May 13 2009

Record Solar Deal: BrightSource Energy CEO Tells All

Posted by: Jonathan Marshall

PG&E and solar thermal developer BrightSource Energy today announced a record solar deal--a series of power purchase agreements totaling 1,310 megawatts, with power output equal to the consumption of 530,000 average homes.

To gain more perspective on the significance of the deal and background on BrightSource, we posed a number of questions to the company's CEO, John Woolard, a PG&E veteran. Here are his answers:

What's the significance of today's announcement with PG&E?
From an industry perspective, the agreements between PG&E and BrightSource Energy now represent the largest solar deal in the world. From BrightSource's perspective, the expansion of our PG&E contracts from 900 megawatts to 1,310 megawatts serves as another validation of our technology and team. 

What makes your technology different?
The Luz Power Tower 550 represents an advancement in solar thermal technology design.  Our decision to use a power tower design stems from our engineering team's experience designing and building the nine Solar Electric Generating Stations (SEGS) in California between 1984 and 1990. 

What the team learned from the SEGS experience is that by moving to a power tower design we could greatly improve efficiencies, reach higher steam temperatures, and significantly reduce costs compared to traditional troughs.

We accomplish this by combining the same basic components found in 90 percent of the world's power generation facilities, namely boilers and turbines, with our proprietary solar technology. 

Using optimization software, our proprietary heliostat systems track the sun on two axes, allowing for more efficient collection of the sun's energy. Thousands of mirrors called heliostats then reflect the sunlight directly onto a boiler atop a tower. The direct concentration of sunlight onto the boiler reduces energy loss endemic to the trough design and enables the system to reach the higher operating temperatures found in today's most efficient steam turbines.  

And by using standard boilers, turbines, and flat glass commoditized mirrors, we greatly cut costs and can deliver performance warranties from major suppliers. 

Why solar thermal rather than solar photovoltaic?
We cannot afford to look at solar thermal and solar photovoltaics (PV) as competing resources. We are going to need both resources to achieve our renewable energy and climate change goals. 

Each resource has different power characteristics that make them attractive. For example, solar thermal can be coupled with storage technology or a small natural gas plant and provide dispatchable power beyond traditional solar hours. The ability to use small amounts of natural gas coupled with the application of conventional turbines also allows for reliable integration into today's grid. 

PV is great for rooftop or utility-scale projects close to load centers. PV can also be good for areas with diffuse sunlight. 

Do you have any commercial deployments or are you starting from scratch?
Our first facility is the Solar Energy Development Center (SEDC) in Israel's Negev Desert.  The SEDC is a six megawatt thermal facility that demonstrates our technology and test equipment, materials, and construction and operating methods.

The facility opened in June 2008 and has been consistently producing superheated turbine-quality steam. At the end of last year, we had an independent engineering firm, RW Beck, evaluate and validate the system as commercially viable.

The next phase will be the implementation of the system on a larger scale at our first 100 megawatt plant in Ivanpah, California. Construction on this plant will start in about six months, following approval from the California Energy Commission and the Bureau of Land Management. PG&E has contracted to buy the power from this plant.  

What do you say to critics who say your installations will endanger sensitive desert habitats?
We share the concerns of environmental groups. We recognize that ours will be the first solar thermal plants built in California in nearly three decades and we take this responsibility to heart. This company was founded on environmental principles and we are taking key steps to help minimize the impact of our solar plants on the environment. Starting with site selection, we tried to identify areas that have already had human impact, existing transmission, and that have not been classified as having critical habitat.  

The technology design also helps to minimize our environmental footprint. By placing individual mirrors onto metal poles that are driven into the ground, we reduce the need for extensive land grading and use far fewer concrete pads than other technologies.

Will your plants require large amounts of scarce water?
Building power plants in desert ecosystems means that we must be conscious of our water use. Early in our design process, we decided to employ an air cooling system, which reduces water usage in our plants by more than 90 percent.This decision comes with an efficiency reduction to our system, but we know that it's the right thing to do. To put our water usage in perspective, our 400 megawatt Ivanpah site will use roughly 100 acre feet of water annually, or about the same amount of water used by 100 homes. In contrast, a similarly sized wet-cooled plant would use about 30 times more water. 

Do you have financing lined up for these projects?
We've been very fortunate in that we did not have to finance a project over the past few quarters when the financial markets could best be described as dysfunctional. The credit markets now seem to be loosening in time for our project financing in the latter half of this year.  When the time comes for us to finance these projects, we are confident in our ability to successfully develop these projects and secure the necessary project financing. 

What are the greatest obstacles to getting your projects completed on time and on budget?
We're very fortunate to have a great set of contracts, sites and projects in the pipeline. We must now execute on these contracts to bring PG&E's customers clean energy. 

Our key areas of focus will be on permitting, financing, and then constructing and operating these solar power plants. I have the utmost confidence in our experienced and time-tested team to make this happen.  

Our development group, which has collectively built more than 20 gigawatts of power projects, will continue to work with the California Energy Commission and the Bureau of Land Management to gain the approval to begin construction on our first site at Ivanpah. Our finance team will also be working with the finance community to structure the project financing. And our engineering team, the only group in the world that has built consecutive large-scale solar plants, will be responsible for working with our contractors to engineer and operate our plants. 

The Holy Grail for solar PV is reaching "grid parity" with traditional fossil-fueled generation. When, if ever, will you reach that?
The idea of grid parity is a convenient framework for understanding the cost of renewable resources, but understanding the true cost of electricity requires a deeper understanding of electricity markets.

Many groups today will provide a cost of electricity per watt, which means that they are not accounting for the cost of installation, the solar output of a given site, or the total cost of a system over its lifetime, including replacement of inputs. We call this the levelized cost of electricity (LCOE). When looking at the costs of competing resources, we should always be looking at the LCOE, not just the resource's manufacturing costs. Ignoring these costs is a disservice to our end customers and policymakers that are creating legislation to support clean energy. 

Using the LCOE framework, many resources, like solar thermal energy, are very competitively priced today. However, the broader solar energy industry is more likely to reach grid parity over the longer term once we fully account for the carbon found in conventional generation sources. 

What inspired you to join the founding team at BrightSource?
I started looking at the climate change challenge in the early 90's while studying environmental planning. What struck me was what a profound impact that energy could have on addressing this problem. I spent the past couple of decades as an investor and entrepreneur researching how to bring market-based solutions to transform the energy industry and I realized that we're never going to be able to address climate change unless we can bring renewable energy to scale. After looking at all of the available technologies, it was clear that solar thermal represented the quickest and most cost-effective way to increase our renewables supply. And after meeting Arnold Goldman, our founder and chairman, and the rest of his team, it became obvious that this group possessed the greatest understanding of the technologies and how to build large-scale power plants. I am honored to be a member of this truly remarkable team. 

Where do you expect BrightSource to be 10 years from now?
In ten years, we will have completed construction on the 14 plants that we have currently committed to our customers, including PG&E. We will also continue to advance our technology, driving efficiency up and total cost down. In addition, we will likely expand our activity within the US and internationally.  

What do you think the renewable energy sector in California will look like 10 years from now?
I am hopeful that in ten years we will have far surpassed 20 percent of our energy coming from renewable resources and will be quickly approaching the 33 percent mark. The energy mix will be much more focused on solar, both solar thermal and PV, as well as wind. We may even see some innovative renewable resources, such as wave or tidal, come online.  Effectively bringing these resources to California's citizens will also require a thoughtful build-out of our current transmission system. 

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