In Depth May 7, 2009, 5:00PM EST

Israel's Clean Technology Pioneers

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Ofer Bloch, Netafim's 49-year-old chief executive officer, isn't keen on letting photographers snap pictures of the place, so precious are the secrets of his technology. Inside, machines custom-carve "labyrinths" on millions of microchips that are then installed behind tiny drip holes inside plastic pipes. The chips measure, time, and distribute the perfect drop of water to be channeled to the roots of every plant in the field. Netafim lays out nearly 3 billion meters of drip lines a year and monitors every bit of water that courses through.

Having conquered the tiny Israeli market, Netafim has set its sights abroad, where it earns 95% of its revenues. In Peru, a provincial government retained Netafim to assess what kind of crops could be sustained in a dry, mountainous region. After engineers computer-modeled the terrain, the verdict came in: asparagus. Citrus and almond growers in California, meanwhile, use Netafim pipes to irrigate thousands of inland acres that otherwise would lie fallow.

Couldn't the government channel such technological expertise to solve its drinking-water problem? Even public officials complain of the lack of progress in desalinization, or removing salt from seawater. "What we've done in terms of drip irrigation we desperately need to do for desalination," says a highly placed government adviser. "Drinking water is immediately urgent. Everyone in Israel, rich or poor, knows it's a crisis. But government just keeps delaying, especially because it will require billions of dollars and years of focus that Israeli leaders won't commit to. So they blame the lack of rain."

Energy is just as vexing to some Israelis. Most of Israel's terrain is well suited for solar panels, yet the nation still derives almost all of its electricity from coal and other nonrenewable fuels. Arnold J. Goldman, chairman of solar utility BrightSource Energy, complains about the situation during a two-hour ride from Jerusalem to the company's testing complex in the Negev. "All that light, all that heat," he says, pointing at the hot sand, "is practically begging you to use it." So far, BrightSource has raised more than $160 million from investors including U.S.-based VantagePoint Venture Partners, Google (GOOG), BP's (BP) investing arm, Morgan Stanley (MS), and JPMorgan Chase (JPM).

Goldman, an avuncular engineer with a chin-strap beard, made a killing during the 1970s by founding Lexitron, the first word-processing software maker in the U.S. After selling the company in 1977, he says, he dove headlong into alternative energy, building nine solar power facilities in the Western U.S. That startup, Luz International, folded in 1991, a victim, alleges Goldman, of collusion by utilities, the gas-and-coal lobby, and their friends in high office. BrightSource Industries, launched in 2004, is Goldman's revenge.

BrightSource's technology seems right out of science fiction. As the van traverses the final mile to a test center in Dimona, what looks like a burning oil rig looms in the distance. Inside the maximum-security complex, passengers present their passports and don protective boots to guard their feet from the scorching sands. A semicircular array of 1,641 mechanized coffee-table-size mirrors pivot to reflect the desert sun's rays onto the boiler atop the rig, which BrightSource calls a "power tower." The company's power towers produce superheated steam for turbines. They "offer the maximum level of efficiency," says Alan E. Salzman, managing partner of Silicon Valley's VantagePoint, BrightSource's largest investor. Salzman says the towers convert steam back into water and return it to the boiler, where it is reused again and again.

SOLAR BOUNTY

The technology, claims Goldman, could help reshape some countries' population centers. Parched stretches of California and Nevada, Saharan Africa, Saudi Arabia, and Australia are especially suited for solar thermal power plants, he says. Last March, BrightSource inked a deal with California's Pacific Gas & Electric (PCG) to provide up to 900 megawatts of solar thermal electricity in the Mojave Desert as early as 2011. (In February, BrightSource signed an even bigger deal with Southern California Edison (EIX). At 1,300 megawatts it's the world's largest solar-power purchase agreement.) "We see solar making a big impact in the Southwest and California," says Jack Keenan, PG&E's chief operating officer. "Partnering with BrightSource will enable us to increase the growing amount of renewable energy demanded by our 15 million customers." Goldman says that if he were able to plaster the southwestern U.S. with solar mirrors, he could meet 69% of the nation's electricity needs.

David Faiman, director of Ben-Gurion University's National Solar Energy Center Dept., says Israel needs to stage a national research and development push to bring down the cost of solar electricity. "It's only natural to ask why a country with all this sunlight and no fossil fuels never moved on that vision," he says. "And yet you also come to learn that our political disarray doesn't lend itself to long-term planning."

What if Israel could find the will to harness the power of its drip pipes, power towers, and desert fish farms? "Israel has such a geopolitical vested interest to steer this innovation," says Jonathan Shapira, a corporate attorney in Boston who organizes and blogs about Israeli cleantech. "Innovating around scarcity is increasingly the world's story."

BusinessWeek Senior Writer Farzad covers Wall Street and international finance.