Israeli solar energy company Solel Solar Systems has made a breakthrough in the global energy market. The company's US subsidiary will build the world's largest solar-operated power plant at an investment of $2 billion. Solel will probably finance the investment with bank and non-bank finance, as is the customary practice in infrastructure projects. Solel will build and operate the plant, and the electricity produced will be sold to US electricity company Pacific Gas and Electric Company (NYSE: PCG) over a period of 25 years. The plant, which will be built in California's Mojave Desert, will be known as the "Mojave Solar Park, and deliver 553 megawatts of solar power.
"We're thrilled to bring 553 megawatts of clean energy to California," says Solel Solar Systems CEO Avi Brenmiller. "Our proven technology means that Solel can economically turn the energy of warm California into clean power for the state's homes and businesses."
Solel develops and produces solar systems based on technology that enables the conversion of solar energy into clean electricity. The company's technology was first developed by Luz, where Solel CEO Bremniller previously worked. During the final years (early 1990s) of its existence, Luz built nine commercial power plants, located in California, with a combined production capacity of 354 megawatts. Solel says that these plants, which are the only ones of their kind in the world, save two million barrels of oil a year. The company also says it is supplying the core technology for two other plants currently being built in Nevada and in Spain, which will have total production capacity of 114 megawatts, and that it will also be partnering with three Spanish infrastructure companies in the building of three other power plants in Spain, with a combined production capacity of 150 megawatts.
The plants that Luz built in California clearly demonstrate the feasibility of Solel's technology, and represent the company’s entry ticket to major projects like the one it announced yesterday. "Luz also produced people who felt that the company's technology had been exhausted, and who wished to create a different technology," says Bremniller in an interview with "Globes," referring to the two rival companies that came out of Luz, Ener-T Global Ltd., and Luz 2. "We, on the other hand, prefer to continue upgrading this proven technology, and use it to develop projects worldwide. And we've made a significant upgrade to the technology, so that the collectors on the plants that Luz built in California will produce 50% more energy a year. This is a tremendous improvement."
Globes: The company will have to grow at a meteoric rate within a short space of time, if it is to execute such projects. How will you go about it?
Bremniller: "It's a tough task. We are definitely growing, but we're also teaming with local strategic partners, who take some of the tasks off us. What is so important in collaborations with these strategic partners, is the fact that they are involved in the internal market, and they know where and how to get hold of money, as well as how to deal with the bureaucracy entailed in the projects' construction. Part of the employee recruitment will be carried out by these strategic partners. In Spain, for example, where we're building three power plants, we have Sacyr, one of Spain's five largest engineering companies, as our strategic partner."
You will have had to have offered a competitive price in order to win a contract like this.
"In the US today, the price of a kilowatt-hour produced through natural gas is $0.10-11. The important point here is to bring the price down below this rate. Once we manage to do this, it will represent a breaking point, and switching to solar energy will become more worthwhile."
Well, you won the contract, and you reportedly went below $0.10 per kilowatt hour.
"I can't comment on the price. I can only say that I believe that we will reach $0.07 per kilowatt hour in future deals within six to seven years."
Regarding the $2 billion. Who else will be investing, aside from strategic partners?
"Financial partners will also be contributing to the $2 billion that we hope to raise. Part of the investment will be made by way of tax credits in return for investment by companies, not necessarily ones from the engineering or financial fields. These companies will not be real partners in the project but rather, equity investors.
"Our role in the project will be to produce the components and assemble them in the field. At present, we're producing the collection tubes only, and eventually we'll also produce metal parts, mirrors, and motor units here. We'll be setting up new production lines in Israel in order to produce these, and we'll be recruiting new employees. We currently employ around 250 people at our factory in Bet Shemesh, and we'll probably take on a further 180. I believe that the construction of the new production lines will be completed by the middle of 2009," says Bremniller.
"Of course, had we been setting up a project of this size in Israel, we would be producing a lot more of the equipment here," concludes Bremniller, a scathing reference to the Israeli regulator, who has been prevaricating on the program to build a solar field in the Negev desert for years.
Published by Globes [online], Israel business news - www.globes.co.il - on July 26, 2007
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