Start-up sees new dawn for old solar tech

A New Age massage educator resurrects discarded engine technology, uses it to evangelize on behalf of a new type of solar energy. Photos: Catching rays with a Stirling engine

A clarification was made to this story. Read below for details.
update David Slawson is an unabashed granola-crunching, tree-hugging New Age apostle whose livelihood rests on matriculating massage therapists to his alternative health care college in Portland, Ore.

Yet he's also the chief executive of a Phoenix-based start-up that's raised $20 million to parlay a quirky, early-19th-century engine design, repeatedly discarded as antiquated by utility, aerospace and other companies, into a multibillion-dollar solar energy company.

Intriguingly, Slawson might be on to something, though with the help of the U.S. Department of Energy's Sandia National Laboratories and Boeing. Then again, one of Slawson's former business partners, Harry Braun, an expert on Slawson's acquired technology, argues that it will never be efficient enough to produce power at competitive rates.

Both men, however, agree that Slawson's Stirling Energy Systems boasts good science as well as inspiring environmentalism. Only the business model is in doubt, which hasn't deterred Slawson. "I've raised money and mortgaged things for the last nine years to keep the company going," says Slawson, 57, the father of two grown children and now the owner of Portland's East-West College of the Healing Arts for advanced massage and hydrotherapy instruction.

Stirling Energy's solar technology, however, is anything but New Age. It consists of small metal tubes filled with hydrogen, which are heated by a large dish of mirrors that concentrate the sun's rays on the tubes, causing the hydrogen to expand and contract as it passes through heat exchangers. This process pushes the pistons of an engine originally invented by Church of Scotland reverend Robert Stirling in 1816 that in turn drives a generator and thus creates electricity.

A matter of efficiency
Unlike the internal combustion engine, never burns any fuel and is consequently a thoroughly clean technology. Today it's used in extremely high-tech environments, such as within nuclear-powered submarines, but has never been deployed on a broader commercial basis.

Stirling Energy's solar technology, however, is about three times as efficient as silicon-based photovoltaic solar cells, Slawson says, which means it could be economically viable as an alternative energy source as traditional energy costs rise.

The engine's one big drawback, however, is that it requires near constant amounts of sunlight when the sun happens to be shining, which restricts its use to places such as the deserts of the American southwest. Another problem: Tracts of isolated land are needed to set up the mirrors and tubes and noisy pistons to generate enough energy to make it worthwhile.

Those are the reasons why Stirling Energy has been largely stymied in booking sales, although Slawson claims he has pending 20-year contracts for 800 megawatts worth $3 billion, including two from utility companies in the Southwest. Alas, he needs financing to begin production: about $40 million, he figures, which he's seeking from high-net-worth individuals and financial markets.

So far, he's funded the company with $20 million raised from friends, family and angel investors, the most prominent being Robert Nissenbaum, who sold his organic food company Imagine Foods to Hain Celestial Group in 2003. Slawson, Nissenbaum and a couple of other large investors own most of the company.

To prove the technology works, Slawson, the DOE's Sandia National Laboratories in Albuquerque, N.M., and Boeing, have together spent $3 million developing and launching a model power plant--a six-dish system that produces 150 kilowatts, enough to power 40 homes, which sits in a small field in Albuquerque.

Slawson is also developing his next project, a 1- to 5-megawatt project that will probably also be set up in New Mexico. The next stop is California, a market he hopes to begin supplying with high-volume commercial units out of his own just-in-time assembly plant in the first quarter of 2008. Schuff Steel of Phoenix has already agreed to invest $8 million to set up a fabrication facility to make the system's steel components, and electric transmission company Trans-Elect of Reston, Va., has agreed to assist Stirling with power transmission.

Earlier this month, Stirling scored a 20-year power purchase agreement with Southern California Edison. If approved by the California Public Utilities Commission, the deal could result in a 500-megawatt, 4,500-acre solar project outside Los Angeles that the utility says would far outstrip production from any other solar project in the country.

Working out the kinks
Slawson says Stirling will outsource and do final assembly in the field, noting it takes five men four hours to put each system together and deploy. Each system would initially cost $150,000 to build, although the price could come down to $80,000. "It's not like building a coal or nuclear plant, where you have to get the whole thing built before you can pull the switch," Slawson says. "Once we get it tied to the grid, we can start pumping power on the grid and be paid for the power sales through construction."

Still, many kinks remain in the technology. The system is big--38 feet wide and 40 feet tall--too large for someone's rooftop and too noisy to be anywhere near a residential neighborhood. But Slawson says he isn't targeting home or commercial use for his technology. He wants to build his systems to provide electricity to existing utilities. And he says he can do it at a competitive 7.8 cents per kilowatt hour.

"We're going to sell electricity," he says. "We're going to build, own and operate the plants. These utilities don't want to invest the capital; they'd rather sign the power purchase agreement. We will augment existing power supply."

It's really all his plants can do. Because they are fueled by the sun's rays, they only generate electricity during sunlight hours. "We're not storing the sun's energy yet," he concedes. "But when capital costs are retired and

 

Correction: This story originally omitted details of a power purchase deal signed in August between Stirling Energy and Southern California Edison.
production comes down to 2 cents per kilowatt hour, we can produce hydrogen fuel and store the solar energy."

That's where a critic of Stirling Energy's business plan weighs into the argument. Harry Braun, who founded the company with Slawson after the educator first read about the technology in Braun's book, "The Phoenix Project," left Stirling Energy in 2000 over strategic direction and the replacement of the project manager, an engineer he had worked with at Boeing. Braun has since started his own company, Sustainable Partners International, to work on wind projects, and asserts that Stirling engines and solar power will never work profitably.

"Nobody is going to buy electricity that's five times more expensive than a wind machine," he argues. "The Stirling system was the most efficient by far from solar to power on the grid. But the sad truth is, it takes more than efficiency to be successful."

"If we were to replicate the power of the Hoover Dam, which generates 2,050 megawatts, we would cover 10.8 square miles. Lake Mead, which supports the dam generators, covers 247 square miles."
--David Slawson, CEO, Stirling Energy Systems

Braun says the Stirling system is too loud and too big to put in a lot of places. "With photovoltaics, you've been able to put it in remote areas and it's clean and quiet," he says. "Can the problems be fixed? Yes, if enough money is invested. But we never had enough money to do what we needed to do."

Slawson counters that his technology requires a smaller production footprint than wind and hydro. "If we were to replicate the power of the Hoover Dam, which generates 2,050 megawatts, we would cover 10.8 square miles," he says. "Lake Mead, which supports the dam generators, covers 247 square miles."

Better yet, 19 states, including California, Nevada, Arizona, New Mexico, Colorado, Montana and Texas, require an increasing percentage of their electricity to come from "renewable" energy sources, of which Stirling Energy can take immediate advantage as soon as it's ready to roll out its first commercial products. What's more, some of these states have plenty of hot, inhospitable land to house his newfangled solar energy plants.

That has financial advisers beginning to work with the company. PricewaterhouseCoopers has worked on Stirling's books and Mark Zvonkovic, an attorney at Akin Gump Strauss Hauer & Feld in New York, has done its legal work toward the goal of going public someday, maybe three to five years out. "We're interviewing investment banks at this time," Slawson says.

That may be too optimistic for a company without a commercial product in hand, yet the solar power sector is hot right now--and expected to get hotter. According to renewable energy research firm Clean Edge, the market for solar photovoltaics (modules, system components and installation) grew from $4.7 billion in 2003 to $7.2 billion in 2004 and should reach $39.2 billion by 2014.

"There's a tremendous amount of activity going on in solar in North America and Europe, particularly in Germany, right now," adds Jarett Carson, an alternative energy analyst at RBC Capital Markets in Austin, Texas. "There's more demand than supply, driven by incentive programs, particularly in Europe. The underlying driver is higher energy prices and concern about fossil fuel. There's certainly a price environment that has created more focus on renewable energy, including solar."

But if Braun's fears prove correct and Stirling Energy can't make a go of it, Slawson says he has another plan. He's written a movie script about renewable energy and the energy industry. "It would be a fun thing to do, to get a movie produced," he says. "It would be a Hollywood movie, action-packed, with Russell Crowe or Brad Pitt in the lead, and would uncover the backroom politics in the energy industry and how a lot of clean energy technology solutions are off the shelf today. Lots of intrigue, danger and romance."

But for now, Slawson's still on a mission. "The technologies are there but we lack the political will to make it happen," he argues. "America needs an Apollo-type program to convert to a sustainable energy system for America, once and for all, and get off the reliance on oil, which is going to run out in 50 years. And we need big corporations to execute the plan."

Such as Stirling Energy, he might have added.

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