The eBay of Electricity

by Tony Seba on August 9, 2011

[Note: this article was also published on Forbes.com: http://blogs.forbes.com/tonyseba/]

When Jan Adams got a NZ $300 (US $247) power bill back in April 2009 she could not believe it.  A tiny one-bedroom flat could not possibly consume that much electricity. New Zealand has a competitive electricity market but shifting to competing offerings looked complicated to her.  She took energy-efficiency measures such as double-glazing the apartment windows, taking shorter showers, and setting the clothes washer to use cold water and expected her bil to go down.   However, the following month she got

Powershop - the eBay for Electricity 2.0

Powershop - the eBay for Electricity 2.0

another NZ $300 (US $247) bill and this time she had had enough.  It didn’t matter how complicated it looked: she switched to an online electricity service provider that promised savings of 20%.  “My power bills have gone down by at least 50%”, says Ms. Adams, who is a Customer Services Representative in Christchurch, “I’m not a techie but now I go online two or three times every week to track my power usage, to check on new discounts and savings opportunities, and to top-up my power supply.  Sometimes I can even get a coupon to a local restaurant with my purchases!”

Top-up power? Electricity discounts? Online Coupons?  Welcome to the future of energy: electricity 2.0.

Ms. Adams’s electricity provider is Powershop, a startup company owned by Meridian Energy, the largest electricity generator and retailer in New Zealand.  “The vision of Powershop is to be like eBay for electricity,” says CEO Ari Sargent. “Any electricity generator in New Zealand, including Meridian’s competitors, can offer their own brands of electricity at different prices and different seasons.”

Two years ago, when I was writing “Solar Trillions” I went to Wellington, New Zealand to learn about this new architecture of energy at work. Powershop had just launched and I got a close look.  I recently talked to Mr. Sargent to check up on the company’s progress.

Powershop offers ‘sponsored’ and ‘branded’ electricity. Are you a sports fan? You can buy ‘Crusaders Rugby’-brand electricity. Concerned about Climate Change?  You can buy ‘Airshed Energy’ which has ‘Certified Carbon Offset’.  Just want to lock in the cheapest price for next spring?  ‘Spring Power’ is on sale now.

I can’t wait for ‘Boston Red Sox Power’- or ‘SF Giants Power’-brand electricity.

Meridian Energy is currently the only generator selling power (under different brands) on this website. Powershop, however, is built with an open, plug-and-play architecture – more like the Internet than the traditional top-down energy architecture.   “Powershop’s infrastructure was developed in anticipation of a distributed energy model,” says Mr Sargent. “As the market builds a larger number of smaller power plants like wind and solar we expect them to sell directly to consumers on our website.”

But will a distributed energy architecture emerge any time soon?

Distributed Power Architechure

The current centralized architecture of energy is one that Edison, Westinghouse, and Tesla would feel comfortable with: large power plants ‘out there’ that generate electricity and millions of smaller ratepayers consuming it.  We get a monthly, sometimes undecipherable, bill, and that’s the extent of our communications with the power provider or even our understanding of our own power usage.  What is emerging is a more distributed architecture where independent power producers are generating electricity from thousands or millions of smaller power plants.

Germany added a quarter of a million solar photovoltaic power plants in 2010 alone, of which just about 100,000 were in the residential scale (under 10 kW) and 135,000 were in the commercial (including farms) scale (10 kW to 100 kW)[1].   Despite its superior solar resources, the United States is far behind Germany – but growing fast.  At the end of 2010 the US had 152,516 grid-connected solar PV systems – of which about 52,5620 were installed in 2010, according to the Solar Energy Industries Association (SEIA)[2].

California is planning to bring 12,000 MW of distributed solar capacity online by 2020.  This will involve a combination of residential, commercial, and industrial-scale power plants.  Southern California Edison (SCE), which serves the Los Angeles metro area, recently announced 250 MW of solar photovoltaic power. The contracts were awarded to 20 plants ranging from about 5 MW to 20 MW[3].  A single project, called Prologis’s Project AMP, calls for 733 MW of solar PV on 750 industrial roofs in 28 states and DC[4].  Each one of these power plants will be on average just under 1 MW.

Today these power plants have to sell to the local utility or consume the power onsite.  What if they wanted to sell that power directly to someone down the street or across town?  What if you wanted to sell at market prices?  Today’s electricity architecture is not built for that.

So the distributed scenario that Powershop is built to take advantage of is taking shape – in countries like Germany and the United States.

Powershop’s revenue model is more like an Internet company than today’s energy industry: to take a percent of each transaction. They don’t charge “connection fees” like many utilities (cable and telephone companies included) or transaction fees. Transactions are simple as can be.

Entrepreneurship and Electricity 2.0

The ‘Smart Grid’ requires  users with the right tools to make smart decisions about their energy usage.  But a closed, top-down architecture does not really allow for that.

Part of the promise of an open architecture like the Internet, Apple’s iOS (which runs the iPhone, iPad, and AppleTV) or Facebook is that entrepreneurs can develop products and services and create markets and investment opportunities that the original designers of those architectures could never have even conceived.   There are more than 500,000 applications for the iPhone/iPad that have probably generated billions of dollars for their creators[5].   Without the open Internet and Web architecture, entrepreneurs could not have created companies like Google, Facebook, and eBay from their garages or dorm rooms.  What if the architecture of energy were as open as the architecture of Internet?

Bruce Hoult is a software engineer in Wellington, New Zealand.   Mr. Hoult signed up for Powershop last April 2009 – mainly to save money, but as soon as he discovered that Powershop offered an open API (Application Programming Interface) he started tinkering with it.   Since nighttime power is 25% cheaper than daytime power he set out to shift some of his power usage from the day to evening. He works from his home office and he did what a good enterprising tinkerer does: he ran experiments with his own power usage putting together available technologies in new ways.

“I built a computerized device based on Arduino [a website that offers an open source hardware and software platform for rapid prototyping] that I programmed to turn my  heater and dehumidifier on and off at different times of the day”,  said Mr. Hoult.  “After tracking power, temperature, and cost for a while, I determined that it was optimal to crank up the heater an hour or two before 7am when power cost goes up.  It turns out that the walls and the house itself retain a lot of the heat and slowly release it during the day.  The result is that I use much less power during the day while maintaining the same temperatures as before.”  Over the last twelve months Mr Hoult has saved NZ$500 or nearly 24% compared to the previous year.

I asked him if he was thinking about commercializing this device. “The payback is less than a year so there could be a market for it. However, I’m a technical guy.  Marketing is definitely not my thing.”

A friend of Mr. Hoult’s has already made some cash.  He took advantage of the Powershop API to develop an iPhone application that replicates some of the Powershop website functionality so he could purchase power and track usage anywhere he went.   The iPhone app was so compelling that Powershop acquired it and made it available for free to all its customers in both iPhone and Android versions.

Show me the money: how is Powershop doing?

Powershop had NZ $49.5 (US $40.7) million in revenues over the fiscal year than ended June 2011, according to Mr Sargent.  This was more than triple the NZ $14.2 (US $11.7) million during the previous fiscal year.  The number of customers has doubled from 16,553 a year ago to 33,628 today.  Mr Sargent expects the company to again double revenues and number of customers as well as start generating positive cash flow over the next year.  The annualized customer retention rate is 94-95% and the customer satisfaction (good or very good) rate is 96%, according to Consumer NZ, an independent consumer organization[6].

“I don’t ever see myself going back to the old power provider”, Jan Adams told me at the end of our interview. “I wish the telephone company worked like this.”

Sources:

[2] Solar Energy Industries Association , “US Solar Market Insight”, 2010 Year In Review, Executive Summary, http://www.seia.org/galleries/pdf/SMI-YIR-2010-ES.pdf

[3] SCE Advise 2547-E,  Jan 31,  2011, at  www.sce.com/NR/sc3/tm2/pdf/2547-E.pdf

[5] Apple IOS, Wikipedia the Free Encyclopedia, downloaded August 4th, 2011,  http://en.wikipedia.org/wiki/IOS_(Apple)

[6] Consumer NZ, “Electricity Suppliers” July 28, 2011,  http://www.consumer.org.nz/reports/energy-providers/electricity-suppliers

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Baseload (24/7) Solar: A Brief History and Bright Future of a Game-Changing Innovation

by Tony Seba on July 5, 2011

In a recent interview Microsoft Chairman Bill Gates said that storing enough solar energy for the night is a “mind blowing problem. I mean that’s more demanding by a factor of a hundred than any other battery challenge we have today.”(1) Wired.com published the interview the day before I published my post about the world’s first baseload (24/7) solar power plant in the world in Forbes.com.

There’s no doubt that baseload (24/7) solar energy is a game-changing innovation – and I will continue to write about it.

Gemasolar - The World's First Baseload (24/7) Solar Power Plant

Today I want to provide a brief history of two core innovations that made baseload solar possible: solar power tower and molten salt energy storage. As ground-breaking as on-demand solar is, it is the result of decades of investments in research and development and plenty of hard work. As Einstein would say, 24/7 solar was “one percent inspiration and 99 percent perspiration”.

Solar One

After the second “oil shock” of the 1970s sent oil prices skyrocketing yet again, the Carter administration created the Solar Energies Research Institute to invest in the development of solar energy.(2)

The first solar power tower in the world was called ‘Solar One’ and it was located in the Mojave Desert town of Daggett, 10 miles east of Barstow, California. This area has one of the best solar resources (called direct normal incidence or DNI) in America and was close to transmission lines and to the load in Los Angeles.

The Solar One pilot plant was commissioned by the then new U.S. Department of Energy (DOE) and was completed in 1981. It had a capacity of 10 MW and generated electricity until 1986. The heliostat field at Solar One consisted of 1,818 mirrors, each 40 m² (430 ft²) with a total area of 72,650 m² (782,000 ft²). The U.S. represented 80 percent of the world’s solar power market at the time.(2)

The original power tower design used water as the heat transfer medium in the tower receiver. The heliostats focused the sunlight on the receiver atop the tower heating the water to up to 950 degrees F (500 C). This superheated steam was then used to run a turbine to generate electricity. Some of the steam was stored in a tank to generate electricity later, thus smoothing electricity generation output. After operating from 1981 to 1986, Solar One proved that solar power tower worked.

Solar Two

In 1992 the original Solar One was reborn as Solar Two. Located in Daggett, California, Solar Two had a major goal to add to Solar One: energy storage that would allow the solar plant to operate long after the sun went down and also while desert clouds passed over.

The energy storage (“battery”) technology used molten salt as the transfer fluid. The chosen type of salt was a combination of sodium nitrate and potassium nitrate, which retains 99% of the heat for up to 24 hours. Another way to put this number: this battery loses just 1% of the heat energy per day.

Potassium nitrate also happens to be environmentally safer and cheaper than most chemical-based battery alternatives. In the Middle Ages, this ingredient was used to preserve food and it is still used in the production of corned beef . Potassium nitrate is also used in toothpaste (for sensitive teeth) as well as in garden fertilizers.

Solar Two operated between April 1996 and April 1999. This plant demonstrated the ability of solar to produce and dispatch electricity hours after sundown. Its molten-salt energy storage technology had a measured efficiency of 97%.

According to a U.S. Department of Energy document “Solar Two met essentially all its objectives. It demonstrated the ability to collect and store solar energy efficiently and to generate electricity when needed by the utility and its customers. Based on the success of Solar Two, U.S. industry [Boeing and Bechtel] is actively planning the first commercial implementation of this technology.”(3)

Solar Three

Two Spanish companies picked up where Solar Two left off. Abengoa Solar, a division of Abengoa (MCE: ABG) built PS10 outside Seville (commissioned June 2007) and Torresol Energy built Gemasolar in Fuentes de Andalucis (commissioned May 2011).

I visited PS10 in February 2009 (see video.) At the time the plant had been operating for just about a year and a half. When I walked into the control room I saw computer screens that tracked every single heliostat in the field as well as other metrics like solar radiation, temperature, and power generation. That afternoon the plant was working at higher than 97% efficiency. The plant manager, Valerio Fernandez, told me that the plant average efficiency for 2008 had been about 95% and was reaching 100% during steady state conditions.

Let’s compare PS10 and Solar One. PS10’s tower is 360 feet (110 meters) compared to Solar One’s 328 feet (100 meters). PS10 uses 74,800 m2 of mirrors compared to Solar One’s 72,650 m2 and has a generation capacity of 11 MW versus Solar One’s 10 MW. A major difference is that PS10 uses fewer but larger mirrors. PS10’s mirrors are 120 m2 (1,290 square feet) each, three times the size of Solar One’s 40-m2 (418 square feet) heliostats.

Gemasolar was born with the name “Solar Tres” (Solar Three), implying a sequential improvement on, or at least a new version of, the California original. Gemasolar built a 15-hour molten salt energy storage battery.

Back in the USA

Two California-based companies are planning to build a pair of solar power tower plants that together will be about ten times larger than the ones that Abengoa Solar (PS10 and PS20) and Torresol Energy (Gemasolar) have built. (This doesn’t include photovoltaics or other CSP technologies such as parabolic trough.)

SolarReserve, a Los Angeles, CA-based company, is planning to build a baseload solar power plant in the Nevada desert with almost five times the output of Gemasolar. Tonopah’s planned 110 MW capacity will generate 480,000 MWh per year vs Gemasolar’s 19.9 MW capacity and 110,000 MWh/year generation. The Tonopah tower will be 653 feet (199 meters) vs Gemasolar’s 495 feet (140 m). It will also use molten-salt energy storage (MSES) to build baseload solar capability and dispatch power on demand. According to SolarReserve, the project will use generate enough electricity annually to “power 75,000 homes during peak electricity periods.”(4) Tonopah is strategically located a few miles East of the California border and about half way between Las Vegas and Reno, NV.

BrightSource Energy, an Oakland, CA, based company is building a 392MW solar power tower plant in Ivanpah, CA – a capacity 15 times larger than Gemasolar. Brightsource’s Ivanpah Solar Electric Generating System (ISEGS), like Abengoa Solar’s PS10, will have steam energy storage – mostly to buffer against cloud cover. Mountain View, CA-based Google (Nasdaq: GOOG) invested $168 million in this project. (5) ISEGS is by far the largest solar power tower development in the world.

Furthermore, according to BrightSource, the company has contracts for 2.6 GW of solar power plants with California’s two largest utilities: Pacific Gas & Electric and Southern California Edison.

Energy Entrepreneurs: Go West Young Ones!

Governor Jerry Brown recently signed into law a Renewable Portfolio Standard requiring that 33% of California’s energy come from renewable sources by 2020.(6) During his campaign, he had outlined a plan calling for 20GW of clean energy by 2020. Furthermore, he sees this not just as an achievable goal but as the stepping stone to more clean energy: “While reaching a 33 percent renewables portfolio standard will be an important milestone, it is really just a starting point – a floor, not a ceiling,” said Governor Brown.

The key innovations that made baseload (24/7) solar a reality were first developed in California starting three decades ago. This state generated 90% of all solar power in the world just 20 years ago. After abandoning these technologies, the state with the 8th largest economy in the world is again shooting for the stars and building the largest solar projects in the world.

Who will be the Ciscos, Googles, Intels, and Apples of the Clean Energy Economy? “If you want a leading indicator that you can feel good about, look at the amount of IQ working on energy today,” says Bill Gates. “Compared to 20 years ago it’s night or day.” What new ‘mind blowing’ energy innovations will they create this time?

Sources:

(1) “Q&A: Bill Gates on the World’s Energy Crisis”, Wired Magazine, June 20th, 2011,

http://www.wired.com/magazine/2011/06/mf_qagates/all/1

(2) Travis Bradford, Solar Revolution – The Economic Transformation of the Global Energy Industry, The MIT Press, 2006

(3) “Solar Two Demonstrates Clean Power for the Future”, March 200o, SunLab, U.S. Department of Energy

(4) Tonopah Solar website: http://www.tonopahsolar.com/index.html

(5) “Google invests $168m in world’s largest solar power tower plant”, Guardian.co.uk, April 15, 2011, http://www.guardian.co.uk/environment/2011/apr/15/google-solar-mojave-ivanpah

(6) “California Governor Brown Signs 33% RPS Bill”, SolarServer, April 2011, http://www.solarserver.com/solar-magazine/solar-news/current/2011/kw15/california-governor-brown-signs-33-rps-bill.html

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The World’s First Baseload (24/7) Solar Power Plant

June 22, 2011

In the future solar power plants will be as plentiful as personal computers or cell phones are today and they will generate energy on demand. Today I have witnessed the future of energy: a solar power plant capable of generating solar electricity around the clock.

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Is Solar PV already below Grid Parity?

March 20, 2011

It recently became official news that solar power is cheaper than electricity from gas-fired power plants. I asked myself: if natural gas is below grid parity and solar is cheaper than gas, doesn’t that mean that solar is also below grid parity? Let’s look at the numbers.

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Baseload (24/7) Solar is here!

March 14, 2011

Gemasolar is a 17-MW solar power tower plant with 15 hours of molten salt energy storage. Yes, a solar power plant that will deliver solar electricity round-the-clock: at 10 pm., at 1 am., and at 4 am. Gemasolar has a capacity factor of 75% and is scheduled to open in about two months.

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Power to the People: Can Egypt Create Sustainable Wealth?

February 10, 2011

In 2006 Egypt spent about $10.8 billion a year subsidizing oil & gas products. Each Egyptian is thus writing a $135 yearly check to subsidize its fossil fuel insustry. In a country where 19.6% of the population lives on less than $1 per day. Egypt could produce solar power for the equivalent of $20 per barrel (or less) for its own power needs and sell its natural gas and oil on the international markets for the equivalent of $90 per barrel (or more).

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The Most Important Energy Projects in the World

January 19, 2011

The future of energy is all about abundant, cheap, and clean power. Over the last few months of 2010 the U.S. Department of Interior’s Bureau of Land Management (BLM) and the California Energy Commission (CEC) approved 10 large-scale Concentrating Solar Power (CSP) projects totaling about 4,190 MW. (1) They include the [...]

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Is Facebook worth $25 billion? How about $40 billion?

December 12, 2010

Facebook’s valuation has been a subject of endless fascination in the Silicon Valley finance and entrepreneurship community in 2010. How do you value a private company? What’s Facebook really worth? $25 billion? $40 billion? $50 billion? This video is from my Stanford class “Finance for Entrepreneurship” where we go over different ways to value a company and use Facebook as a case study. So how much is Facebook worth? The answer is…

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Video: Can Bio Energy (bioethanol, biodiesel) Scale? Are Biofuels Sustainable?

November 23, 2010

Biofuels like bioethanol and biodiesel, and biomass like wood pellets, have been supported by governments around the world as a form of ‘renewable’ energy and as a way to achieve ‘energy independence’ by substituting bio energy for coal or oil. But is bio energy clean? And can it scale? Is bio energy sustainable? Can it be financially viable? Watch “Solar Trillions” author Tony Seba talk about biofuels and biodiesel, starting with the fact that green plants are solar plants.

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Can the Poor Afford Solar?

November 20, 2010

Seventy Seventy percent of the Bangladeshi population has no access to electricity. Grameen Shakti a spinoff of Grameen Bank has created a new business model that has spurred one of the fastest-growing adoption rates of home solar anywhere – amongst the poorest of the poor! Grameen Shakti proves that a profit-making, market-based enterprise with a social purpose can give millions of poor people access to electricity without a transmission grid. Solar makes Power to the People an affordable reality. Today.

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