SolarReserve & ACWA Power's 110 MW Redstone project

"The goal going forward is to grow the revenue base of the company; to take larger positions in our projects so that we can enjoy the revenue streams going forward,” Smith told CSP Today.

“We don’t want to just invest in a project, develop it and then sell it down,” he said.

SolarReserve was formed in 2008 and a strategic investor at this point would better equip the company to raise finance for a pipeline of projects to be developed over the next five years, Smith said.

The company currently has more than $1.8 billion of projects in operation or under construction and holds development and long-term power contracts for 482 MW of solar projects representing $2.8 billion of project capital.

"We're growing in a market that is expanding very fast...The goal is to bring in somebody that is looking at long-term investments in assets and has the ability to raise in excess of $4 billion of equity," Smith said.
"It's a tremendous investment opportunity but it is going to have to be a larger player.”

SolarReserve's 6 GW development pipeline mostly consists of projects using proprietary tower technology and molten salt storage design acquired from NASA contractor Rocketdyne. The company's portfolio includes a pipeline of stand-alone photovoltaic (PV) projects and hybrid facilities which bring together CSP and PV to provide a 24-hour storage solution.

"We've got a fabulous technology and a huge development pipeline and the whole reason to bring in a strategic investor is to continue the growth of the company," said Smith.

"We've got a very deep portfolio of projects in development around the world; more than 6,000 MW. If we look at what we'd like to do over the next five or six years the investment isn’t going to come from private equity sources."

The need is clear. The company's 150 MW Rice tower project in California, which was set to benefit from a 25 year PPA with Pacific Gas and Electric (PG&E), fell through after the developer failed to attract sufficient financing.

After SolarReserve had fully developed and gained permits for the 110 MW Redstone tower with 12 hours of storage, the firm took on ACWA Power as a joint partner, in order to finance it.

The deep-pocketed Saudi company had the ability to put together over 50% of the equity funding needed for Redstone, which was awarded by South Africa’s REIPPP renewable energy program this past January, Smith explained.
"They have a larger balance sheet and can provide that equity,” he said.

Next venture

In the venture capital world, clean tech investment has failed to deliver the profits of the IT tech industry.
"The returns have been so horrible in [the clean tech] space over the last decade," said Robert Siegel, General Partner with XSeed Capital.

Experienced both in venture capital and strategic investment, Siegel said that at SolarReserve's stage in development, a strategic investment could make sense.

However, financing a $4 billion pipeline would be well outside the venture capital investor’s range of $1 to $30 million.

Some of the private equity players that invested early in SolarReserve’s development were a great support for the early-stage company, but these companies may not want long-term assets.

Smith did not rule out strategic investment from another energy company, and said there is some crossover in business models within the energy sector as a whole, which can be attractive.

”You are generating electrons and sending electrons to where people can consume them. That's why you often see big integrated energy companies,” he said.

Generating interest

The storage capabilities of the latest CSP plants have made them an attractive option for markets where rising wind and PV capacity cannot be relied upon to cover peak demand periods, particularly in the evening.

There is currently over 4 GW of CSP capacity globally and according to International Energy Agency's 'Technology Roadmap: Solar Thermal Electricity - 2014 edition' CSP capacity could reach 1,000 GW by 2050, providing as much as 11% of global electricity supply.

"The value of Solar Thermal Electricity (STE) will increase further as PV is deployed in large amounts, which reduces mid-day peaks and creates or increases evening and early morning peaks," IEA said in its report.
"Deployment [of STE] could increase rapidly after 2020 when STE becomes competitive for peak and mid-merit [demand periods]," IEA said.

However, Bloomberg analyst Jenny Chase highlights the risks for any investor in the CSP sector.
"The risk for both SolarReserve and investors is that solar thermal may have no future, particularly when batteries get cheap," she noted.

The cost of lithium ion batteries, the most common battery type, currently varies in a wide region around $500 per kWh, but costs are projected to fall by over 30% in the short to medium term.

In terms of potential investors in SolarReserve, Chase said a company such as ACS Cobra, the Spanish construction and engineering firm which was one of SolarReserve’s early investors-- might make a good strategic investor as its focus on the market would help SolarReserve move decisively for opportunities.

"A Middle East strategic connection would also be useful, since these are some of the most likely markets for solar thermal," Chase said.

The latest deal between GlassPoint Solar and Petroleum Development Oman to build the world's largest CSP plant on an oil field in South Oman highlights the potential benefits of being well-positioned in the Middle East market.

By Susan Kraemer