It'd be hard to ask for a more conclusive sign that the desert solar gold rush is grinding to a halt than last week's announcement that BrightSource Energy is postponing its IPO. BrightSource, the Oakland firm now building the massive Ivanpah Solar Electric Generating System (ISEGS), called off its much-anticipated Initial Public Offering of stock on Wednesday night, April 11, citing "adverse market conditions" as the reason for the postponement.
What are those "adverse conditions"? BrightSource is using 19th century technology to compete against tech from the 21st Century, and basing its business plan on assumptions about the power industry that will soon be just as obsolete.
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BrightSource isn't the only one on the field feeling the pressure. Last September "SunCatcher" developer Stirling Energy Systems filed for bankruptcy, stung by financial reverses. These included a lawsuit by a Native tribe that stopped its proposed Imperial Solar Two project dead, with the utility SDG&E subsequently rescinding an agreement to buy power from the project and the California Energy Commission reversing its approval. SES's dedicated development arm Tessera Solar went under the year before.
Where BrightSource's core technology is antiquated -- hundreds of mirrors focusing light and heat on a boiler, the chief concession to modernity being computers helping the mirrors track the sun -- Stirling/Tessera's was absurdly complex, single parabolic mirrors tracking the sun and heating fluid in a Stirling engine, whichdrove a turbine. Though Stirling engines are a nifty technology, SES's SunCatchers were largely untested, broke down with distressing frequency at the firm's development grounds in Arizona, and to the chagrin of neighbors of the proposed Imperial Solar Two plant, they were loud.
SES/Tessera were the initiators of the Calico Solar project east of Barstow as well, but sold that proposed 663.5-megawatt solar factory in 2010 to K Road Power. K Road promptly announced plans to scrap most of the SunCatchers planned for the site in favor of photovoltaic panels (PV), which are reliable, abundantly field-tested, and can be installed in configurations that have no moving parts to break down. (That hasn't solved K Road's problems. The Calico site is a vibrant stretch of old-growth desert with immense wildlife value, with desert bighorn sheep and Mojave fringe-toed lizards in the vicinity, as well as the same species that has bedeviled BrightSource's PR department as they try to cast the Ivanpah project as a "green" development -- desert tortoises. The Calico project poses such a threat to desert wildlife that the Natural Resources Defense Council, usually a de facto promoter of giant desert solar projects, joined Defenders of Wildlife and the Sierra Club in suing the Interior Department over Calico's approval. Calico's so bad even NRDC's against it: that's saying something.)
The trend that Stirling started has gained speed. Solar Trust of America, the U.S. face of the German firm Solar Millenium that broke ground on the one-gigawatt Blythe Solar project in 2009, filed for bankruptcy early this month. The firm also proposed the 500-megawatt Palen Solar Power Project near Desert Center, the 250 megawatt Ridgecrest Solar Power Project in Kern County, and the 500 megawatt Amargosa Farm Road Solar Project near Beatty, NV. Blythe was the only Solar Millenium project that advanced to the bulldozer stage. In June 2011 Interior Secretary Ken Salazar and California Governor Jerry Brown lauded the project at its official groundbreaking. Two months later Solar Millenium announced it was going back to the drawing board, jettisonning its planned parabolic trough CSP design in favor of PV. This resulted in a delay of further construction and the loss of $2 billion in federal loan guarantees. Solar Trust of America filed for Chapter 11 protection just as a $1 million rent obligation to the BLM came due.
There are two baseline issues here. We'll deal with the second one in a bit. The first is that due largely to renewable energy economic policy in the People's Republic of China, which has invested heavily in its solar technology sector, the price of PV panels has dropped precipitously: by 75% in the last few years. PV is much cheaper to maintain than CSP. It needs neither turbine fluids nor equipment that must withstand high temperature. It has moving parts only if it's placed on mounts that track the sun. Otherwise it just sits there, quietly generating electrical power when the sun shines on it. Though CSP designs can generate a bit more power per square foot of installation than PV, that advantage drops away when PV gets cheaper per generated kilowatt-hour.
BrightSource insists its technology isn't obsolescent, touting its plans to introduce molten salt thermal storage for energy production at night. (If you look at that last link, you'll see John Farrell pointing out that PV systems can add energy storage -- namely, batteries -- far more cheaply per watt than is the case for industrial-scale molten salt systems. In press statements over the last week, BrightSource PR staff Keely Wachs touted the firm as having "[a] strong financial position, support from world-class investors and partners, one of the largest solar pipelines in the US and a disruptive technology."
Some tech journalists weren't fooled. In a tweet on the evening of the IPO announcement, the San Jose Mercury News' Dana Hull asked:
Tweep Poll! What happens to BrightSource now? a) acquisition bait b) existing investors throw in more money c) death spiral— Dana "Fully Vaxxed & Slowly Emerging” Hull 👩🏻💻 (@danahull) April 12, 2012
That's a good question. BrightSource has absorbed $1.6 billion in federal loan guarantees just in building Ivanpah, more than three times the taxpayer dough received by the notorious Solyndra. Future loan guarantees are far from certain, an infusion of cash from new stockholders has been postponed, and BrightSource's own decision this past week is being seen as heralding a new bearish era for solar venture capitalists.
Despite the $1.6 billion in federal loan guarantees, Ivanpah is expected to take at least an additional $600 million to complete. It's found sufficient investor backing to cover the difference with Ivanpah, but unless BrightSource has a funding rabbit to pull out of its solar hat, the future of its other projects looks hazy.
Which isn't to say that desert solar developers relying on PV have it easy either. Take for example First Solar, dreadnought of the US PV industry, which announced this week it's laying off 2,000 workers and closing plants in Germany and Malaysia. That announcement came on the heels of the revelation in February that the company's thin-film PV didn't actually work all that well in the desert's extreme heat. Its panels are actually better-suited to producing power on rooftops and in other urban settings in cooler coastal climates, but First Solar has staked its farm on immense projects in the desert.
The true death knell for large desert solar is almost inevitable and it's the second of the two baseline issues that plague the desert solar gold rushers. Without market intervention by the government, utility-scale desert solar must compete with wholesale prices of electricity from other forms of power generation. As the widespread adoption of "fracking" has pushed natural gas prices way down, it's really difficult to produce solar power cheaply enough to compete.
But PV panels on urban rooftops, installed by the property owners, aren't replacing power bought at wholesale prices. They're replacing power bought retail. Rooftop owners -- and parking lot owners, and other people likely to install small amounts of urban PV -- thus have a much stronger financial incentive to put in solar panels. The energy wonks call this "grid parity" -- the point at which putting solar panels on your roof isn't any more expensive than paying your electric bill. When grid parity happens, people start installing solar panels on their roofs without need for subsidies. That causes a drastic drop in demand for expensive peak power, which reduces utility company profits. The utilities will almost certainly respond by raising rates, which makes rooftop solar even more attractive. Lather, rinse, repeat.
So the Desert Solar Gold Rush is almost certainly doomed, unless desert solar developers and utilities manipulate the market to forestall the inevitable -- which would take a lot of manipulation, and the solar developers are likely too busy bleeding to take on the task. It's not impossible that the Ivanpah, First Solar's Desert Sunlight, and the Genesis project on Ford Dry Lake will be the last large solar projects built on remote desert wildlands.
Chris Clarke is an environmental writer of two decades standing. Director of Desert Biodiversity, he writes from Palm Springs regularly at his acclaimed blog Coyote Crossing and comments on desert issues on KCET weekly. Read his recent posts here.