Big Solar's day in the sun

This is not the same old pipe dream. The economics -- and the technology -- of turning light into electricity have changed. Business 2.0 has the inside look at the industrial-strength power plants coming soon to a grid near you.

By Todd Woody, Business 2.0 Magazine assistant managing editor

(Business 2.0 Magazine) -- Clouds hang low over the New Mexico desert, deep inside a military reservation a dozen miles south of Albuquerque. A breeze stirs the air; tumbleweeds roll by. Then the sun shines through and a low whirring sound breaks the silence.

Six mirrored solar dishes that look like giant flowers with 15-foot stamens come to life. They pivot in unison, slowly tilting to face the sun rising over the jagged peaks of the Manzano ranges. A total of 468 mirrors -- 78 on each flower --capture the sun's rays and concentrate them into beams of light intense enough to melt lead.

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DREAM COME TRUE: Bruce Osborn, 52, has been working to make the Stirling dish a reality since 1978.
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POWERING UP: Stirling has won contracts to supply as much as 1.75 gigawatts of green energy to California.
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PLANTING ENERGY: Portuguese subsidies enabled PowerLight CEO Tom Dinwoodie (left, with U.S. ambassador Alfred Hoffman Jr.) to build a photovaltaic array (photo below) on a farm in Portugal.
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BRIGHT FUTURE: Bob Cart's tiny startup already has deals in the works to build plants using its microdish technology.

At each flower's focal point, suspended on metal struts, is a Stirling engine -- a heavy, piston-driven heat engine whose design dates from the Steam Age but is now coming into its own, thanks to the grim calculus of rising oil prices, global warming, and the threat of government-imposed carbon taxes. As the tips of the engines glow white-hot, 150 kilowatts of greenhouse gas-free electricity flows into a power grid.

Welcome to the proving grounds of Sandia National Laboratories, a nine-acre field of dreams for solar entrepreneurs and a launching pad for the next era in energy technology: the age of Big Solar.

This is not Jimmy Carter's energy crisis, when government subsidies ran ahead of market realities and launched a thousand solar projects that never saw the light of day. Their rusting hulks can still be seen scattered around the test fields: 1970s-vintage solar dishes, a 200-foot solar tower, parabolic mirrors surrounded by the detritus of bygone experiments.

This is the real deal. This is industrial-strength solar energy, sold to public utilities in 20-year contracts measured in gigawatts. Stirling Energy Systems of Phoenix, whose giant flowers are gleaming in the New Mexico sun, has signed agreements to provide up to 900 megawatts of solar energy to San Diego Gas & Electric (Charts, Fortune 500) and another 850 megawatts to Southern California Edison (Charts, Fortune 500).

That's nearly six times the utility-scale solar power being produced in the United States today.

California and other states are leading the way, requiring utilities to obtain more electricity from renewable sources, thus creating by fiat a long-term market for green energy. As a result, the deserts of the Southwest have become the Saudi Arabia of solar, attracting a crowd of competitors from around the world: Australia, Germany, Israel, Spain. Similar building booms are under way across Europe; even the oil sheikhdom of Abu Dhabi is going solar.

Tough challenges remain: Securing hundreds of millions of dollars in financing for untried technologies. Making solar competitive with fossil fuels. Navigating regulatory mazes. Connecting desert power stations to distant cities.

But the solar prospectors are ready and eager. Gray-haired industry veterans who toiled in obscurity for decades are having their moment in the sun. Joining them are green entrepreneurs, backed by Silicon Valley venture capital, developing a new generation of utility-scale technologies.

Unlike in the age of carbon energy, which was driven by gargantuan gas-and coal-burning power stations, there is no single solar technology or one size that fits all. As electricity distribution becomes decentralized, there's a place for 4,500-acre solar dish arrays as well as small 10-megawatt photovoltaic plug-in farms.

In the paragraphs that follow, we take you to five hot spots in the world of Big Solar and introduce you to some of the players -- and the technologies -- that are poised to grab a piece of the multitrillion-dollar global electricity market.

Seeing the forest of solar trees

Dwarfed by a 40-foot-tall solar dish, Stirling CEO Bruce Osborn is shooting a promotional video for San Diego Gas & Electric. Soft-spoken and unfailingly polite, Osborn, 52, is explaining how the technology works in the patient tone of a man who has spent decades in a blue-sky pursuit. "We're making large-scale solar a reality," he says. "It's been a life's dream for all of us."

For Osborn, who later this year will begin planting the first of as many as 70,000 "solar trees" in the Mojave Desert -- enough to power a million homes -- this is indeed the fruition of a lifelong goal.

He began working on Stirling dish technology in 1978 as a 22-year-old engineer with Ford Aeronutronic in Newport Beach, Calif. When oil prices crashed in the early 1980s, Ford abandoned the effort, which was taken up first by McDonnell Douglas, then by Southern California Edison, and finally, in 1996, by Stirling, a startup co-founded, improbably enough, by a holistic health entrepreneur named David Slawson.

Slawson hired a cadre of old solar hands, Osborn among them, but faced a classic chicken-and-egg dilemma: The Stirling dish is one of the most efficient means of generating electricity from the sun, but without the economies of scale that come with mass production, it couldn't compete with fossil fuel.

Then came the California energy crisis of 2000-2001. Blackouts roiled the world's eighth-largest economy, sending utilities scrambling for alternative energy sources. Seizing the initiative, Stirling moved its dishes to the Sandia proving grounds and began collaborating with the lab's scientists.

It also began hashing out 20-year power purchase agreements with California utilities. Says Stirling executive vice president Robert Liden, "Because we have the efficiency and the large-scale contracts, we can go out to our suppliers and say, 'Hey, these are the cost targets we need to achieve to be competitive.'"

Stirling still has a ways to go. The utilities are taking a gamble on a technology that's never been deployed on such a large scale -- or on any scale, for that matter. But after extensive tests, Southern California Edison concluded that among the competing technologies, this was its best bet.

Besides, the economics of the old power industry don't necessarily apply to Big Solar. Get a contract for, say, a 500-megawatt gas-powered plant, and investors won't see a return on their investment for years.

Each Stirling dish, however, begins generating electricity -- and cash -- the moment it's planted in the ground. "Before we've got very many of them out there, we're going to know if everything is working right," Liden says. "If not, we've got plenty of time to make the corrections."

Return of the sun king

Want proof that Big Solar is not just a mirage? Head over the Fremont Pass north of Los Angeles. As you drive by the last faux-Italianate subdivision, Range Rovers give way to Ford F-150s and the sunbaked landscape flattens. On the approach to Harper Dry Lake, the air begins to shimmer with a bluish tinge, not from heat but from 234 acres of parabolic mirrors that carpet the desert floor of the Mojave.

These are Solar Electric Generating Systems VIII and IX, two of nine "solar trough" power plants built after the oil shocks of the '70s by American-Israeli entrepreneur Arnold Goldman and a company he called Luz.

At Harper, long rows of curved mirrors heat tubes of synthetic oil that glow with a white light. The hot oil produces steam, which in turn drives electricity-generating turbines. Despite the plant's sheer size, the only sound is the low groan of oil moving through the tubes, barely audible over the birds flitting among the gray-green scrub.

Luz's plants still produce 354 megawatts of electricity -- enough to light 150,000 homes. But by the early '90s, California utilities were building power plants that ran on ever cheaper natural gas, and solar energy became as passé as the Pinto. The tax breaks Luz depended on evaporated, forcing the company into bankruptcy, and the solar plants were sold off. (Most are now run by FPL Energy (Charts, Fortune 500).)

But the erstwhile sun king is making a comeback. Sensing that solar's day was dawning again, in 2004, Goldman reassembled much of his old team into a new company: Bright Source Energy. He didn't go back to the solar trough; he thinks that technology has reached its limits.

Instead, his engineers have developed what he calls a "distributed power tower." Thousands of sun-tracking mirrors -- known in the industry as heliostats -- focus the rays on a water-filled boiler, heating the liquid to 1,000 degrees Fahrenheit and producing high-pressure steam that drives a turbine.

Behind Goldman's grandfatherly demeanor is an encyclopedic knowledge of solar energy -- born of hard experience -- in all its technological, regulatory, and financial complexity. "In 2003 it started looking a little bit like 1973," says Goldman, 64, to a recent visitor at Bright Source's Oakland, Calif., headquarters. "And I'd always had an urge to complete the work we'd started."

Goldman secured about $50 million in venture funding and persuaded Silicon Valley VC John Woolard, an energy and software veteran, to become Bright Source's CEO. "I looked at every company out there," says Woolard, 42, "and I thought this one had the best combination of experience and technology and was pragmatic enough to deliver on it."

It was no accident that Goldman picked a software executive to run Bright Source. The company is using sophisticated computer modeling to simulate the plant's operation and perfect its design. "That has allowed us to move incredibly fast," he says.

Right out of the gate, Bright Source scored a 500-megawatt deal with the giant California utility PG&E (Charts, Fortune 500). The company is also negotiating joint ventures in Spain. Hal LaFlash, PG&E's aptly named director of renewable energy policy and planning, says what clinched the deal was Goldman's track record in the Mojave, along with the potential of his new technology to provide cheaper green electricity on demand.

"The power tower looks like it could be a breakthrough," LaFlash says.

The solid-state power plant

For more than a decade and a half, John Lasich's team at Solar Systems in Australia toiled on the concentrating photovoltaic technology he invented in his backyard in the 1980s, surviving on the goodwill and capital investments of a handful of true believers.

As he puts it, "Seventeen years is a long time to keep on the path."

But the work paid off last year when Solar Systems won $95 million in Australian government funding toward building the world's largest photovoltaic power station, a 154-megawatt plant in southeastern Australia. Unlike Stirling dishes, power towers, and other "solar thermal" technologies that use the sun's heat to drive a generator, photovoltaic plants produce electricity directly from the effect of photons striking semiconducting materials.

Like Bright Source, Solar Systems will build towers, but instead of a boiler, each tower will hold a receiver containing the world's most efficient photovoltaic cells. Fields of heliostats will focus the sun's rays on the towers, making electricity without turbines, generators, or just about any other moving parts. It is, in effect, a solid-state power station. That makes the technology hugely scalable: A 1-megawatt plant should be just as efficient as a 1-gigawatt version.

It's potentially game-changing technology, particularly in a place like Australia that relies on cheap and plentiful but highly polluting coal. At his suburban Melbourne office, Lasich, 52, holds up a midnight-blue cube etched with photovoltaic cells. It's one of the multijunction solar modules the company has developed in partnership with Spectrolab, a subsidiary of Boeing (Charts, Fortune 500).

"We're seeing that we can turn sunlight into electricity instantly and at the same efficiency as brown coal," Lasich says, noting that his company's technology and commercial viability underwent three rounds of government scrutiny to win funding. "That's a real watershed."

And indeed, to get a sense of how Big Solar could alter the economics of power production, you need only head downstairs to Solar Systems's "factory." In a 625-square-foot clean room, a Yamaha robot assembles solar modules. That one bot can churn out enough megawatts per year to power a small town. A new facility now being built will boost production by a factor of 10.

A couple of days later, Lasich travels to the outback to demonstrate his technology in the Aboriginal community of Hermannsburg, a collection of pastel cement-block and tin-roofed homes scattered across the red desert. Beyond a building with a sign reading "If You Drink and Drive You're a Bloody Idiot" sits an array of eight solar dishes, one of three small-scale Solar Systems power stations. A horse, seeking relief from the 104-degree heat, stands in the shade of a 46-foot-wide parabola.

Lasich has swapped the photovoltaic modules in the receiver of one dish with Spectrolab's state-of-the-art cells. In the station's control room, a monitor shows a boost in efficiency of more than 50 percent for that dish. "This is going to reduce the cost of PV power by a factor of five or six times," Lasich says. "It's just massive. If we can hit that target, there's a stack of places around the world where it's a goer."

Farming for energy

On the other side of the world, new photovoltaic technology is already paying off. Atop a hill in the Alentejo wine region of Portugal, waiters serve cocktails to blue-suited government dignitaries and corporate executives. Before them is a picturesque landscape of olive groves, grazing sheep, and 52,000 solar panels sparkling in the late March sunshine.

It's hard to imagine anyone putting on a four-course luncheon to celebrate the opening of a power plant. But the reception given this new 11-megawatt photovoltaic station -- built by Berkeley-based PowerLight and financed and owned by GE Energy Financial Services -- reflects the new opportunities for utility-scale solar in Europe.

PowerLight, best known for installing big rooftop solar arrays for companies like Microsoft (Charts, Fortune 500) and FedEx (Charts, Fortune 500), has found a niche in building photovoltaic plants in Europe, where countries like Portugal support renewable energy by paying a premium for green power. In this case, GE's 15-year contract guarantees it above-market rates for the electricity produced by the $75 million plant, which covers 150 acres of farmland outside Serpa, a village of whitewashed, orange-tiled homes.

PowerLight is also building three more power stations in Spain. Says PowerLight executive vice president Howard Wenger, "Utility-scale solar is taking off like a rocket ship."

The appeal of photovoltaic power is easy to see. Serpa's sun-tracking panels take up considerable acreage but are only chest-high and virtually silent. In fact, the plant, which powers 8,000 homes, looks more like a modern art installation than an industrial facility.

"Serpa will be providing enough electricity to power this entire region," says PowerLight CEO Tom Dinwoodie at the dedication ceremony, as Portugal's economics minister languidly smokes a cigarette. "Now continue this action across Portugal, across Europe, and across the globe. Thousands of jobs will have been created, and farmers will be making income from food and from energy. Village by village, we will have created a revolution."

The financiers of that revolution are companies like GE (Charts, Fortune 500), which plans to spend $3 billion on renewable-energy projects by the end of 2008. "We truly believe utility-scale solar will be an incredible opportunity," says Kevin Walsh, managing director of GE Energy Financial Services, gesturing toward the fields of solar panels.

GE is currently investigating several Big Solar technologies, but Walsh declines to elaborate on specific deals: "We're still doing due diligence to make sure they're reliable and solid on a large scale."

In the past the high price and relatively low efficiency of solar panels made photovoltaic power plants too pricey for the U.S. market. But that's changing. Utilities scrambling to meet demand for peak power are trying to avoid building new carbon-spewing facilities. As more of them turn to photovoltaics as an alternative, the power grid is starting to look like the Internet -- distributed and scalable.

PowerLight, for instance, broke ground in April on a 15-megawatt photovoltaic plant at an Air Force base in Nevada. Silicon Valley startup OptiSolar has signed a deal to build a 40-megawatt photovoltaic plant in Canada. And SunEdison, another installer of commercial solar arrays, is constructing an 8-megawatt photovoltaic plant in Colorado.

"There's a fairly large transition going on in the utility industry," says SunEdison VP Mark Culpepper, "and that's creating opportunities."

A plug-and-play solution

The plug-in power plant is the niche targeted by San Francisco startup GreenVolts. Founded in 2005 by Internet marketing veteran Bob Cart, the company's high-concentration photovoltaic microdish arrays are designed to relieve utilities' overloaded substations with photovoltaic plants of between 1 and 20 megawatts.

Due to their efficiency, they take up about half the land needed by plants like the one in Serpa. That means they can be built near cities and plugged directly into substations. "That's our sweet spot," says Cart, 42.

GreenVolts's offices are located above a Jack-in-the-Box one block from the bus station. Until recently, a potted plant was the sole bit of decor and the company's name was handwritten on a piece of paper stuck to the door. The virtue of the space is that it's free -- PG&E provided it as part of a $120,000 package the company won last year through a green-tech contest.

Now GreenVolts has bootstrapped its way into a contract with Avista, a small utility in Spokane, Wash., to build a prototype power plant, and Cart says he expects to sign a second deal with a major utility soon. He brings out a GreenVolts microdish, a dinner-plate-size mirror that concentrates the sun's energy on a tiny but highly efficient Spectrolab solar cell. The company will place 176 of the microdishes on a rotating platform that sits low to the ground; the mirror and tracking system boost the cell's efficiency.

So how did a seven-person company that has raised less than $1 million become a power player? The green-tech contest opened doors. Bright Source's CEO invested in GreenVolts and joined its board. Cart also tapped the expertise of a group of engineers, paying them in stock, and he forged a partnership with a Spokane manufacturing firm.

"A certain high-level VC from Sequoia, whose name I probably shouldn't mention, wanted a meeting with us," Cart says. "He came in and said, 'This sounds great, but you guys are never going to sell anything to a utility. You're just a little company, and utilities are big and conservative.' If you don't know the current state of the industry, that's a reasonable assumption -- but that's not how it works anymore."

Grid 2.0

Like the Web, the energy grid has entered a new era. You could see it in action in recent months as utilities across the West solicited bids for renewable-energy projects ranging from 1 to 500 megawatts. In Phoenix, it was standing room only as green-tech entrepreneurs attended a bidders conference held by Arizona Public Service (Charts), the state's largest power utility.

Some of the same faces showed up in San Francisco a month later at a PG&E bidders conference. "We're open to any and all offers," a PG&E executive told an audience that included both Silicon Valley startups and solar companies from Australia, China, and Japan. "We'd like to place our bets with a number of technologies and see which ones work best," said PG&E's LaFlash.

Of course, getting a contract for a power plant is one thing; getting that plant financed, built, and profitably converting photons into electrons is another. But even Wall Street is waking up to the power of Big Solar, says Gilbert Cohen, an executive with Acciona Solar Energy, a Spanish company that has built a 64-megawatt solar trough plant in Nevada.

"A few years ago, we had to beg investment banks to talk to us," he says. "Now they're at the door asking us, 'When are you going to do the next project? We want to be involved.'"

For the latest news on green tech, turn to Todd Woody's blog, Green Wombat.

Todd Woody is an assistant managing editor at Business 2.0. Top of page

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.