Investors take notice when Bill Gross places a market bet.
If you haven’t heard of the man, you’ve certainly heard of the billion-dollar companies he’s incubated and brought to market or the business models he’s created.
By my count, he’s made lucrative exits from 59 companies either through acquisition or initial public offering (IPO) — a venture capitalist empire by any measure. NetZero, answers.com, tickets.com, and PetSmart are included in that count.
Gross is also an expert at pioneering new ways to generate profit. His search engine GoTo.com was the first to introduce the concept of paid search to the Internet. The company was bought by Yahoo! for $1.6 billion and was the precursor to Google’s highly profitable pay-per-click advertising model.
The man is an entrepreneurial genius. And now he’s lending his expertise to the energy world…
The Problem With Solar, and the Bill Gross ‘Fix’
Detractors are quick to point out solar’s current flaws:
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It’s still too expensive;
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It doesn’t scale;
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It doesn’t produce power at night.
And while the rooftop solar market is a great distributed energy solution, it falls short of being able to provide baseload power at competitive rates, which is essential in today’s electricity business.
Gross’s new venture is aiming to change all that.
The company, eSolar, is making utility-scale solar energy solutions capable of generating up to 500 megawatts per plant — enough to power nearly half a million homes.
Its unique system uses hundreds of specially-designed mirrors — called heliostats — that reflect solar heat onto a central receiver. The receiver holds water that boils when heated by the intense sunlight; the steam is used to create electricity.
Each unit produces 46 MW. And the system is completely scalable, so a utility can install one unit or ten. The latter would generate 500 MW and look something like this:
The company is already garnering lots of attention and dollars — including more than $130 million from Google, NRG Energy, idealab, and the Quercus Trust — as they address solar pitfalls one by one.
It’s Not Too Expensive
Rooftop requires using panels made out of large amounts of highly refined (and very expensive) silicon. According to Gross, that cost can be measured in dollars per square inch.
By using mirrors instead of silicon, eSolar can bring the price way down; their cost can be measured in cents per square inch, not dollars.
In a recent interview, Gross said the company’s goal is to “make a utility-scale power plant actually compete with fossil fuels with no subsidies.” He added, “And we’re getting very close.”
In fact, the company claims it already competes head-to-head with natural gas in California.
That’s why NRG Energy (NYSE: NRG) — which boasts one of the largest electricity generation portfolios in the country — is using eSolar’s technology to build 11 solar power plants. The plants will be built in the Southwest and have an eventual capacity of 500 MW.
As a Fortune 500 company with numerous coal plants under operation, you can bet NRG isn’t all that interested in clean power or reduced emissions. They’re after cheap baseload power… And eSolar can deliver it.
It is Scalable
They’re also addressing the issue of scalability.
Because rooftop solar installations are typically only a few kilowatts, it’s harder to reach scale. That is, fewer projects are completed in varying locations, making it harder to drive down costs. Each system is also unique, which means each one needs to be designed and installed separately.
And while rooftop solar companies are making great progress in making their business more formulaic, eSolar is already there.
Their systems are prefabricated and can be installed with low-level labor. A 46 MW unit comes ready to install — with the mirrors, central tower, condenser, and other parts.
To scale up, one needs to simply order another unit.
This is what’s so attractive to utilities: clean, cheap, baseload power that’s easily replicated. The model fits nicely into their long buy cycles and, because each system is identical, helps them more easily meet regulations.
It Does Work at Night
The last reason utilities haven’t widely adopted solar is a simple one: The sun doesn’t shine at night.
Utilities need generation sources that work at all hours like coal, natural gas, and nuclear. In their mind, it’s pointless to build a solar plant if it needs to be backed up by natural gas.
eSolar is changing that, too.
Remember, they use steam, not photovoltaics. In other words, they use the sun’s heat to make electricity, not its light.
By storing that heat, eSolar can produce electricity at any time — even at night — making it truly a source of baseload power, with no fuel requirements after initial installation.
Breaking all these barriers could make solar thermal the go-to choice (over even coal and natural gas) when utilities need new generation in sunny locations.
Think about it…
NRG could’ve built a new coal- or gas-fired plant. But they chose solar thermal.
China could’ve chosen another fuel source for an upcoming 2,000 MW project. But they, too, chose eSolar earlier this year in one of the largest solar deals to date.
The same scenario played out in India, where eSolar has been selected to build 1,000 MW worth of projects.
These are multi-million dollar energy deals, looking to award contracts to the cheapest bidder. And everyday, solar is edging out its fossil counterparts.
You can bet eSolar will be the 60th company from which Bill Gross makes a lucrative exit. It might even be an IPO that you can get in on.
Call it like you see it,
Nick
P.S. While you can’t invest in eSolar yet, there are plenty of other solar companies turning hefty profits for investors. And because of clandestine gov’t deals, a few are pushing higher than all the rest. In fact, I’ve found an annual closed-door summit that has sent select energy companies soaring every time it convenes. This year, a solar company is in for a large windfall. Our new report outlines this series of conferences and the companies that will get a share of the government “kickbacks” this year.
