Q&A: eSolar bets on software to make solar cheaper
Bill Gross, the head of start-up incubator Idealab and CEO of eSolar, uses a background in Internet entrepreneurship and software to bring down the cost of utility-scale solar.
Among the Internet cognoscenti, Bill Gross is best known as the head of tech incubator Idealab. Now, as the CEO of solar start-up eSolar, he's working in renewable energy, but he's still putting his digital economy chops to work.
Two-year-old eSolar is having an opening ceremony for its pilot solar power plant in Lancaster, Calif., on Wednesday. There's a veritable glut of solar start-ups, but eSolar has already gotten further than most: it's actually producing electricity at below the price consumers pay in California.
The plant is also the first concentrating solar "power tower" in the U.S., capable of producing five megawatts, or enough power to supply about 1,500 homes or up to 4,000 during peak hours. This emerging utility-scale solar technology uses mirrors to concentrate sunlight onto a tower to make steam, which is then pushed through a turbine to make electricity. The company also has signed deals to build much larger plants in California, New Mexico, and India.
One of the tricks to getting this far, says Gross, is replacing steel with software. In one 46-megawatt eSolar plant, there are 200,000 flat mirrors, each individually controlled by a microprocessor for the optimal angle.
In an interview, Gross predicts that the "more software, less steel" trend will continue in solar, which will help get the cost of solar electricity down. And he says that because banks "are acting like mattresses" rather than lending, other concentrating solar companies will struggle to get utility-scale solar projects off the ground.
Q: Why have you been able to build a demonstration plant in a year while so many others haven't?
Gross: A few reasons. A big one is the land. By using these smaller-piece parcels of land, we don't have to wait for government permission (to use Bureau of Land Management land). We can just use private land. Not to mention we don't have to do environmental impact studies because we're not using pristine desert land, which a lot of people worried about impacting.
The second thing is everybody has to wait for build transmission lines. That could be 10 years or never. You could build a power plant and people could block you from building transmission lines to the main distribution point, so buying land specifically adjacent to transmission helps.
The biggest one, though, is the finance. Most people's projects are billion-dollar projects--they have to be billion-dollar scale before the economics work, and nobody is going to raise a billion dollars in this climate. Our projects work economically at $100 million scale. And we can pay for this plant with cash because we raised $170 million. Everybody else will be held up for years and years until banks will lend on the riskiness of a new project. For us, banks can lend against our project (for new projects) because they can see it works.
Grand opening
There's been a catch-22 on new solar technology--projects can't go forward because they only have a PowerPoint.
In the scheme of things, this plant is just five megawatts (about enough to power 1,500 homes). How do you scale?
Gross: A 46-megawatt plant takes one quarter mile, so to build a gigawatt in California would take 20 of those--or 5 square miles. We purchased that land for $30 million in cash, all in small quarter-mile plots, all adjacent to transmission, so we've completely eliminated the owning and permitting issue.
(Project development companies like) NRG will buy the project from us (for a planned installation in New Mexico) and own and operate the plant for 20 years.
So it's large scale but done in a distributed way?
Gross: Exactly. The ultimate distributed solar is to put (photovoltaic) solar panels on every rooftop. The ultimate centralized solar is get 2,000 acres of BLM land and then you have a transmission problem because you need to build a gigawatt of transmission. We're in between--we're large-scale utility but we're still distributed--distributed in small enough pieces.
Two years ago we didn't know how prescient it would be, but we looked at the entire transmission grid of California and where there was 46 megawatts of available capacity, we would go and buy a patch of land right next to that. We inverted the problem. Others said, "Let's build where the sun is best because I need to buy 2,000 acres at once to get economies of scale. And then I'll try to lobby for 10 years to get 100 miles of million-dollars-per-mile transmission built."
Now environmental groups of all things are protesting people using BLM land, and they have a point. Solar is great but you don't want to destroy the pristine desert...Our land is already being used for something (such as farming).
On the technology side, how much more productive or efficient is this solar tower than existing solar trough technology?
Gross: It is a little more productive than solar troughs. Solar troughs run at between 27 percent and 30 percent efficiency, and we are at 34 percent efficiency. But the real thing is we're half the cost. It's not the efficiency that we're much better at, it's the price--that's really the breakthrough. The reason we're so much less cost is that we use hundreds of thousands of small flat mirrors, instead of long, long rows of huge curved mirrors. The troughs use a mirror that is 5 meters wide by 100 meters long. They pay the same price as we do for the mirror--it's the same high-quality Belgian or German suppliers--but that's only 10 percent of the cost.
The main cost of the solar thermal plant besides the mirror is the steel and the actuator (for controlling mirrors)--that's 90 percent of the cost...The steel (is needed) to hold the mirror in shape without distorting, to stay in a perfect parabola. Because we use a one-square-meter mirror, we use half the steel. Imagine if you take a piece of flat glass and put a tripod behind it, it'll stay flat. But you need far more steel to bend glass against its will.
So why haven't other solar companies broken up their mirrored troughs into smaller bits?
Gross: The problem is historically it's been a software control problem to track hundreds of thousands of small things. The benefit of one big row is you only need 20 motors to turn troughs--all pointing at the sun--and software control is trivial. We have 24,000 individual mirrors, all pointing in slightly different directions to point at one spot. We're basically making a dynamic parabola in software where they are making a static parabola in steel.
In the last decade, there's been a 1,000-fold increase in computational power, so now we can put a $2 microprocessor in every mirror and it costs almost nothing--almost one and half percent of the (material) cost. So every mirror that is tracking the sun during the day has its own computer. And the computational power of a microprocessor today is mind-boggling. It's a 16-bit microprocessor with eight I/O ports. It's like an IBM AT (PC) in every mirror--that was a $5,000 computer in 1985. This completely wouldn't be possible without Moore's Law.
It's interesting that you've come from the computer world into solar. Will there be other stories like eSolar to come?
Gross: I definitely think so. eSolar has been grown right in the same building as other Idealab companies with all the benefits of IT they had--it uses all the servers built for Internet companies with all the experience and hardening capabilities. And it even uses many of software developers from prior years that we've hired back from places like Yahoo.
If anything, we're more a software company than a solar company. Of course we're a solar company, but software is 50 people out of the whole company. There are 135 people--100 are in engineering, 35 are out running power plants, so half the (engineering people) are in the software group, which is an amazing percentage for a solar company.
The reason that this going to happen more is that, of course, every commodity in the world is going up over time. There will be blips like we're having now, but in general, the cost of things that require natural resources will go up. The only thing going down is computation power. Everything else behaves on a different law--one of scarcity.
Computing costs are going down. If you want to crack a problem where cost is the issue, you gotta bet on the thing going down in price and include more of that. Less steel, more software--that is the right trade you want to make. I think that's going to be used more and more.
Are you optimistic on solar and green tech in general?
Gross: I'm wildly optimistic about it, and we only have this momentary setback due to the recession and the banking industry. But this is going to be a 100-year-long build-out to replicate what we built out with coal and natural gas in the last century. The only way it's going to happen is if you actually lower the price--it's not going to happen through altruism. If you can beat natural gas and coal, then you'll have access to huge, huge markets. If you don't, then you'll be limited to the subsidized market. (eSolar's projects benefit from a 30 percent federal tax credit).
How did you start getting into energy after working in the Internet?
Gross: I have been interested in energy all my life, ever since I was a teenager. I worked on energy projects back in 1973 during the first energy crisis, called Solar Devices, a mail-order business I ran as a teenager. I think I got into Caltech because of that business--I wrote about it in my application. But then OPEC came along, formed, and colluded to drive down the price of oil so that at end of the '70s, nobody was interested in renewable energy anymore. So I had a 20-year hiatus in software and Internet companies and had a string of successes that enabled me to have the capital to come back to my true love in 2000. And of course, by 2000 people were talking about energy issues, maybe running out of energy. That's when we did the research that led to this crop of solar companies (covering different solar markets such as rooftop solar and off-grid solar) over the last nine years.
Updated at 6:30 a.m. PT with corrected figures for the number of mirrors.