What GlassPoint tells us about the natural gas market

The woes of the solar thermal industry are well known but mostly boil down to the unexpectedly steep decline in pricing for solar panels, its primary competitor. But the technology and concepts behind concentrating sunlight from parabolic mirrors to generate heat and energy was sufficiently exciting for startup GlassPoint to figure out another, perhaps more lucrative, application of the technology: enhanced oil recover (EOR).

I spent some time recently with GlassPoint’s VP John O’Donnell discussing the engineering ins and out of concentrating solar to produce a valuable application. The company recently picked up a hefty $53 million from a group of investors led by Shell and the sovereign fund of Oman.

O’Donnell explained that GlassPoint’s founders had always liked the idea of concentrating solar technology but found some of the engineering aspects complicated and expensive. Most importantly because of the exact precision needed in angling mirrors correctly, expensive and heavy materials were needed to protect the mirrors from the impact of wind and dust. Even small amounts of wind could be disruptive. Wouldn’t it be great if you could put concentrating solar indoors?

The reality was that you could put concentrating solar indoors but you also needed to find a lucrative application and end market for the technology. For starters GlassPoint decided to put its parabolic mirrors inside a greenhouse to protect them from wind and make them easy to manage. This significantly cut the costs of parts as well as allowed the company to buy as many off the shelf parts as possible rather than getting mired in manufacturing (I see many early startups fail because they have to engineer and build every part, sending costs through the roof. I’m thinking of Fisker right now).

But what about an application? GlassPoint wanted an application that could deliver the product locally rather than rely on transmission as solar farms and concentrating solar do when they must transmit power to where it’s needed. The company came upon the idea of enchanced oil recovery. Rather than use natural gas to heat steam that is then injected into wells to extend an oil well’s lifetime and production rate, they could use parabolic mirrors to turn water into steam and inject it locally into a well.

“We wound up with fundamental cost, land use, durability and opex advantages against the older CSP [concentrating solar power] technology,” O’Donnell noted to me.

A major part of GlassPoint’s strategy involves the Middle East. While people may think of the Middle East as overflowing with cheap fossil fuels, that’s only partially true. Energy use is growing very quickly across the Middle East and it’s expensive for the sovereign oil producers to burn natural gas to enhance oil recovery when it could be exported. We see this story playing out in renewed interest in solar photovoltaic in the region as the countries would rather not use their precious fossil fuels to produce power domestically when it could be exported at a premium.

GlassPoint has deployed pilot projects in California as well as the Middle East, and is benefitting from regulatory pushes in California. Replacing natural gas combustion with solar steam at enhanced oil recovery sites has the potential to save a lot of carbon emissions, even if these technologies don’t take us any closer to actually moving off fossil fuels as the primary source for power generation and transportation.

O’Donnell believes the EOR market could be as large as $100 billion since most wells in the world don’t currently employ EOR technology. The price of natural gas will, to some extent, impact the attractiveness of GlassPoint’s technology, just as it impacts the entire renewable energy sector (more expensive natural gas makes solar steam EOR more attractive).

But few, people, including myself, belief natural gas will get any cheaper, particularly when/if export terminals come online domestically. And with $53 million in the bank, GlassPoint will use that money to accelerate deployment of its technology in the Middle East and elsewhere.

2013: Solar soared, wind got hammered, and renewables moved forward

The most recent report from the Solar Energy Industries Association and GTM Research puts into relief just how far solar has come in its penetration of the U.S. energy economy. And how difficult a year 2013 was for the other historical leader in renewable energy—wind power.

Solar made up a third of new electricity last year, while natural gas accounted for half. 2013 saw 4.75 gigawatts of installed solar capacity. More solar has been installed in the last 18 months than in the last 30 years. SEIA is forecasting continued growth in 2014, with solar PV coming in at just under 6 gigawatts of installed power, a 26 percent increase over 2013. Keep in mind that California accounted for 2.7 gigawatts of the installed power, more than half of all solar installed last year as the state leads the charge. Arizona, North Carolina, Massachusetts and New Jersey rounded out the top five states.

So, yes, state by state renewable energy mandates drove much of this phenomenon. But so did the plummeting price of solar panels and improvements in installation times and costs at both the residential rooftop and utility scale level. Average installations system prices ended 2013 15 percent below prices at the end of 2012.

The SEIA report is already presaging the future issues in solar and they’re not going to be about cost. The report reads:

Increasingly, solar is not bound by its cost, but rather by its role in the electricity sector. And as solar continues along its path toward the mainstream, its integration with the broader electricity market from a technical, market and regulatory perspective will become one of the most important issues in the industry.

The issues going forward are going to relate to energy storage, handling intermittency presented by solar/wind, and the technical challenges of integrating both utility scale power and dealing with customer erosion for utilities related to rooftop installations.

2013 tells a very different story for wind power, however. It accounted for just 7 percent of new electricity, which was massively down from 2012 when it accounted for 41 percent of new electricity in the U.S.  Wind had accounted for 36 percent of new power in the U.S. over the past five years, supplying about 4 percent of the nation’s electricity.

It’s an interesting turn of events for wind power generation. Uncertainty about incentives for wind power helped drive much of the downturn in 2013. And the industry is going to have a tougher time arguing for subsidies in the future.

According to Energy Information Administration data, unsubsidized wind costs $86 per megawatt hour, cheaper than coal ($100) or nuclear ($108). When subsidized, wind is just $63 per megawatt hour, even cheaper than the current leader, natural gas ($67).  Obama has called for expanding production tax credits for both wind and solar in his most recent budget but that budget is likely dead on arrival.

Despite having the second largest amount of installed wind power in the world, the U.S. installed just one gigawatt last year. The Global Wind Council (GWEC) called 2013 “another difficult year for the industry.” Though China remains the beacon of hope for wind power, installing 16 gigawatts last year, making it the biggest wind power user in the world with 91 installed gigawatts. There were also signs of an uptick in installations in India and Brazil.

Globally strong incentives in Japan and continued growth in China further aided the solar industry. Improvements in the subsidy environment for wind could help bring back wind power domestically and in Europe, where it’s been historically strong, though that’s a big ask right now given debt issues in the developed world. Still many analysts believe 2014 could be a rebound year for wind since 12 gigawatts of wind power under construction should come online.

At the end of the day, as solar power comes down in cost, it becomes an inevitable competitor for wind. What strikes me though as more remarkable is that with almost half of new power in the U.S. coming from wind and solar last year, renewable energy in general has become a major part of the future of the domestic energy economy. And who knows, if natural gas prices spike as natural gas export terminals come online over the next few years, renewables could get even more competitive.

Natural gas: The other scenario

Cheap natural gas is widely regarded as a serious threat to the growth of renewable power generation. But natural gas prices are sure to get more expensive, potentially making things much easier for renewables.

To export or not to export natural gas, that is the question

As many eagerly await a delayed report on the impact of exporting natural gas on the domestic economy, the renewable energy sector finds itself in the strange position of needing higher natural gas prices to makes its own clean power more cost competitive. This means exporting natural gas.