Global Economics

Money Shines on Israeli Solar Startup


BrightSource has raised $115 million from the likes of Google.org and BP to speed the delivery of electricity from solar-thermal plants

A conference organized by Israeli President Shimon Peres to mark the country's 60th anniversary kicked off May 13 with a showcase of 60 pioneering Israeli firms that have the potential to shake up medicine, biotech, clean energy, transportation, information technology, and communications. Among them was Luz II, a Jerusalem solar thermal energy company with more than one reason to celebrate its newfound recognition.

Early the next day, Luz II's parent company, Oakland (Calif.) based BrightSource Energy, announced that it had raised $115 million in financing from a high-profile group of investors including Google.org—the philanthropy offshoot of Internet giant Google (GOOG)—and Black River Asset Management, an asset management unit of agricultural giant Cargill. Also participating in the funding are the investment arms of two major oil companies, BP (BP) Alternative Energy and StatoilHydro Venture.

All of BrightSource's previous investors also kicked in to the latest round, including the Chevron Technology Ventures unit of Chevron (CVX), Silicon Valley venture firm Draper Fisher Jurvetson, Morgan Stanley (MS), and DBL Investors, a former unit of JP Morgan (JPM), bringing the company's total funding to date to more than $160 million.

Changing the Way Utilities Make Electricity

The new investment round comes on the heels of a huge deal signed in March between BrightSource and utility giant Pacific Gas & Electric (PCG) that calls for BrightSource to provide PG&E with up to 900 megawatts of solar electricity using the Luz II technology, one of the largest such contracts ever awarded. Unlike photovoltaic systems that convert sunlight directly into electricity, Luz II's solar thermal system uses concentrated heat from the sun to drive turbines that produce power.

BrightSource/Luz II is currently developing a number of solar thermal plants in Southern California's Mojave Desert, with construction of the first facility set to start in 2009. The new funding should let the startup accelerate delivery of utility-grade power at a time when many power companies are searching for reliable sources of renewable energy. "Our technology will change the way utilities generate electricity," promises Arnold Goldman, the U.S.-born chairman and founder of both BrightSource Energy and Luz II, and an attendee at the Jerusalem conference.

BrightSource's big news underscores the extent to which solar thermal energy is fast becoming one of the hottest renewable energy bets for investors. Some experts go as far as predicting that over 90% of the U.S.'s electrical needs someday could be met by solar thermal power—including even powering fleets of electric cars.

A Hotbed of Alternative Energy Research

Silicon Valley investors are certainly pouring money into solar. In addition to its funding for BrightSource, Google.org last year invested $10 million in eSolar, a California company specializing in solar thermal energy. Venture firm Kleiner, Perkins, Caufield & Byers, which employs former U.S. Vice-President and environment champion Al Gore, also has made solar thermal a focus, investing $40 million last year in Ausra, a Palo Alto (Calif.) company that develops utility-scale solar thermal power technology.

With its desert climate, strong pool of engineering talent, and near total dependency on imported power, Israel is quickly becoming a hotbed of alternative energy research and startups. Among other local success stories are Solel Systems, which uses "parabolic trough" collectors to focus sunlight onto pipes containing heat transfer liquid (BusinessWeek.com, 2/14/06). Solel also has won a big contract with PG&E, to build a 553 megawatt solar thermal plant in the Mojave Desert. (In a bit of irony, Solel uses technology it acquired from a predecessor to Luz II, called Luz, that was also started by Arnold Goldman. The original Luz went broke in 1991 when solar became financially unviable compared with rival natural gas systems.)

Israel Solving Europe's Energy Problems?

Another Israeli solar pioneer is Zenith Solar, based in Nes Ziona, near Tel Aviv. Unlike Luz II and Solel, whose systems are intended for utility-scale installations, Zenith is pushing small solar thermal collection dishes that could be mounted on the roof of any home or business to produce local electrical power (BusinessWeek.com, 3/26/08).

Solar thermal energy also is the focus of the Trans-Mediterranean Renewable Energy Cooperation project, a network of scientists and politicians exploring ways to solve Europe's energy problem (BusinessWeek.com, 5/1/08). They are talking up a scheme, dubbed Desertec, that would involve installing thousands of parabolic trough collectors in North Africa and the Middle East to generate electricity for Northern and Western Europe.

Done With Mirrors

Luz II's Goldman knows all about parabolic troughs. Starting in the mid-1980s, his original Luz designed, financed, built, and operated the world's nine largest solar electric generating systems, which used parabolic technology, in the Mojave Desert. After the company failed, and its assets passed eventually to Solel, Goldman took a break and worked on other projects. But he couldn't resist the lure of solar, and in 2004 decided to launch Luz II, tapping into Israeli expertise in optics, communications, and solar power engineering.

A key goal was to improve the efficiency of solar power generation. Instead of parabolic troughs, it uses flat ground-based mirrors, called heliostats, that redirect sunlight to a central "power tower" where the intense collected heat creates steam to power turbines. The heliostats, which follow the path of the sun like a sunflower, are simpler and cheaper to install than the parabolic mirrors used in solar trough systems. The result is a 50% reduction in the cost per kilowatt-hour of power generation, Goldman says—making solar thermal competitive vs. natural gas even without subsidies.

Each heliostat can generate enough energy to power a household, Goldman says. Fanned out in fields of thousands of mirrors encircling the power tower, each cluster of heliostats can produce up to 20 megawatts of electricity, and each Luz II installation will consist of five towers. Goldman says that BrightSource has secured rights for 40,000 acres of land in the U.S., enough to produce 5,000 megawatts of power.

The technology is currently being tested at a pilot plant in Dimona, in Israel's Negev Desert, that's scheduled to be inaugurated June 12. With the new technology, Goldman says, "We hope to make a major contribution to large-scale utilization of solar energy in the United States." Not to mention to Israel's growing clout in green energy.


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