Showdown in the sun

(Fortune) -- The clean energy homes of tomorrow are on display all this week on America's Main Street, the national mall in Washington, D.C.- and they are generating excitement from the FORTUNE 500 companies, government advocates for renewable energy and even some venture capitalists.

They are there as part of the U.S. Department of Energy's Solar Decathlon, a contest in which 20 colleges vie to build energy-efficient, sustainable, attractive and affordable homes. The results can be eye-popping.

Think low-maintenance vertical vegetation growing up the side of a house, for added insulation. Think sleek countertops and floors made of fast-growing renewable bamboo. Think an indoor waterfall that, improbably, sucks moisture from the air - it's spiked with calcium chloride - and curbs the need for air conditioning. Think a stove powered by magnets, and insulation made from recycled blue jeans.

Remarkably, all the homes will not only operate off the grid for a week - the contest ends on Friday - but they are designed to generate enough electricity from their solar photovoltaic panels to create surplus power that will be used to drive an electric car.

"This is a manifestation of the new energy economy that we seek, right here, today," said Alexander "Andy" Karsner, the assistant U.S. energy secretary for energy efficiency and renewable energy. Noting that buildings consume 40 percent of the energy used in the U.S., Karsner said, "We're trying to transform the built environment."

Companies hoping to profit - and every transformation creates opportunities as well as risks - including not only the usual suspects, like BP Solar, a title sponsor, but firms like Sprint, Honeywell, Philips, Applied Materials, Home Depot, Herman Miller and Texas Instruments, all of which want to sell more clean technology.

It turns out that TI's chips, for instance, are found in most solar inverters, the devices that convert direct current from solar panels into alternating current for homes. The company's technology is also built into electronic meters that reduce waste, motion sensors and more efficient TVs.

"TI is inside a lot of products that drive energy efficiency," says Paul Westbrook, the firm's sustainable development manager, who practices what he preaches (his home in a Dallas suburb is powered by solar panels and by a small-scale wind turbine).

Kevin Dowling, an executive with Philips Lighting, hopes to highlight the potential of LED (light-emitting diodes), which are more efficient and easier to recycle than compact fluorescent bulbs but a mystery to many consumers. "The technology's so new that many people aren't even aware of it," he says.

Lee Edwards, an engineer with a Wharton business degree who is CEO of BP Solar, expects costs of solar panels to fall within a few years to the point where solar-generated electricity can compete against the retail rates charged by electric utilities. In states like California, with generous rebates and high electricity rates, solar is already a cost-effective alternative.

"What will your utility charge you for electricity 20 years from now?" he says. "I can tell you what your cost for solar will be." That's because all the costs are paid upfront, for panels that last 20 or 30 years.

BP has enough confidence in the long-term future of solar power that it broke ground last summer on a $97 million expansion project of its U.S. headquarters and manufacturing plant in Frederick, Md.

To be sure, mainstream use of solar power remains tiny - less than 1 percent of electricity use - despite subsidies and attention to all things green. But don't tell that to the students who devoted a year to 18 months developing their homes. Seventeen teams will compete for U.S. schools, including MIT, Cornell and Texas, while three others come from Canada, Spain and Germany.

The pressure is on the University of Colorado, winner of the two previous contests. Rather than duplicate past efforts, they set out to design a marketable 2,100-square-foot home that they will erect after the competition is over. Contest rules limit the size of homes to 800 square feet, but the team will build a larger home out of two recycled shipping containers on campus after the competition is over.

Chad Corbin, a 30-year-old graduate student in building systems, told me he went to Colorado specifically to compete in the decathlon, and to learn how to design sustainable homes. He estimates that his team's green home, with two bedrooms, two and three-quarter bathrooms and a media room, as well as living room and kitchen, can be built for about $220,000, not including land costs. The more they build, the more costs will drop. "Everyone here is passionate about it," says Corbin, who hopes to test his plan after graduating.

James Bickford, a 21-year-old mechanical engineering student from Santa Clara University, showed off a mission-style home featuring gorgeous wood-and-glass doors, an induction stove powered by magnets and even load-bearing beams made of bamboo, which required special approval from regulators in California and Washington.

"Sustainability should be about economics, environment and equity," says Bickford. By equity, he means that the homes should be affordable. But operating out of Silicon Valley, he's learning about another kind of equity. "There are technologies that we've developed that venture capitalists have approached us about," he said.

Visit the mall this week if you can. If not, check out the DOE's excellent Web site, http://www.solardecathlon.org/. All of the competing schools also have Web sites, showcasing their work.