Solar Thermal Heats Up

The hitch with solar power has always been its sky-high cost: the sun may be free, but the materials and the equipment needed to convert rays into electricity certainly aren’t. That’s why entrepreneurs have long been searching for a way to create a solar company with an economic model that resembles a software startup–selling a sophisticated computer program that drives cheap, commodity hardware.

Bill Gross, founder of the startup incubator Idealab, based in Pasadena, CA, believes that he’s got it: an enterprise designed to kick off what he calls a “disruptive revolution” in carbon-free energy. A serial entrepreneur who has launched more than 30 tech companies, Gross is CEO of eSolar, a Pasadena-based solar thermal venture that will go live with a five-megawatt test bed of its utility-scale technology on the grid later this summer.

But that’s only a tiny fraction of what’s to come. The privately held eSolar and its power plant operating partner, NRG Energy, have announced agreements with three electric utilities to install 500 megawatts of thermal solar capacity over the next few years.

To put that into perspective, that is more than the current 450 megawatts of solar thermal capacity that’s online in the United States today, says Daniel Englander, a solar energy analyst with GTM Research, in Cambridge, MA. And it’s a significant fraction of the total of 1.5 gigawatts of photovoltaic solar capacity currently installed nationwide.

The agreements–with Pacific Gas and Electric, Southern California Edison, and El Paso Electric–are aimed at producing power beginning in 2011. While the utilities aren’t disclosing the target price for the electricity in the contracts, Gross claims that he can deliver it at about 10 cents per kilowatt-hour–less than the typical rate for wind power or even a natural gas plant.

ESolar’s thermal power technology has only a few basic components. Giant fields of tabletop-sized glass panels track and reflect the sun. The beams shoot at towers where water is boiled to make steam that can drive a traditional turbine. Meanwhile, special software that costs $100 million to develop runs on a bank of Dell servers. The software coordinates with cheap video cameras that continually monitor the angle of the panels as the sun rises and sets.

Other companies, such as Brightsource Energy, have also developed solar thermal technology using central towers and boilers. But what’s new about eSolar’s approach, says Daniel Englander, is that the mirrors are smaller and cheaper to make and install, thus requiring more sophisticated control software.

Utility-scale thermal solar plants have been around for decades, the largest of which is the set of Kramer Junction plants in the Mojave Desert that produces 350 megawatts of peak power for Southern California Edison. But its massive trough-shaped panels, which harness the sun, are expensive to make and install, in large part because they require so much steel to support the parabolic-shaped glass panels.

However, a large amount of new thermal solar power capacity is being planned using newer technology. Currently, there’s more than eight gigawatts of thermal solar capacity being promised to U.S. utilities; how much of that will actually get built is unclear. “A lot of these contracts in California that the utilities are signing aren’t with an eye to actually building,” Englander says. “A lot of times, it’s just a good-faced effort to show that they’re engaged with renewable energy.”

Later this month, eSolar’s 24,000-panel plant in Lancaster, CA, is set to begin supplying its power for the grid. However, since the plant is self-financed and company operated, no one outside eSolar will be able to verify the real costs of producing the electricity.

From then on, though, eSolar won’t be building its own plants. NRG Energy, based in Princeton, NJ, will purchase eSolar’s technology and build, finance, and operate the planned 500 megawatts. NRG currently operates 24 gigawatts of power capacity at dozens of plants powered by a full range of energy sources. Michael Liebelson, NRG’s chief development officer for low carbon technology, says that he chose eSolar because “it is the lowest cost of all solar solutions.”

In a separate but even larger deal, eSolar has signed a similar pact with ACME Tele Power of India for one gigawatt of capacity–enough to power hundreds of thousands of homes.

So far, Gross has raised $170 million from various venture firms and strategic partners, including investments from NRG, ACME, and Google.