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Solar Power's New Hot Spot

By Otis Port The world's biggest solar-power plant -- that's what Stirling Energy Systems could soon be building in California's Mojave Desert. The Phoenix-based upstart last week won a major commitment from Southern California Edison (SCE.PB).

For 20 years, the utility will buy all the electricity that Stirling can generate at a 500-megawatt (MW) solar-energy farm near Victorville. Previously, the most ambitious plan for solar power was the 12-MW Solarpark Gut Erlasse, near Arnstein, Germany.

What will sprout on Stirling Energy's 4,500-acre desert farm? Thousands of giant dish-shaped mirrors. Each 37-foot-diameter dish will track the sun and focus its heat rays on an oil-barrel-size contraption suspended in front, like the antenna on a satellite-TV dish. Inside the barrel, the heat will be harnessed to drive a small, 25-kilowatt power generator. If local power lines can be upgraded to handle even more juice, Stirling Energy could enlarge its farm to 850 MW, and SoCal Edison would take all of that, too.

"HEAT ANTENNAS." The deal could rake in upwards of $90 million a year for Stirling Energy, once the solar dishes are generating 500 MW. For SoCal Edison, already the largest U.S. purchaser of renewable energy, the 500-MW facility will more than double the 354 MW of solar power it tapped in 2004 -- and add almost 20% to its total of 2,588 MW of renewable energy sources, including 1,021 MW of wind power. In 2004, more than 18% of the electricity that the utility delivered to its customers came from renewable sources.

Monster "heat antennas" are not what usually spring to mind when solar power is mentioned. People tend to equate solar power with flat solar cells that turn the sun's light into electricity. But solar cells don't produce power as efficiently as Stirling dishes. Most solar-cell panels harvest only 10% to 15% of the sun's energy, although 20% efficiency has been achieved with new technology developed by HelioVolt and SunPower.

HelioVolt, an Austin (Tex.) startup, makes coatings that can be applied to ordinary roofing and siding materials, transforming a building's exterior into a solar generator. SunPower, based in Sunnyvale, Calif., was acquired by chipmaker Cypress Semiconductor (CY) in 2002 and is a major supplier of silicon solar cells for Germany's Solarpark Gut Erlasse.

SUNNY OPTIMISM. For years, Stirling dishes have been roughly twice as efficient as the best solar cells, even before Stirling Energy took over the technology in 1996. Today, a Stirling dish converts 29.4% of the sun's energy into electricity, according to tests by Sandia National Laboratories at a six-dish operation in Albuquerque.

"Later this year we'll do even better," declares D. Bruce Osborn, Stirling Energy's new CEO and longtime solar-power proponent. He won't predict by how much better, though.

Why hasn't Stirling Energy's technology made more of a splash in the power business? The answer: It's too expensive. "Our dilemma has always been how to get costs down," says Osborn. The dish generators are costly beasts -- $250,000 each. But that's because most have been hand-crafted in sporadic lots of one or two units. Building a group of 40 or 50 would trim the cost to $150,000 apiece, Osborn says, and the company has estimated that mass production could slash dish costs to $80,000, or perhaps just $50,000.

PEAK LOADS, PEAK POWER. When SoCal Edison said it wanted to buy more renewable energy, Osborn's outfit proposed the 500-MW project as the means of solving its chicken-or-egg impasse. Producing that much electricity will require 20,000 Stirling dishes, built in a steady flow over several years. "We're in the process of ramping up production now," says Osborn.

He expects to have 40 dishes in place for a 1-MW facility by the end of next year, 50 MW in 2008, and all 500 MW by 2011. As each new dish is installed, SoCal Edison will get another 25 KW. The electricity will be delivered only when the sun is shining, but that's when the utility's customers place peak demands on electricity. "Our system is a really good match, providing peak power at times of peak load," notes Osborn.

The 20-year purchase agreement from SoCal Edison is important because Stirling Energy figures it will take about 15 years for investors in the solar farm to recoup their money, assuming sales in the range of 6 cents to 8 cents per kilowatt-hour (kWh). Peak power usually commands higher prices, though. Once the hardware has been amortized, the dishes promise to mint money, producing peak power for 10 additional years at a cost of a penny per kWh.

APPROVAL LIKELY. The actual price that SoCal Edison will pay is confidential -- and must be approved by the California Public Utilities Commission. But there's little doubt that the contract will get a thumbs-up, perhaps as soon as next month. One reason: At the end of February, California Governor Arnold Schwarzenegger called for an eightfold boost in the state's solar power, to 3,000 MW, by 2018.

Sacramento is willing to subsidize new solar projects, but SoCal Edison says the price it negotiated with Stirling Energy is so attractive -- "well below the 11.33 cents per kWh" it now pays for peak power -- that it won't seek any state subsidies. That seems certain to cement approval.

Ironically, SoCal Edison sold the dish-generator technology to Stirling Energy founder David Slawson in 1996, after California's regulators told the utility to stop passing on its research and development costs to customers. Before that, SoCal Edison picked up the technology from McDonnell Douglas, which developed the solar generators with Sweden's Kockums and the U.S. Energy Dept. in the 1980s. All told, $400 million was plowed into the dish generators.

LONG HISTORY. However, the concept dates back even farther. It originated in the late 1970s at Ford's (F) former Aeronutronic Division. In another twist of fate, that's where Osborn, now 50, got his first job.

"It seems like I've been doing solar energy most of my life," says Osborn. Then a youngster fresh from college, he was the engineering team member tagged to work late into the night, analyzing various solar-energy systems. "The Stirling-dish approach always came out as the best," he recalls.

Ford never built an actual dish generator, however. Soon, though, Osborn will begin closing the circle he started tracing almost 30 years ago. But, he quips, "we won't build a Maserati -- we need to build lots of Fords."

ROOM TO GROW. California's new solar-power drive dovetails nicely with Stirling Energy's long-term vision. Osborn says 11 square-mile dish farms could produce as much electricity as the 2,050 MW from Hoover Dam. "We're already looking at a half-dozen square-mile sites in the California desert," he says, "and there's lots and lots more territory there."

Better still, there's even more sunny, open space in the deserts of Arizona, Nevada, New Mexico, and Utah.

Ultimately, Stirling dish farms with a total area of 100 miles square could replace all the coal now burned to generate electricity in the entire U.S. -- if some dishes get coupled to systems that can store solar energy for use after sunset, such as massive flywheels and fuel cells. Whether that remains a utopian dream or emerges as a viable plan probably hinges on Stirling Energy's success in delivering on its deal with SoCal Edison. Port is a senior writer for BusinessWeek in New York

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