The desert boom (pg. 2)
Competitors are lining up behind Goldman, staking claims on some of the same sites in hopes the bank will abandon them. PG&E (PCG, Fortune 500) and FPL (FPL, Fortune 500), 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."