Green Tech

Updated at 10:00 a.m. PT with comments from Ausra providing more detail on its strategy.

Because of a lack of financing, solar-technology company Ausra has dropped plans to make massive solar-thermal power plants in favor of smaller, cheaper units.

Ausra President and CEO Bob Fishman told different news outlets this week that the company has been forced to change its business strategy in response to the credit crisis. The company is also laying off staff as part of the reorganization, according to reports.

Ausra's pilot solar-thermal power plant in Australia.

(Credit: Ausra)

The change is a clear sign of how the credit crisis and the current structure of government incentives are hurting the business for large-scale renewable-energy projects.

Backed by top-flight Silicon Valley venture capital firms, Ausra has designed equipment for concentrating solar-power plants. Specially shaped glass plates reflect light to create heat. The heat makes steam, which then drives a turbine to make electricity.

Several new companies have formed with different designs for concentrating solar power, or solar-thermal energy, with an eye toward building power plants in the southwest. California utility Pacific Gas & Electric has contracted with Ausra and others to buy electricity from these planned projects through a contract called a power purchase agreement (PPA).

But Fishman said the financing simply isn't there for solar-power plants that rival the size of coal or natural-gas plants.

"What a lot of people thought when they went out and signed 500- or 900-megawatt power purchase agreements was that it was easy to go from a 1-megawatt demo plant to a 900-megawatt project,'' Fishman told the San Jose Mercury News. "That's simply not reality. The finance market will not support it."

Instead, the company intends to make and run small to midsize power-generating facilities--on the order of 50 megawatts, he said. The company will also emphasize its business of licensing its technology to other project developers and utilities.

Ausra vice president of communications Katherine Potter said that the company still thinks that the business for large-scale solar power is viable. But the company is adjusting to the market conditions by focusing on equipment sales.

The company could, for example, sell a solar field as part of an existing coal or natural gas power generation facility. The solar power delivers electricity at peak times during the day, offsetting a utility's carbon emissions.

Financially, it's easier to do because utilities can deploy Ausra's equipment in six to 18 months, Potter said. By contrast, Ausra's deal to provide 177 megawatts worth of solar power to PG&E will take a few years just to get through the permitting process, she said.

Investors and solar executives say that, even with strong demand, a lack of money to finance projects means that other solar start-ups will either shift strategies, scale back plans, or go out of business.

Renewable-energy investments get a 30 percent federal tax credit. The recession means that fewer corporations expect to have a tax bill to offset, which means that there's a dearth of "tax equity" available to invest, according to financiers.

Last week, PG&E CEO Peter Darbee said the California utility will invest in solar-power generation directly because of the tax equity problem. By building and operating its own solar-power generation facilities, rather than working with a project developer, PG&E can benefit from the tax credit.

Solar power is one of the most heavily invested areas within clean tech, making it a crowded field. Because financiers are being particularly conservative, new technologies will likely have trouble being deployed at a large scale this year.

"I think it's going to be a brutal, brutal year for solar, and a lot of companies will go out of business," said Andrew Beebe, the CEO of Suntech Energy Solutions, which develops solar-power facilities for corporations and utilities. "A lot of mistakes were made. Now is the time of reckoning, and it's going to be ugly."

BrightSource Energy will build 500 megawatts' worth of solar thermal power plants for Pacific Gas & Electric in California, and the contract contains an option for PG&E to order another 400 megawatts on top of that.

The deal is the largest yet in the solar thermal world when the option is added. PG&E earlier inked a deal with Israel's Solel under which Solel will build 533 megawatts' worth of solar power for the utility. Ausra, an Australian start-up that has moved to the U.S., will build a 177-megawatt plant for PG&E. Ausra also has a contract to build a 300-megawatt facility for FPL, a Florida utility.

PG&E is required by the state to get 20 percent of its power from renewable sources (not including conventional hydroelectric power) by 2010. The utility actually already has enough, under contract terms, to hit that mark, but it is also signing contracts for the decade beyond the 2010 deadline.

Under the deal, BrightSource, based in Oakland, will build a 100-megawatt solar plant in Ivanpah, Calif. (near Barstow and close to the Nevada state line), that will start operating in 2011. The company will then build a 200-megawatt solar plant the year after that, and another one a year after that, said BrightSource CEO John Woolard. While the first two plants will go up in Ivanpah, the remaining power plants will be built in nearby Broadwell, Calif.

Solar thermal is considered by many to be one of the most promising forms of renewable energy. In solar thermal plants, arrays of mirrors collect heat from the sun and then focus that heat onto a chamber or tube filled with liquid. The liquid is used to create steam, which then turns a turbine. Excess heat captured by the mirrors can also be stored in molten salt, so that these plants can produce electricity after the sun goes down. Plants are expected to go up in the southwestern U.S., Spain, Abu Dhabi, and North Africa in the next few years.

Some have even predicted that large industrial conglomerates may build and make their own solar thermal plants. Currently, while investors fund these projects, solar thermal plants provide power over the grid to the public at large.

BrightSource has taken some of the expense out of solar thermal power plants through the design of its components. The company employs flat mirrors, rather than more expensive curved mirrors, to capture heat. The liquid that gets heated is contained in a large tower, called a heliostat, rather than a tube like in many other plants. This configuration allows BrightSource to more efficiently exploit the heat that gets gathered by the mirrors, according to the company. (The liquid used in its system is also water, which gets turned directly into steam, rather than oil, a switch that also improves thermal efficiency.) Overall construction costs are also lower than conventional thermal systems, the company claims.

An artist's rendering of how heliostats work. The things on the ground are mirrors. They focus heat on the towers, where water is boiled to make steam.

(Credit: BrightSource Energy)

The size of the power plants helps to reduce costs as well. The more mirrors and other equipment a company can install in a single location, the less power costs. Now, the largest plants can produce between 300 and 400 megawatts, and larger ones are expected in the future.

"Our target is to be cost competitive with fossil fuels" for power generation, said Woolard.

The plants, though, aren't cheap. The BrightSource plants will likely cost around $2 billion to $3 billion in the aggregate, he said.

Companies built solar thermal plants in California in the late '80s and early '90s. Conventional electricity, however, dropped in price and the state eliminated some tax breaks for solar electricity providers. The combination of factors drove some solar power providers out of business. One of those companies was Luz, which was tinkering with a flat mirror/water tower system. The Luz management team came together again years later to form BrightSource.

One cloud on the horizon? Tax benefits. Right now, California exempts solar thermal power providers from real estate taxes, which would cost these companies millions. But the exemption ends in 2009. A bill is winding its way through the state senate that would extend it to 2016.

A bigger problem, though, revolves around the possible elimination of federal tax incentives, which are slated to expire this year. "That is a bigger problem," said Woolard.

Solar thermal company Ausra will cut the ribbon on a large factory in anticipation of a construction boom in solar power plants in the Southwest United States.

Flanked by government officials, Ausra executives are scheduled to dedicate a 130,000-square-foot facility capable of turning out enough thermal collectors to generate 200 megawatts every month. That translates into about 70 megawatts of electricity capacity per month, according to the company.

Ausra Las Vegas solar thermal factory will use an automated assembly line.

(Credit: Ausra)

At that rate, the plant will be be able to manufacture enough electricity capacity to power half a million homes per year year at equivalent prices to gas-fired power plants, said John O'Donnell, the company's executive vice president.

"It will more than double the worldwide solar thermal system output," he said. "We're investing in this factory capacity now because we are seeing explosive demand from utilities."

Solar thermal plants use thousands of mirrored troughs or glass panes to heat a liquid that makes steam. The steam turns a turbine to make electricity.

The technology has emerged as one of the most cost-effective forms of utility-scale renewable power when built in desert areas.

The Ausra plant, set to go online next April, will build the material for a 177-megawatt plant that Pacific Gas & Electric intends to construct in San Luis Obispo County, Calif.

Many more solar thermal plants, also called concentrated solar power, are expected in the Southwest and in Spain.

There are 5,800 megawatts' worth of concentrated solar power projects in the planning stages worldwide, according to Emerging Energy Research. It anticipates the potential investment to go up to $20 billion of the next five years.

Ausra said that its product design has lower manufacturing costs and thus, a lower cost per kilowatt for utilities. It uses less steel than mirrored troughs and standard components like architectural glass, so it doesn't need to rely on specialized suppliers, O'Donnell said.

Former Vice President and Nobel Prize winner Al Gore has joined venture firm Kleiner Perkins Caufield & Byers as a partner to concentrate on green technology investments.

(Credit: CNET News.com)

To date, Kleiner Perkins has had something of a mixed record when it comes to clean tech. The firm has invested in Miasole, which recently swapped CEOs and has had to delay products. It is also an investor in EEStor, a mysterious supercapacitor company that has delayed its product and is going through some management changes. The firm has also not been part of some of the early, successful IPOs in clean tech like EnerNoc or First Solar.

On the other hand, it has placed money in some companies that many believe have a lot of promise: Ausra, the Australian solar thermal company and Mascoma, a cellulosic ethanol company that has laid plans to build three plants in the U.S. (with millions in state subsidies). It also has a stake in Amyris Biotechnologies, one of the early companies in synthetic biology. Amyris makes compounds for treating malaria and wants to get into feedstocks for synthetic fuel.

So who knows. Compared with these guys, I live in abject squalor.

Gore is one of a number of "name" individuals the firm has recruited over the years. Others include heir Will Hearst III, former Oracle honcho Ray Lane, and Sun Microsystems scientist Bill Joy.

Pacific Gas and Electric has entered into a contract to buy 177 megawatts of power from a solar thermal power plant that will be built by Ausra.

The power plant will be located in San Luis Obispo county in central California and provide, roughly, enough power for 60,000 homes. Ausra has filed applications to build the plant with the California Energy Commission and hopes to have the plant up and generating power in 2010.

This won't be the last solar thermal contract PG&E will sign. PG&E says it plans to get a gigawatt worth of power from solar thermal systems in five years. Another likely partner is Brightsource Energy. The company, a reincarnation of an Israeli company, also plans on building plants in California. PG&E already has an agreement to buy 533 megawatts from Solel, which has a solar thermal plant in the Mojave Desert.

The utility is shooting to get 20 percent or more of its electricity from renewable sources, not including traditional hydroelectric power, by 2010. It currently gets 12 percent of its electricity now from renewables and has contracts that push it up to 18 percent. Most of its renewable energy so far comes from wind and biomass: PG&E right now gets only a little of its power from solar.

Another day at the solar thermal plant

(Credit: Ausra )

In solar thermal plants, mirrors to collect heat from the sun. The heat turns a liquid into a gas, and the pressure from the gas cranks a turbine. Excess heat can be stored in molten salt to generate electricity when the sun goes down. Heat, salt, water, mirrors: technically, these are components that have been used by engineers since Tacitus. The plants, though, are quite complex: typically, solar thermal plants take up hundreds of acres, cost millions to erect, and take years to build.

Despite the complexity and scale, many scientists and energy experts say that large solar thermal plants can generate power at a cost that's comparable with some types of traditional fossil fuel plants, a significant milestone.

Ausra, from Australia, says it can dramatically cut the costs of building solar thermal plants. Rather than employ parabolic mirrors, Ausra's system uses cheaper flat mirrors. The liquid is water too, rather than oil. Real estate is additionally economized. The San Luis Obispo plant will only occupy a square mile, or 640 acres.

Less land means that the plants can be built closer to population centers. Connecting these plants to the grid costs about $1.5 million a mile in transmission lines. Ausra, which recently raised $40 million in a venture funding round, signed a deal for a 300 megawatt plant in Florida earlier this year.