Fred Morse: The Solar Thermal King Talks Consolidation, Financing

It’s one thing for a company to score a utility deal to build a solar thermal power plant; it’s another thing entirely to get that solar project permitted, connected to transmission lines and financed, says Fred Morse, U.S. senior adviser to Abengoa Solar, the solar arm of the decades-old Spanish renewable energy and engineering giant Abengoa. “You’ve got to be big and strong for this industry,” said Morse — dubbed the king of the solar thermal industry by Forbes — listing a series of hurdles that face companies once a solar thermal power purchase agreement gets signed, including land siting, permitting, linking to transmission lines and financing.

That’s one of the causes he points to for the consolidation taking place in the solar thermal industry, a market where companies build and sell technology based on mirrors and lenses that can concentrate sun rays and drive a turbine. This week French nuclear giant Areva agreed to buy up solar thermal startup Ausra, which was backed by high profile investors Kleiner Perkins and Khosla Ventures and develops next-generation solar thermal gear. Last October Siemens purchased Solel, a 14-year-old Israeli company that develops more-traditional solar thermal trough technology and owned and operated its own plants.

Abengoa, which develops both solar trough technology and more cutting edge solar “power tower” technology, has a large enough footprint and deep enough pockets, that it has been able to take a more steady — perhaps cautious — approach, compared to some of the eager startups out there. Abengoa has only been selling its solar trough technology into the U.S. market (it sells both technologies in other markets), partly because the financing in the U.S. for the more advanced tech has proven difficult. If the financing market opens up for power tower tech in the U.S., Morse says, Abengoa will go there, too.

Abengoa “is on track,” with its trough-based solar farm called Solana, that it is building to sell power to Arizona utility APS in Gila Bend, Ariz, said Morse. “We’ve completed the permitting, we’ve gotten the tranmission link ready, and now we are starting on financing the project.”

According to The Arizona Republic, Abengoa’s solar power plant in Arizona is expected to cost more than $1 billion to build. That’s a lot of financing. Morse says that while there is “healthy competition” in the solar thermal market, financing could remain as a barrier for some players. “There are 8,000 MW of signed solar thermal power purchase agreements,” says Morse, “You know how many are under construction? None. They still have to get financed.” (That’s not including solar thermal pilot plants that have been built as test beds and demonstrations).

Will Abengoa be adding to the growing solar thermal consolidation? Morse responded to my question with “our technology in this area is really strong,” (and he wouldn’t comment on merger or acquisition plans even if they exist). Abengoa does have relationships with mirror providers and tube makers, so I could envision a play to add a component technology, but I wouldn’t expect Abengoa to buy one of the bigger solar thermal startups that have been wracking up projects with utilities as of late, like BrightSource and eSolar. At the end of the day, Abengoa’s steady approach might appear cautious to some, but will likely come out in the end as very realistic.

Image of Abengoa solar trough technology at Solnova in Spain.