With summer temperatures averaging 120 degrees fahrenheit, the Mojave Desert is one of the world's most brutal and unforgiving stretches of earth. Home to Death Valley in the heart of the American southwest, the region is absent almost all forms of vegetation, save for the isolated cactus or Joshua tree.
In the early 1990s, with relatively cheap oil and the debate over global warming largely confined to academics and environmentalists, the solar power industry looked similarly barren to many venture capital firms whose solar investments kept flopping.
Fifteen years later, the Mojave may be the site of what many experts are calling the largest leap into alternative energy the US has taken to date.
On 1 April, California utility Pacific Gas and Electric (PG&E) awarded the largest contracts in US history to solar energy company BrightSource to build up to five massive energy plants in the California desert.
If PG&E picks up the options on two of the five contracts, the plants will generate roughly 900 megawatts of energy – enough to supply over half a million households. In total, the projects could cost between $2 billion (€1.3 billion) and $3 billion, by far the most expensive set of solar projects undertaken in the US. The first plant is slated to be up and running by 2011.
“There is a fundamentally different set of circumstances in this decade than we saw in the 1980s or 70s,” says Jack Jenkins-Stark, chief financial officer for the Oakland, California-based company.
In many ways, the history of BrightSource – and its relationship with VantagePoint Venture Partners – reflects the ups and downs of the solar industry itself. The company is the reformed successor of Luz International, an Israeli-based solar firm which built several plants in California in the 1980s. Although the plants still exist, Luz itself collapsed in the early 90s as oil prices plunged and government subsidies dried up.
“We are going to become an ever more resource-constrained world, and VantagePoint is looking into businesses that address these demands.”
As oil neared $100 a barrel and global warming became a vital issue, in 2005 VantagePoint tapped former Luz chief executive John Woolard to lead an investment committee dedicated to opportunities in alternative energy.
After surveying the competitive landscape, Woolard decided to start his own business with many Luz alumni in toe – and with VantagePoint's fundraising prowess behind him.
The highly publicised contracts may mean lucrative returns for Silicon-Valley based VantagePoint, whose cleantech division has led two financing rounds in BrightSource worth more than $50 million.
“VantagePoint was the first of the broad-based venture funds to develop a dedicated cleantech practice,” says Stephan Dolezalek, managing director of the firm's CleanTech Practice Group, which has committed roughly $350 million to green investments.
“We are going to become an ever more resource-constrained world, and VantagePoint is looking into businesses that address these demands,” he adds.
VantagePoint is banking on BrightSource's innovative solar-thermal technology to bring the price of wholesale renewable energy in line with its main California competitor – natural gas.
Most solar-thermal plants utilise what's called the trough model, in which hundreds of curved mirrors reflect sunlight to heat a series of water pipes; steam from those pipes are used to move a turbine, which in turn generates electricity.
In constructing the PG&E plants, BrightSource will employ a relatively new innovation on the conventional trough model. By designing and arranging the mirrors in a slightly different fashion, BrightSource will focus the reflected heat on one single point, known as a solar “power-tower”. BrightSource says this design allows for higher steam temperatures, which in turn enables greater energy production. “Functionally, the higher the temperature of steam you produce, the more efficient is your production of electricity,”says Charles Ricker, BrightSource senior vice president.
BrightSource and its venture capital backer have every reason to believe that this particular investment will be an oasis in the desert rather than another of its heat-shriveled victims.