[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

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.”

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

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

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.

Located in the Spanish province of Andalucia, Torresol Energy’s Gemasolar is the world’s first utility-scale commercial baseload solar power plant.

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

Torresol Energy, the company that built Gemasolar is a joint venture between Spanish infrastructure giant Sener and Masdar – Abu Dhabi’s Future Energy Company. During my visit to Gemasolar I met with Santiago Arias, Torresol’s Chief Infrastructure Officer and one of the co-founders of the company.

Solar Salt Batteries

Gemasolar, which officially launched last month (May 2011), is a 19.9-MW plant with a 15-hour ‘battery’. Gemasolar’s expected production is 110,000 MWh per year—or about enough to fully power 25,000 households. Because it can store energy, this 19.9 MW generates the equivalent of a 50 MW solar power plant without storage, according to Mr. Arias.

Gemasolar’s battery consists of two tanks of molten salt thermal energy storage that allows the solar plant to generate on-demand electricity: during the evening, during cloud cover or rain, or even days or weeks later. Molten salt energy storage (MSES) or ‘solar salt’ batteries are thermal not chemistry-based batteries like Lithium-ion which power electric vehicles like Tesla’s (Nasdaq: TSLA) Roadsters.

MSES uses a combination 60% potassium nitrate and 40% sodium 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.(1)

Potassium nitrate 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.(2) Potassium nitrate is also used in toothpaste (for sensitive teeth) as well as in garden fertilizers. MSES capital costs are also relatively low, clocking in at $50 to $100 per kWh, compared to about ten times that for a Li-on battery that powers a personal computer or electric vehicle.

Gemasolar is not the world’s first commercial solar plant with MSES. If I had driven another 300 Km (186 miles) due south-east on Andalucia’s A94 highway I would have seen Andasol-1, a 50 MW CSP plant that has been operating with a 7.5-hour battery since July 2009. Gemasolar basically doubled the battery availability to 15 hours.

Torresol’s Arias expects Gemasolar to produce electricity about 6,400 hours per year – a capacity factor of 75%. For comparison, the Hoover Dam has a capacity factor of just about 23% while China’s Three Gorges hydro-electric power plant has a capacity factor of about 50%.(3) According to a 2003 study by Clemson University Prof Michael Maloney in 2003 the capacity factor of nuclear reactors in Japan, France, and the US were in the 65% to 72% range and the worldwide load factor was 69.4 percent.(4)

Solar Power Tower

When most people think about solar power, they think of photovoltaic (PV) panels on the roof of a house or building. PV converts photons directly into electricity. Gemasolar belongs to a category called Concentrating Solar Power (CSP) which use the sun’s energy to heat a fluid (water, synthetic oil or molten salt) to generate steam which then drives a turbine to generate electricity.

If you’ve ever used a magnifying glass or better yet a concave mirror to focus sunlight and burn a hole in a piece of paper, you get the idea. Use thousands (or millions) of square meters of mirrors (not PV panels) to reflect that same sunlight on a single point (actually small area), and you can heat a fluid flowing past it up to several hundred degrees Celsius and use that superheated fluid to drive an industrial-scale turbine.

Each heliostat has reflective mirror surface about 110 square meters (1,184 square feet) and follows the sun using two motors with built-in pogrammable logic controllers (PLC) that recalculate and readjust the heliostat’s position 15 times per minute. As I walked under the heliostats I could hear the slight hissing sound of the motors moving the heliostats every 4 seconds. I went up to a heliostat to touch the reflective surface mirror and sure enough it was a mirror, not metal. When I asked Mr Arias about it, he said that these are slightly better mirrors than what I would have in my house.

Energy Storage Changes Everything

Santiago Arias, Torresol’s Chief Infrastructure Officer, started building power plants 38 years ago. He converses about the electricity market and gets excited about the impact of a solar power plant that can operate around the clock. “The maximum demand for electricity takes place during the evening on the hottest days of the year,” says Mr Arias. The market pays a premium price for electricity during those peak hours. A solar power plant generates the most energy precisely during those hot sunny days.

“The ability to store energy when the sun it at its peak and deliver it when the market demand is at its peak changes everything in the power market. My fuel cost is zero. Natural gas can simply not compete with us.”

Sources:

(1) “Solar Trillions – 7 Market and Investment Opportunities in the Emerging Clean-Energy Economy”, Tony Seba, January 2010, Amazon.com http://www.amazon.com/Solar-Trillions-Investment-Opportunities-Clean-Energy/dp/0615335616

(2) Potassium Nitrate, Wikipedia, http://en.wikipedia.org/wiki/Potassium_nitrate , retrieved June 20, 2011

(3) Capacity Factor, Wikipedia, http://en.wikipedia.org/wiki/Capacity_factor, retrieved June 20, 2011

(4) Michael T. Maloney, “Analysis of Load Factors at Nuclear Power Plants”, http://works.bepress.com/cgi/viewcontent.cgi?article=1009&context=michael_t_maloney , as of June 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.

Solar PV is cheaper than natural gas

On January 31, 2011, Southern California Edison (SCE), which serves the Los Angeles metro area wrote an Advice Letter announcing

Solar PV is below grid parity

that they had approved 20 contracts totaling 250 MW of solar photovoltaic power. The bid process was done according to a mechanism called Renewable Auction Mechanism (RAM) which is a market-based reverse auction in which the bidders are ranked starting with the lowest levelized cost of electricity (cents per kilowatt-hour or ¢/kWh). The contracts were awarded to the lowest bidders with plants ranging from about 5 MW to 20 MW that collectively added up to the program total which was 250 MW. The SCE Advice Letter does not state the exact LCOE on these bids. But it does say that they were all below the 2009 Market Referent Price (MRP). (1)

I went to the California Public Utility Commission (CPUC) website and checked CPUC Resolution E4298 which defines the Market Referent Price as what it would cost to own and operate a baseload combined cycle gas turbine (CCGT) plant. (2)

The SCE Solar PV power plants have 20-year power purchase agreements (PPA) “resulting from SCE’s 2010 Renewable Standard Contracts” so I looked for the equivalent gas timeframe. The 20-year MRP for a gas-fired plant with a 2010 contract date was 9.674 ¢/kWh. (2)

This means that according to Southern California Edison’s Advice Letter, all of the 20 winning solar PV bidders came in below 9.674 ¢/kWh.

Natural Gas is a volatile commodity which has recently dropped in price so I compared the California PUC number with what an electricity customer would pay in Houston, TX. The Reliant Power Tracker © is an electricity program where the ratepayer pays based on the variable market price of natural gas. According to Reliant the average price assuming 2,000 kWh is 10.4 ¢/kWh which includes an ‘energy price’ of 9.9 ¢/kWh plus assorted charges such as “transmission fee”. So there doesn’t seem to be much variation between gas power prices in these California and Texas markets.

So sure enough, the numbers officially show that solar PV is cheaper than electricity from a gas-fired plant. – at least in sunny California and Texas. How about ‘grid parity’?

Solar PV below ‘grid parity’

The average residential electricity price in America in 2009 was 11.55 ¢/kWh, according to the United States Department of Energy. (3) The SCE solar projects, which came below 9.674 ¢/kWh, beat residential grid prices in America.

But the 11.55 ¢/kWh grid-parity is an average price. In reality millions of Americans are paying much more for their electricity. For instance, in Pacific Gas & Electric’s territory the ‘baseline’ power price is 12.2 ¢/kWh. (4) However, 2.2 million PG&E ‘tier-three’ and ‘tier-four’ customers will pay 29.4 ¢/kWh and 40.4 ¢/kWh respectively for their power consumption.(4) and (5) That’s three to four times the cost of the SCE solar power plants.

How about commercial grid-parity in the whole country? Remember that businesses pay a different rate from residential consumers. According to the U.S. DOE, the average commercial electricity rate in American in 2009 was 10.21 ¢/kWh.(3)

This means that solar PV (which came in below 9.674 ¢/kWh) is below ‘grid-parity’ for both residential and commercial electricity users nationally.

Furthermore, the 250 MW SCE projects are not the first solar projects that officially puncture grid-parity. A 1MW Concentrating Photovoltaic (CPV) plant at Victor Valley College in Southern California has generated solar power since the summer of 2010 at 8.5 ¢/kWh – without subsidies, according to Nancy Hartosch of SolFocus (Mountain View, CA).

So in the case of the Victor Valley CPV power plant, unsubsidized solar is cheaper than subsidized natural gas as well as electricity from the grid.

So next time someone says that ‘solar is too expensive’ ask them to look at the data above which indicates that:
1- Solar PV is officially cheaper than natural gas in sunny California and Texas.
2- Solar PV is below ‘grid-parity’ for the average residential and commercial ratepayer in America, and
3- Millions of Americans are paying their utilities up to three to four times more than the cost of solar PV.

So start spreading the news: solar is cheaper than both natural gas and ‘grid parity’.

Sources:
(1) SCE Advise 2547-E, Jan 31, 2011, at www.sce.com/NR/sc3/tm2/pdf/2547-E.pdf
(2) CPUC Resolution E4298, Dec 17, 2009, at http://docs.cpuc.ca.gov/WORD_PDF/COMMENT_RESOLUTION/109813.pdf
(3) “Average Retail Electricity Prices, 1960-2009”, US Department of Energy, at http://www.eia.doe.gov/emeu/aer/txt/ptb0810.html
(4) Pacific Gas and Electric, Electric Schedule E-1, Advice Letter 3797-E-A, Effective March 1, 2011, http://www.pge.com/tariffs/tm2/pdf/ELEC_SCHEDS_E-1.pdf
(5) “PG&E raises electricity rates for some homes”, San Francisco Chronicle, March 2, 2011, at http://articles.sfgate.com/2011-03-02/business/28644976_1_electricity-rates-tiers-pg-e

The Andalucia region of Spain has developed many solar firsts: the world’s first commercial solar power tower (PS10), the largest (PS20), as well as the world’s first solar power plant that generates solar electricity past midnight.  Andalucia will soon add another first to that shiny list: the world’s first commercial baseload solar power plant.

Gemasolar - 24/7 Solar Power Plant (Copyright @ Sener with Permission)

Cobra’s (ACS Group) Andasol-1 plant near Granada, which officially went online in July 2009, is a 50-MW plant with a 7.5 hours battery. This ‘battery’, built by Spanish engineering giant Sener, consists of two tanks of molten salt thermal storage that helps the solar plant generate on-demand electricity in the evening, during rain or cloud cover. Total plant production is about 280,000 GWh per year—about enough power for 170,000 people. (1)

Andasol’s capacity factor is 41%. That is, it can generate electricity 3,600 hours per year. For comparison, the Hoover Dam has a capacity factor of just about 23% while China’s Three Gorges hydro-electric power plant generates has a capacity factor of about 50%. (2)

Solar Salt Batteries
Molten salt energy storage (MSES) or ‘solar salt’ batteries are thermal not chemistry-based batteries (like Lithium-Ion).  MSES uses a combination 60% sodium nitrate and 40% 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 happens to be environmentally safer and cheaper than most chemical-based battery alternatives.(3)  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.(4)  MSES is also relatively cheap, clocking in at $50 to $100 per kWh, compared to about $1,000 for a Li-on battery.

24/7  Solar

Drive back to Seville on the Autovia del Sur (A-4 highway) and you’ll find the world’s first commercial large-scale baseload solar power plant: Gemasolar.

Built by Sener, 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 is scheduled to open in about two months, according to former Sener USA President Jose Martin.

Gemasolar’s capacity factor is 75%. For comparison, the capacity factor of nuclear reactors in Japan, France, and the US were in the 65% to 72% range (in 2003) according to Clemson University Prof Michael Maloney.(5)

Solar CSP has solved the energy storage challenge in an economical, elegant, and environmentally safe manner.  Round-the-clock (baseload) solar is here.

Sources:

(1) “Solar Trillions – 7 Market and Investment Opportunities in the Emerging Clean-Energy Economy”, Tony Seba, January 2010, Amazon.com http://www.amazon.com/Solar-Trillions-Investment-Opportunities-Clean-Energy/dp/0615335616

(2) Wikipedia, Capacity factor, http://en.wikipedia.org/wiki/Capacity_factor, as of Mar. 14, 2011

(3) “Solar Power and Salt Batteries,” Energy Matters, December 29, 2008, http://www.energymatters.com.au/index.php?main_page=news_article&article_id=263

(4) Potassium Nitrate, Wikipedia, http://en.wikipedia.org/wiki/Potassium_nitrate , retrieved June 21, 2009

(5) Michael T. Maloney, “Analysis of Load Factors at Nuclear Power Plants”,  http://works.bepress.com/cgi/viewcontent.cgi?article=1009&context=michael_t_maloney , as of March 12, 2011

In 1912 Egypt built the first commercial solar power plant in the world. At a time when Egypt was the largest producer of cotton in the world, American inventor and entrepreneur Frank Shuman engineered, raised financing for, and built a solar power plant in Maadi that pumped 6,000 gallons of Nile river water per minute to irrigate the cotton fields. (1)

In 2006 Egypt spent about $10.8 billion a year subsidizing oil & gas products, according to the International Energy Agency.(2) 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 (3) and the average family spends 40% of their income buying food (4) this is an unsustainable policy.

In my book “Solar Trillions” and in a blog piece I published last year, I wrote about how Egypt can transcend its chronic poverty and become an energy world power. (5) To summarize: if Egypt were to build solar power plants in an area similar to the Aswan hydro-electric dam it would produce the energy equivalent of all of the Middle East oil exporters combined.

It would take far less to generate Egypt’s power needs using solar. In 2008 Egypt produced 132 billion kWh, according to the Energy Information Agency (EIA). It would take an area of less than 8% of the Aswan hydro plant (which has just 2GW capacity) to produce all that energy with solar power plants following the assumptions of a major study by the German Aerospace Center – DLR.(6) Furthermore, the cost of producing that solar power is rapidly falling. According to the German Aerospace Center report the cost of solar is expected to fall to the equivalent of oil at $20 per barrel by 2020 and to $15 per barrel beyond that point.(7) Remember that oil prices hit $147 in 2008 and is hovering around $90 per barrel now.

So 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).

Instead of a negative cash flow of $10.8 billion per year to keep its economy hooked on subsidized fossil fuels, Egypt could produce a positive cash flow many times larger.

Take those energy profits and invest them in the infrastructure to power the Egyptian economy out of its doldrums; create clean energy jobs and sustainable wealth for its population; deliver education, health care, food, and water to the Egyptian people.

Egypt is blessed with abundant sunshine that can help deliver clean power and wealth to its people. A century after it built the first solar power plant in the world Egypt could go back to its solar roots to power its future.

Sources:

(1) “Solar Trillions – 7 Market and Investment Opportunities in the Emerging Clean-Energy Economy”, Tony Seba, January 2010, Amazon.com http://www.amazon.com/Solar-Trillions-Investment-Opportunities-Clean-Energy/dp/0615335616
(2) An Analysis of the Scope of Energy Subsidies and Suggestions for the G-20 Initiative”, IEA, OPEC, OECD, WORLD BANK JOINT REPORT, June16, 2010
(3) World Food Program, Egypt, http://www.wfp.org/countries/egypt
(4) Credit Suisse Emerging Consumer Survey 2011: https://www.credit-suisse.com/news/doc/media_releases/consumer_survey_0701_small.pdf
(5) “Can Egypt Join the Ranks of the Energy World Powers?” http://tonyseba.com/desert-power/can-egypt-join-the-ranks-of-energy-world-powers/
(6) Assumptions: solar-to-power efficiency = 11% and DNI =2,400 kWh/m2/year
(7) Franz Trieb et al, “AQUA-CSP – Concentrating Solar Power for Water Desalination,” Final Report, German Aerospace Center, DLR, Institute of Technical Thermodynamics, Stuttgart, Germany, November 2007

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 largest single solar power tower (370 MW) and parabolic trough (1,000 MW) projects in history.

In terms of their collective impact on the future of energy, these Desert Power projects may well be the most important energy projects in the world today.

The 2 main forms of Concentrating Solar Power (CSP): Parabolic Trough and Power Tower at Abengoa Solar's Solucar

California Solar Valley – Back to the Future

Back in the 1980s Califonia had a solar boomlet led by a company called Luz. Nine CSP power plants collectively known as SEGS (Solar Energy Generating Systems) went up in the Mojave desert using parabolic trough concentrator technology. The SEGS power plants have a total of 354 MW and have generated about 0.7 TWh of electricity yearly over the last two decades. SEGS would fulfill San Francisco residential power needs for about 7 months of each year.

By 1990 SEGS generated about 90% of all the solar power in the whole world which made California the world’s largest solar market and technology developer. But development of new CSP plants came to a grinding halt. America didn’t build another large solar power plant until Nevada Solar One was built near Las Vegas in 2007, adding another 70 MW of solar power to the grid.

The newly approved 4.2 GW of Desert Power CSP will increase America’s solar CSP infrastructure by an order of magnitude. Solar power will significantly contribute to California’s Renewable Portfolio Standard (RPS) goal of 33% clean energy by 2020 and would make the United States the global market leader in Utility Scale solar CSP generation again.

4.2 GW is still tiny compared with the 13 TW (terawatts) of energy consumed around the world each year. Why do I think these desert power projects are so important?

Learning to Cut Costs by Half

Luz didn’t just build solar power plants in the eighties. As it built them its engineers learned to cut costs. Over five years in the 1980s, while building the SEGS plants, Luz cut the cost of solar electricity by 50% – from 28 c/kWh to 14 c/kWh, according to Joshua Bar-Lev, who was on the Luz team in the 1980s and is now is at BrightSource, Inc (Oakland, CA). SEGS plants now generate power at 9 to 12 cents per kWh. (America’s average power price is around 10 c/kWh.) (2)

Solar CSP is not the only set of solar technologies that is pushing costs down. Solar photovoltaic technologies have had exponential drops in costs since the 1970s. Solar PV prices have dropped as much as two-thirds over the last three years alone. (3)

As a result, photovoltaic power plants have already started to puncture grid parity in areas with high solar radiation. A 1MW Concentrating Photovoltaic (CPV) plant at Victor College in Southern California has generated solar power since the summer of 2010 at 8.5 cents per kWh – without subsidies, according to Nancy Hartosch of SolFocus (Mountain View, CA). This is less than the 10 c/Kwh that Americans pay on average (grid-parity). It’s also much less that the prices of more than 40 c/kWh that many pay during the peak summer heat.

Learning curves and cost-cutting are of course not unique to solar. There are several reasons why solar and many other industries have been able to continue to push cost curves down. Several of them actually reinforce one another:

1. Learning Curves. The more we do something the more efficient we become at doing it. According to NASA industries like shipbuilding, aerospace, or repetitive electronic manufacturing have learning curves of 80%-95%. (4)
2. Innovation.  As the market grows in importance it attracts more talent and attention in Universities, Research Labs, and Corporations.  Increased research and development create new technologies and processes or improve existing products to grab a larger share of that growing market.  In my book “Solar Trillions” I wrote a case study on a startup company that developed a simple but ingenious component that promises to to cut solar power costs by 10% or 20%. (2) Even Google has announced it’s working on an innovative mirror for CSP plants. (5)
3. Investments. The more the market grows the more suppliers across the whole solar value chain (from suppliers to customers to competitors) invest in new capacity and new products and services to meet the new demand.  They work with innovators and invest in in-house R&D and product development capabilities. Venture Capital flows into startup companies that create new technologies that cut costs even further.
4. Scale.  Building a large-scale CSP solar plant is a construction project which consumes commodities like concrete, steel, and aluminum. The larger the purchase order of alumimum that a company makes the lower the unit cost that a company is going to get.
5. Bankability. As more solar power plants come online, many bankers lose their fear of financing new plants.  The cost of capital for new solar power plants decreases – which further lowers the levelized cost of solar electricity.

The history of SEGS suggests that the builders of  4.2 GW of new CSP desert power plants in will cut the levelized cost of electricity (LCOE) of utility scale desert solar power by 50% over the next 5 years.

The Future of Energy – Making Legacy Energy Obsolete

This 50% cost shave means that by 2015 we will be talking about desert solar power costs on the order of 7 c/kWh. (Assuming that CSP cost of electricity in the Mojave desert are around 14 c/kWh, which is where Luz left off in 1990.)  This will undoubtedly be cheaper than two major forms of subsidized legacy power: new nuclear and natural gas. The few nuclear plants breaking ground today will already be obsolete by 2015 – years before they even start generating power.  Desert Power CSP will also be within striking distance of coal.

Cost-cutting would create a virtuous cycle of demand and investments in more solar power plants which would lower costs even more which would spur more demand and investments and so on.

How long can the solar industry keep up the desert power cost-cutting?  Can the solar industry cut costs another 50% between 2016 and 2020?  The Bureau of Land Management (BLM) has received requests to develop solar CSP plants totaling of 24,000 MW (24 GW) in California’s deserts. (2)  This does not include desert land to be developed elsewhere in the US SouthWest, India, China, Spain, the Middle East and North Africa.  If this wattage is developed over the next decade and the cost curve follows solar history or matches industries such as shipbuilding, aerospace, or repetitive electronic manufacturing then we will be looking at another 50% cut in the solar LCOE. The cost of solar would then be on the order of 3.5 cents/kWh.

This would mean that by 2020 desert solar power will be cheaper than coal.

Put another way, by 2020 solar will be cheaper than the three major forms of subsidized dirty legacy power: coal, natural gas, and nuclear.  Solar, which is by far the most abundant source of energy on earth, will also the cheapest, thus helping to bring about a multi-terawatt clean and sustainable energy infrastructure.    This is why the 4.2 GW of California desert power projects are key to the future of energy and the most important energy projects in the world today.

Endnotes:

(1) The California Energy Commission, Large Scale Solar Energy Projects,   http://www.energy.ca.gov/siting/solar/index.html

(2) “Solar Trillions – 7 Market and Investment Opportunities in the Emerging Clean-Energy Economy”, Tony Seba, 2010, http://tonyseba.com/books/solar-trillions/

(3) The New York Times, http://www.nytimes.com/2011/01/15/business/energy-environment/15solar.html

(4) NASA Learning Curve Calculator: http://cost.jsc.nasa.gov/learn.html

(5) CNET, “Google develops prototype mirror for solar energy”,  http://news.cnet.com/8301-11128_3-10460913-54.html

Facebook’s valuation has been a subject of endless fascination in the Silicon Valley finance and entrepreneurship community in 2010. Even the mainstream business media has got into the guessing game. From Barron’s announcement of a $14 billion valuation in January to Fortune magazine arguing for a $50 billion valuation in August to the almost-daily blogosphere and water-cooler conversations, the subject will probably not die until the company goes public.

It is of course fairly easy to find out a public company’s valuation. As I write this, Google’s (Nasdaq: GOOG) market value (or Market Cap) is $189.6 billion, according to Morningstar. (When you read this this will certainly be different.)

From an entrepreneur’s perspective the question is: how do you value a private company? In the fall of 2010 I taught a course at Stanford called “Finance for Entrepreneurship” where we covered several ways to value a company and used Facebook as a case study. So how do you value Facebook? How much is Facebook really worth? Here’s the video clip. Enjoy.

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 imported oil. But is bio energy clean? And can it scale? Is bio energy sustainable? Can it be financially viable?

Watch this excerpt from a recent keynote on the Future of Energy where I talk about biofuels and biodiesel, starting with the fact that green plants are solar plants.

Seventy percent of the Bangladeshi population has no access to electricity—a shameful number in a nation with such great solar radiation. Lack of energy makes it difficult if not impossible for people to better themselves socially and economically. Without electricity you can’t run an efficient poultry farm, a food catering business, or even a basic home sewing business.

So Grameen Bank founder and Nobel Peace Prize winner Dr. Mohammed Yunus started Grameen Shatki to bring solar power to the people. GS would employ the same principles as Grameen Bank: to give poor and rural people access to a resource with which mainstream institutions and “the market” had formerly neglected to provide them.

In 1997, Grameen Shakti provided the know-how and the credit for the installation of 228 solar panels. GS trains installers who go door-to-door in rural centers promoting the benefits of solar electricity. Since most homemakers are women, 50% of these installers or “engineers” are also women. Bangladesh is a socially conservative country. Having men performing these duties is problematic because it’s not considered appropriate for women to be visited at home by a man who is not their husband or other close family member. But this very restriction on women at home creates an opportunity for other women to learn skills and earn money.

Over the decade after 1997 Grameen Shakti grew almost a thousandfold. By 2008 it had installed a cumulative 220,000 “Solar Home Systems” and was still growing at 100% per year. It had also provided “green jobs” to 8,000 people, of whom 4,000 were “engineers” or installers. Most of these 4,000 people were school dropouts (it’s common in Bangladesh for girls to leave school very early in order to help at home) who might otherwise not have had a chance at decent jobs and economic advancement. (2)

Bangladesh Solar Home System Adoption

The cost of a Grameen Shakti solar home system (SHS) including the (Japanese) rooftop solar panels, the electronic components, and a battery is $350-$400. Buyers put down 10-15% of this cost and get a 3-year loan to amortize the system (2). At this point they own a solar generating system that should provide electricity for 20 years.

The energy capacity installed by Grameen Shakti as of March 2009 is 11 MW, equivalent to the PS10 tower power plant in Seville. This capacity benefits up to 2 million people daily and produces 44 MWh per day. (3) The electricity lights up homes, powers television sets, and recharges cell phones at night.

These solar generators are mainly displacing kerosene, which is people’s main source of light and cooking energy throughout Bangladesh—and throughout much of the poor world. Kerosene costs up to $2 per kWh, about 20 times what I pay for electricity in San Francisco. The poorest of the poor are paying much more than we are, both in absolute terms and as a percentage of their incomes!

What’s more, kerosene also kills people, not just by fire but by producing noxious fumes. According to UNESCO, more than two million children died from acute respiratory disease in 2000; 60% of these deaths were associated with indoor air pollution and other environmental factors (4). Kerosene is not just expensive. It’s downright dangerous.

Meanwhile, solar energy is even more capable of distributed operation than cell phones are, since solar PV has no need even for transmission towers. The potential to reach everyone everywhere and give them access to modern energy is unique to solar. Can anyone say “democratization of energy”?

The sky is literally the limit for the growth of solar energy. Grameen Shakti plans to install one million solar home systems by 2012 and wants to create 100,000 green jobs by 2015 (5). Create jobs and advancement opportunities for the poor, save children’s lives, and save the planet too? This sounds like another Nobel Peace Prize to me. In January 2009 Dipal Barua, who spun off Grameen Shakti from Grameen Bank in 1997 and has been its Managing Director since, won the $1.5 million Zayed Future Energy Prize (6).

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, just as China proved that similarly inexpensive processes can give phone access to hundreds of millions without a traditional telecommunications infrastructure.

Solar makes Power to the People an affordable reality. Today.

Adapted from “Solar Trillions – 7 Market and Investment Opportunities in the Emerging Clean-Energy Infrastructure”, Chapter 6 – Opportunity IV—”Power to the People: Residential-Scale Solar” (Copyright © 2009 by Tony Seba). Available at Amazon.com http://www.amazon.com/Solar-Trillions-Investment-Opportunities-Clean-Energy/dp/0615335616

Endnotes:
(1) Grameen Shakti “At A Glance March 2009,” http://www.gshakti.org/glance.html
(2) “Grameen Shakti Brings Sustainable Development Closer to Reality in Bangladesh” , GreenBiz.com, January 21, 2009, http://www.greenbiz.com/blog/2009/01/21/grameen-shakti
(3) Grameen Shakti “At A Glance March 2009,” http://www.gshakti.org/glance.html
(4) United Nations Education Scientific and Cultural Organization (UNESCO) World Water Assessment Programme http://www.unesco.org/water/wwap/facts_figures/water_energy.shtml
(5) Grameen Shakti “At A Glance March 2009,” http://www.gshakti.org/glance.html
(6) “Zayed Future Energy Prize Recognizes Dipal C. Barua,” Reuters, January 19, 2009, http://www.reuters.com/article/pressRelease/idUS154081+19-Jan-2009+PRN20090119