Solar’s Day In The Sun will have arrived when solar power costs less than 10 cents per kilowatt-hour — and new solar concentrators may be about to reach that goal:
The parabolic troughs work well. But the mirrors, among other things, have to be very precise, making them difficult and expensive to build. The original series of plants in the Mojave managed to bring the cost down from 28 cents per kwh to 16 cents, while the newer ones are a penny or two cheaper. But O’Donnell was determined to start at 10 cents and go down from there.So was there something better and less costly?
O’Donnell stumbled on the answer thumbing through a scientific journal at an engineering society meeting in May, 2006. A paper by University of Sydney professor David Mills described a field of almost flat mirrors focusing the sun’s rays on fixed tubes held by poles above the mirrors (diagram). Such mirrors are easier and cheaper to build than the parabolic troughs, and can be made strong enough to withstand Florida’s hurricanes. And rather than using the troughs’ oil-filled tubes, which sap power to pump the oil, Mills uses the sun’s heat to turn water directly into steam. “It just riveted me. I thought: ‘Whoa, Mills is either a genius or a madman,” O’Donnell recalls. “If it can compete with coal even at the beginning of the learning curve, it will change the world.”
The more he learned, the more intrigued he became. Mills had been working on solar technologies for three decades. In 2002 he had hooked up with local businessman Peter Le Lièvre, who had been building vehicles with liftgates that ranchers use to hoist and transport sheep.
In a rented garage, Le Lièvre bolted together the parts for the first mirror. His team barely got it out between the garage’s pillars. But it worked. “That first mirror had great focus,” says Le Lièvre. “It would burn the hairs off the back of your hand.” On a shoestring, they assembled 60 mirrors into a 1-MW array next to a coal plant in Liddell, New South Wales. When they flipped the switch, steam gushed out. “Everyone was aghast that it worked the first time,” says Mills.
Here’s the finance angle:
Coal plant builders have been able to count on 80% to 90% debt at an interest rate of 5.5% to 6%. Their equity investors expect about an 11% return on equity. That puts the average cost of capital at about 7%. But since no one has built a giant solar plant, investors demand a risk premium. O’Donnell’s equity investors want a richer 20% rate of return. Plus, he can get only 50% debt, at an interest rate of 7.5%. As a result, the overall cost of capital for Ausra’s first plants is 12%.The hope, therefore, is that the first few large plants show investors that the risk is low, causing the future cost of capital to drop. That would enable Ausra to lower the price below the current 10.4 cents. “Once people build one or two units, the financial risk premium goes away,” explains Jim Ferland, senior vice-president at New Mexico utility PNM.