Financing woes shrink Ausra's big solar plans

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.

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."