Francisco’s MMA Renewable Ventures (MMA), which finances the installation of huge commercial solar arrays for corporate clients. MMA Renewable retains ownership of the rooftop systems and sells the electricity back to the client at a discounted rate. SolarTech proposes an online market to match up solar power providers and purchasers. The upside for business owners – or even homeowners if the model was adapted for residential solar power – is that they get clean green energy without forking out the capital costs of installing rooftop systems. The solar financiers reap the benefit of renewable energy tax breaks, rebates and tradeable credits associated with the projects.

Lastly, SolarTech wants to radically reduce the time it takes to install a solar energy system and connect it to the grid – now typically 29 to 50 weeks – to five weeks. "We envision Silicon Valley as the leader in developing, delivering, and growing solar power for our state, our nation, and indeed, the entire world, and through this effort, we anticipate helping to deliver tens of thousands of new jobs," the white paper states. "We are committed to nothing short of turning Silicon Valley into Solar Valley."