¶ BrightSource's Concentrated Solar Ambition
Latitude Media Podcast. of climate technology.
So can you take me to the moment when you knew that the pilot was going to be a success when you actually got to see it working? How did that feel?
We were able to go up and stand up there with our engineering team and our management team, where if you raised your hand five feet above your head, it would be in five hundred sons of flux. It wouldn't last.
And just to kind of frame this for people in terms of what it means to stick your hand in five hundred sons, when you say it wouldn't last, do you mean like Your hand incinerates.
I would never know. Nobody would ever
You don't actually know how badly it would burn you. Wow.
No, nobody would nobody's ever played with that one.
In 2009, John Willard and his team were in the middle of the Negev Desert in southern Israel. They were standing on a platform at the top of a 500-foot tower. Below them, a field of mirrors covered the desert floor, fanning out in concentric circles all around them. And all of those mirrors were together reflecting the equivalent of 500 sons worth of light to the top of the tower where they were standing.
There was such precise control. We had the entire team up on a platform. about five, eight feet below the boiler and you could just feel a very, very modest amount of heat because the control of those heliostats was so precise and so well done. that gave you the confidence to go up there very close to an in uh an incredible source of heat.
At the time, John was the CEO of Brightsource, a concentrated solar company. And on that day he flipped the switch on a pilot project that was years in the making, a first of a kind project he thought would be a major player in the power industry. And what they were after was steam.
So the big party was up when the steam showed up because when you really had high quality steam at 550 degrees C, 130 bar, you knew then that you could take that, that anybody could take that. and create electricity from it reliably.
That was the plan. Brightsource wanted to scale their pilot to 440 megawatts and then build many more plants beyond that. And the company believed it could beat the cost of previous concentrated solar plants and the cost of photovoltaics at the time too. That is, until the team faced a series of unexpected challenges, including a global financial crisis and a powerful competitive threat.
If you're asked to develop something with that's price is flat to increasing, when your competitors price is decreasing every day, you're asked to do something you can't.
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I'm Laura Pierpoint. And this is the Green Blueprint, a show about the architects of the clean energy economy. We've already invented most of the solutions needed to decarbonize the global economy. But many of those technologies are not yet commercial and they need to get financed.
And built at scale. We don't have decades to get them commercialized, we have years. This week I talked to John Willard, the former CEO of Bright Source Energy, on lessons learned from the concentrated solar boom and bust.
Become very, very focused on your own technology sometimes and you believe too long that sometimes it can. And I think there was a very strong affinity towards that initial technology and the belief that there was a way to engineer through
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¶ Evolution and Early Advantage of Power Tower
Back in the mid-2000s, concentrated solar power or CSP was on the verge of becoming a breakout star in the clean energy world. There are many different types of CSP, but the basic idea is that a field of mirrors reflects the sun's rays into a single point. creating heat and steam to drive a turbine and generate electricity. It's an idea that had been around for decades, but it never scaled beyond a handful of plants. Plants that relied on an old design.
So the old design was a parabolic trough. Think of it as a mirror long parabola that focused on an oil that was at the focal point. And you could only get maybe 200 sons of concentration, and the oil could get to about 400 degrees centigrade.
four hundred degrees is hot, but it's not hot enough. Without higher temperatures to generate more electricity, the economics of concentrated solar just didn't work. In the nineteen eighties, one of the largest builders of concentrated solar plants, an Israeli company called Luz, went bankrupt. But in the two thousands, a window of opportunity opened up.
California passed some standards around solar, renewable portfolio standards and minimums of the utilities we're now expected to buy.
And the team behind Louz formed a new company that they called Bright Source Energy. They also brought in a new CEO, this is John, who had already started and had successfully sold an energy company.
The company came back with a different design based on the same solar thermal concepts, but a radical engineering approach. It was much different. It was a power tower.
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The higher your heat can get, the hotter your seam can get, the more efficient your turbine. And then you can decrease the amount of mirrors, all the costs. And the way to do that was actually to use a tower, a single power tower with lots of mirrors, like a field of heliostats or mirrors that surrounded a tower that was about 500 feet high, and then put 600 tons of concentration on it.
Steam.
And that hotter seam would be more efficient and dramatically reduce the cost. It reduced, it was about a forty percent cost reduction from the design alone.
It was a huge leap in design. Individual pieces of the technology had been proven out and even been commercially done before, but no one had integrated them together into a single system. They believed they could beat out the competition. So silicon PV is starting to come on the scene at this point, but describe a little bit about how that looked and what the price was.
and why there were some advantages around this technology, especially because I know there's, you know, you've essentially got a thermal energy storage medium associated with these plants, right?
Yeah, so so think of it in just terms of what it takes to build something, dollars per watt is maybe the easiest term for everybody to think of. And then capacity factor, how much energy you can produce. So silicon PV was around nine dollars a watt. And the tower technology we had was around$6 a watt, dropping to$5 a watt. So it was more or less half the price.
And it could produce, if you put it in the right site, it could produce at around a thirty percent capacity factor versus more like a twenty-three, twenty-four percent capacity factor. Lower capex cost and higher production gave you uh about a half of the LCOE, if you want to use that term. So about half the cost of delivered energy in the 2005-2006 time period.
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¶ Securing DOE Loan for Ivanpah
Bright Source was planning to deploy this technology in its first commercial plant, a$2.2 billion project in the Mojave Desert called Ivanpah, for the EPC work or engineering, procurement, and construction. In two thousand and nine, they landed a deal with Bechtel, which had helped to build the Hoover Dam, and in twenty ten, they secured a one point six billion dollar loan guarantee from the US Department of Energy.
Talk about two major votes of confidence. So they had momentum, but that was just the beginning of their story. I talked to John about navigating all sorts of unexpected forces that wound up endangering the project.
Including the meltdown of the financial markets. So now you're getting serious. Now you've got an EPC kind of in the door with you. Um, and ultimately you need to finance this plant. And we're talking$2.2 billion in financing. You've already mentioned some of the pieces of the puzzle here.
Maybe can you let's start actually with a DOE loan guarantee? Cause that was probably something that was one of the things you had to start earlier in the process. So what did it look like at that point in time to go get DOE money committed to this project?
Well th there's a funny story behind it where I brought it up to the Israeli team and everybody and they said, Absolutely not, no way, don't touch it, do not do the DOE loan guarantee, that's a disaster.
Why? What was their concern?
I think they'd had some challenges in the eighties with some government loan challenges that didn't come through. I'm not sure. But they said, Don't do it. Do not do it absolutely. So we Turned around as the US team and said, Well, it's just a three-page application. Let's let's just start. So we started the process. we um basically ignored them and started the process and uh you know got it moving because there were the cost was zero to start the process and get it moving.
And lo and behold, we were selected about a year later at a time when bank financing was getting tougher and so we were part of the process and then
And how much was that?
That was one point six billion in total.
¶ Tax Equity Collapse During Financial Crisis
And if you take a 2.2 billion project, the rest comes from a combination of call it sponsor equity and tax equity. And so the tax equity financing component is really important because at this point this would have been the largest tax equity financing or was the largest tax equity financing ever done. We in fact w had worked with Morgan Stanley who
um invested in our company and had a board seat at Bright Source and the person on the on our board was the head of their tax equity department. That's how important this was to them and to us.
So let's pause there for a second because I think this is another piece that's really important, especially right now. There are some incredible incentives, obviously, particularly in the IRA. And so a lot of folks are looking at I think potentially using tax equity as a way to finance. So was that easy? Was that hard? Were your Morgan Stanley folks already bought in by the time they were kind of joining the board and knew that they were gonna put this tax equity financing together for you?
Well, it was hard in that we didn't want to nobody uh on our side we weren't gonna do it in a um faith based way that we will trust you, Morgan Stanley, to take great care of us later. We said we need to pre negotiate the term. So we had to we had to basically create a framework that was accessip acceptable to us and acceptable to Morgan Stanley, but that was a framework around the market that was changing.
So right, you can't you couldn't just lock in exactly what the terms were because the financing was gonna occur eighteen to twenty four months in the future. So but we created a framework around it that basically floated based on changes in rates and interest rates so that we were we knew that it was gonna be financeable and acceptable to us and to them.
I'm I'm curious to understand two things. First of all, what did you have that sort of gave Morgan Stanley the confidence to make that deal with you? Like at that point, had you completed some key part of the permitting process? Was there something that they saw?
from the pilot that helped them understand this was really gonna be a good economic deal. I'm curious to understand, like what did you prove to them to get them to say this? And then secondly, what's in it for Morgan Stanley? Like at the end of the day, there are other tax equity deals they could do. Why this one?
Well, that's a good question. So w they wanted to get into a new market with solar. There was tax equity for wind. PV was expensive and small. And so, you know, this was really viewed as the next interesting market for tax equity. But what importantly, what they looked at When the pilot started to generate steam to spec, I believe that was a condition precedent to Morgan Stanley putting their capital into the company.
But remember where we are in time. So this was 2009 and the financial crisis hit. So we bridged, we I believe we took the capital from Morgan Stanley in two thousand eight. And then the financial crisis hit and guess what disappeared? All of the taxable income of all of the Wall Street banks. So they their tax equity appetite went from very large to zero overnight.
Everybody was fired from Morgan Stanley. We lost our board member. We lost our tax equity sponsor. And that was the pivotal part of a very complicated financing that disappeared. in two thousand nine.
¶ Salvaging the Deal, Launching Construction
So let's go back to this moment then. So you've got your DOE loan guarantee. This recession hits. Um, so talk about the unwinding of the deal with Morgan Stanley and what you did next.
So what we did was we looked and said now that The world has changed and the banks are upside down, getting bailed out. What do we do for tax equity? And we went to the tech sector. So we had been in dialogue with with Google before this. about a call it a modest participation in tax equity to start to learn.
And then once this changed with Morgan Stanley, we had both NRG and Google were able to step in and take meaningful stakes in the project from a tax equity and a cash equity perspective because they both had taxable income. that gave us a window of where to go, but we had to move
fairly crisply to get this done. We have a project that is getting permitted. We've got a lot of things moving. And so NRG, they came in and were able to take about 300 million, I believe, of the equity, both cash and tax. And then Google came in for about half that amount and that gave us what we needed to do to restart the financing.
Okay, so you've got the financing here together. So you have now Google and energy providing tax equity financing. You have the DOE loan guarantee, which enables you to get bank debt. Were there any other key sources of financing for this project?
If you look at the financing structure, you had debt being the biggest component and then everything else flowed from there. So once you had the debt able to close, uh which really came down to several things, but a lot of it was bectal. being willing to stand up and say, hey, if Bright Source goes away, we will make sure the project still gets built. Because Bright you know, the US government didn't necessarily want to back, even though we were well financed.
uh startup, we were still a startup. And Bechtel was willing to step in and say, we've got this. Which is an interesting position to be in when you're the the the group who's originated the project and the big gorilla is saying, They don't matter. You know, we can do it without'em. But it was really important to get the financing that effectively was Bechtel saying we're gonna help you eliminate that technology risk layer.
That's a fascinating dynamic right there. This idea that you don't matter and that being key to kind of getting the project to go forward and ultimately getting the debt financing together. Again, I think that's something counterintuitive for startups. You're supposed to prove to the world that you're the only one who can do something. And then here you were basically saying we're not Bacil could do this without us and that's the reason this project happens.
So what was the moment when you basically sign the papers, finance the plant, and get officially launched on your construction journey?
Ultimately it was May of of twenty eleven when construction really started in earnest with trucks lined up at the gate to the site. And that morning they opened up and There were hundreds of workers on site the first day. And overall it was thousands. Uh I think the peak employment was about a thousand at one time.
So Bright Source recovered from a failed tax equity deal that could have killed the project. They had backing from the government, they had policy tailwinds, and they had workers on site. But the biggest challenges were yet to come. We'll hear what happened next after the break.
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¶ Permitting and Unexpected Environmental Hurdles
Well and here's where I think, you know, in some fairy tales we'd love to say and then they all otappily ever after. But let's get into what it was like doing construction, because that's not quite how it was, right? Maybe we can start by talking about some of the Some of the heartstopping moments you had related to some of the environmental challenges that started coming in as you're constructing this site.
Yeah, so some of the environmental challenges were happening before construction. It was around desert tortoise. So we had to make some concessions through the permitting process. One was to reduce the size of the site from over four thousand acres to thirty five hundred acres. Uh we also then started and agreed to do what's called a head start program for tortoise where Basically of the of the eggs that are are actually laid, uh only two percent survive.
So we took pregnant tortoise, we found them and we moved them, we took eggs, we m and we created this nursery, and we actually inverted those numbers to where over 90% survived. when we had'em in a nursery and then we moved'em to other lands and other areas that were better habitat.
Um and then we had construction starting. Um there we had some really interesting I mean some some things you couldn't even believe. We had a On site large tent facility that was a temporary manufacturing facility complete with a robotized automated assembly line where we were gonna assemble one hundred and seventy three thousand heliostats because it made more sense to assemble and do the manufacturing on site.
rather than do it remote and take a fragile manufactured piece and run the risk of damaging it. So we would just had mirrors, steel posts, and motors shipped to the site and then assembled in this automated process. We happen to have a brown cover to that temporary eighteen month manufacturing facility and the C E C California Energy Commission. uh tried to stop all construction, which basically would have killed the project, because the color of the tarp was not the right color.
What color did they want it to be?
Uh, I believe they wanted a light tan instead of a brown.
So
It's You know, if you...
I mean you can't make this stuff.
Think of a project where you're gonna take, you know, five hundred to a thousand workers, you've got cranes on site, you've got cash burning, and stop it so that you can change the color of the tent. Fortunately, we were able to very aggressively put we just pushed through and logic prevailed and we were able to to keep that moving.
I mean, yeah, I I just love the juxtaposition of these two stories because I think this says everything about what needs to happen with permitting reform. It's like our environmental laws in this country are incredible and valuable and matter and mean that sometimes you have, you know.
construction of infrastructure that winds up actually doing beneficial things to endangered species. And on the other hand, sometimes you have gigantic fights that almost destroy entire projects over the right shade of brown. For a tarp. It's just really it speaks to the need to make sure that we preserve the best and maybe also make some changes around how we do environmental permitting.
¶ PV's Rapid Rise and CSP's Declining Edge
Um, okay, so you're fighting various fights on the permitting front, but as you're doing this, there's really a gathering storm on the horizon when it comes to some shifts in the solar market and specifically the cost of silicon PV. So talk a little bit about when and kind of how you were observing the cost reductions that were coming through solar PV and when you started to realize that you might have a cost competition problem.
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Go back to 2000 when we first started, and I mentioned it was we were about half the price on an LCOE day. PV started to make some improvements. The raw silicon uh was starting to be produced in China, lower input cost, and PV was dropping it by the time you got to 2009. it was down to maybe three dollars. And three dollars watt became an interesting number. So that's when the
Started to pay attention and say, you know, this is something that is now, it's been cut in half. It's gone from$6 a watt to$3 a watt. Two years later, 2011, it was lower than you could do the next gen of CSP at in just two years. So we started, we had um we had a lot of land, we had PPAs, we had development assets, and so the um development team basically said we should consider moving and using all of our development assets for PV.
Which is a hard thing for a engineering-led technology company to do because you'd like to believe that your design is better. And it takes a lot to say it's not. It's now no longer cost competitive. And the truth is it wasn't. And so we basically said, let's present data, let's talk about information, let's talk about the price, and let's look at different possibilities.
In the end, a lot of the engineering team that was based in Israel and had formed there had a strong belief, as did some of the venture capital money that had invested in the technology. that the technology, you know, would have some breakthroughs and would be able to compete. And at that point I think you started to lose the hearts, minds, and souls of the developers because
If you're asked to develop something with that's price is flat to increasing, when your competitors price is decreasing every day, you you're asked to do something you can't win at. There's no way to to make it work. That's that that set up a very interesting dynamic within the company because we had this very, very real external force and we had some interesting strategic choices too.
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¶ Confronting Non-Competitiveness and Pivot Resistance
Yeah, I mean, this sounds really hard. So let's get into kind of kind of how that happened. So in twenty twelve, very specifically, there was a board meeting where you and your CFO brought this up. Can you take us to that moment? Like what was the conversation at that point? Was this kind of the first time that you were really saying we have got to do something differently.
I wouldn't say anything was a first time because we'd been talking about this trend. We know we spent a lot of time over here. tracking and monitoring price points of PV of cells of EPC cost, looking at where the competition would be. And so we had Uh from tw two thousand nine, ten, eleven, twelve for years been following this curve of P V.
But I think it really came in twenty twelve. That's when we basically said, We can no longer win game. We are no longer competitive. And that was a different message. We'd said, well, maybe you could and you could sell in different attributes. But um at that point we said this is no longer a competitive technology.
And is that because you just knew you couldn't like ring out any extra costs? You talked about that this might be a flat to increase in cost for a solar C S P. Is that what how did you come to that conclusion? How did you know that you weren't gonna be on the same trajectory as silicon PV?
Well so the engineering team was working really diligently and really hard to do whatever they could on cost. And our costs were going from, say, five dollars a watt to four dollars and thirty cents a watt and maybe down to about three ninety a watt. Uh meanwhile at this point P V is is down at two dollars and fifty cents and dropping faster. So
in order to go get a new PPA or in order to take the existing PPAs and make sure you could could follow through on them, you needed to have a competitive price point. And we little under did.
Well, and so say a bit more about like because you said maybe we could compete on attributes. And I think this is something that that I hear a lot in the startup community too. Like I have the better technology, I have
thermal energy storage that's inherently baked into this particular technology that I have. So there's more that I can do and more services I can sell to the grid. But it sounds like fundamentally you came to the conclusion that that didn't matter. So can you talk a little bit about that? That specific dynamic, how did you know that cost of electricity was really the thing that was gonna win the day?
Well no it it is interesting that you bring up storage because the one attribute that C S P can has that and can deliver on is it can basically deliver
um energy over a longer time period through using molten salt storage. Now we had not done that with Ivanpaw. We were just generating steam directly. But the next designs all started to include molten salt Storage because then you could deliver instead of an eight hour or nine hour solar window, you could deliver energy over an eighteen hour window. So there is some benefit to integrating solar and storage, but the market at the time was not valuing that integrated product.
So here you are, you're it's in you're in twenty twelve. You've just said to your board, this isn't gonna happen. And it sounds like you sort of tried to make the case we should pivot effectively into a silicon PV company. And even though this is a company that pivoted on its technology before, that just wasn't gonna happen this time. Is that essentially what you heard?
Yeah, to and to be clear, we were saying we should uh we're almost through the construction of Ivanpaw. That is a uh fine project. It actually has strong economics. The project stands alone stands well on its own PPA, so you need to deliver on that. But then for all the next projects where we have LAN, Interconnect, and PPAs that we could um use.
Third party technology, PV, we were not saying become a PV company uh manufacturer, but use third party technology to deliver those contracts and basically become a more of a developer. And that was a pivot that the board and a lot of the original shareholders did not want to uh
¶ Ivanpah's Legacy and CSP's Niche Future
Why not?
I think you become very, very focused on your own technology sometimes and you believe Too long that sometimes it can prevail and I think there was a very strong affinity towards that initial technology and the belief that there was a way to engineer through. Whereas the development team here said did not see that and said that even if you cut it in half, it would barely be competitive.
So then a year later you left the company. And so how did things go from there? The project ultimately got built.
Well yeah, so I I mean I was very you know, I had been part of starting this, building this company, so it wasn't something that you want to ever leave unless it's kind of done over a long period of time. So we spent a year, we brought in David Rahm as a CEO. I stayed spent time with him, overlapping with him to make sure he was okay and that he was everything was stable and I was working my way out and trying to leave David uh as somebody who believed in the mission could be
in charge.
But I basically, you know, didn't think that it was gonna work other than being a developer. And you don't want somebody who doesn't believe in the mission running the company that never works.
So then let's talk about the the sort of how things have gone since then for Ivanpot. Like it's still generating power, right? So it by many financial metrics, it's a big success, but fundamentally I think what it sounds like where the disagreement with your board lay was in the next couple of projects and the questions around could you build concentrated solar projects after that? So say a bit more about kind of how you were thinking about those next projects.
and what ultimately happened with the company.
Yeah, so to close off Ivanpaw, Ivanpaw had some awkward parts ramping up, but ultimately delivered and ramps and produces power and energy today, um, at about ninety percent of its original design capacity. One of the next projects was the Ashalim project in Israel, which was subsidized smaller, and it was subsidized by the Israeli government. But it was a good project, but I think it was ultimately probably the last large solar thermal project to get built.
Once that was done, it's really hard to see where solar thermal is competitive. It's just the the economics of photovoltaic power have gotten they've gone down from three dollars a watt in two thousand and nine to thirty cents a a watt for a module. today. Now it's nudged up to thirty five cents or something. But the that price decline was so extreme and the price decline of lithium ion storage has been so notable.
that even with the attributes of molten salt storage, it's hard to see how solar thermal can be competitive today. That's not to say somebody can't find a new design and a new application for industrial heat or something in the future, but it's likely to emerge, if at all, as a niche where you have. Strong sun, strong DNI and some reason to have heat rather than just electricity.
¶ Critical Lessons for Climate Tech Innovators
Is there anything you would have done differently around this, around thinking about cost curves of competing technologies? I mean, it sounds like you were doing all the work. You were tracking the cost of the other things that you knew could eat your lunch and this was sort of the outcome it, you know. I mean, would you have backed a different horse?
There was n really nothing to do from an engineering perspective that was additional. We were trying everything we could and I think the engineering team was solid and being very thoughtful about using every tool at their disposal. I think if I had something to do over, I would have been more
firm and more strong that the company was facing not just a decision, but an existential risk. And I would have s been a lot stronger on that, saying that this company will not exist if we do not move to a new technology.
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Is there a way that that the folks who are working on the CSP equivalents today can know that that's what's happening? In other words, like is there a way that you could have seen maybe earlier? That you ultimately had a technology that wasn't gonna be the winner when it came to price competition and maybe figured out earlier that you might have needed to pivot.
Yeah, you know, really take seriously the the cost curves of things that might not be direct competitors or even indirect competitors to you. You know, one example is a lot of people aren't taking small nuclear and the new nuclear technologies very seriously. No, they're starting to get uh contracts. You know, the large tech companies are starting to actually move forward with them.
To me, some of those might indicate that something like I'll pick on offshore wind at, you know, 15 cents and up is not economic compared to reliable power at a number lower than that. So I think You know, being really thoughtful about what is emerging and what the potential is for engineering and for engineering cost out. And just because something's a little more expensive today doesn't mean that it's not gonna have a path forward that could be could change everything.
John Willard is the former CEO of Bright Source Energy. He's now the CEO of Meridian Clean Energy. The green blueprint is produced by Latitude Media in partnership with Trellis Climate. The show is hosted by me, Laura Pierpoint. Our producers are Aaron Hardick and Daniel Woldorf. Ann Bailey is our senior editor, Sean Marquand is our technical director, Stephen Lacey is our executive editor. If you'd like to suggest topics
Or guests for the show, send an email to editorial at latitudemedia.com. You can listen to the green blueprint at latitudemedia.com or subscribe wherever you get your podcasts. And if you have fellow clean energy or climate tech travelers who would benefit from the insights in this show, send them a link. This is the Green Blueprint, a show about the architects of the clean energy economy.
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