BrightSource Energy signs whopper solar contract with PG&E

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.

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.