Power provider NRG Energy has signed a deal with solar thermal startup eSolar under which NRG has acquired the rights to build solar thermal power plants on three areas earlier secured by eSolar.  In turn, eSolar will provide the equipment for the projects. The first solar plants from this deal should be operational by 2011. NRG is paying $10 million to eSolar for the rights to the projects as well as an equity investment in the company.

When the plants are built, NRG will subsequently sell the power to utilities. Meanwhile, eSolar will garner revenue from selling equipment and providing expertise, not selling power.

If the contours of the deal sound familiar, that's because they are. Earlier this year, solar thermal startup Ausra changed its business plans. The company had earlier planned to build solar thermal power plants with its own equipment. Revenue for Ausra would come from selling power. In January, however, Ausra said it would start to concentrate on selling solar thermal equipments and building out solar thermal plants.

The reason for the switch at Ausra? Capital and time, said Ausra's CEO Robert Fishman in an interview. Building and owning power plants takes several years and hundreds of millions in capital. Utilities and power providers have access to the kind of manpower and money needed to do that. Startups don't.

Power plants "are way beyond" the capabilities of a startup, Fishman said. Besides, by shifting to power plants, Ausra could begin to garner revenue now, versus several years in the future when power begins to come online.

Pasadena, Calif.-based eSolar has already raised $130 million. Still, it has been looking for additional funds. New CEO (and early investor) Bill Gross said in January that the company was looking to sell up to 10 percent of the company.

The power versus equipment debate will likely be a big one this year. BrightSource Energy, another solar thermal company, says it will forge ahead with its plans to become a power provider. It recently signed a deal to build 1.3 gigawatts worth of solar thermal capacity. Southern California Edison will buy the power from BrightSource. BrightSource and Stirling Energy Systems also have other large solar thermal contracts.

Wind and wave energy companies in Europe are also debating their options on this issue.

Companies will largely determine which way to go on this issue depending on the circumstances, said Travis Bradford, who heads up the Prometheus Group, in an interview last week. If they need money now, they sell equipment, which can be lucrative as well as cutthroat. If they have enough, they tend to look at the idea of being a power provider more closely.

"People fit their business model to whatever restraints they find themselves under," Bradford said.

On a conference call, Gross and Michael Liebelson, Chief Development Officer Low Carbon Technology for NRG, claimed that eSolar's "power tower" designs, which are very similar to those being created by BrightSource, can provide lower cost power than the alternatives.

The two companies also emphasized that eSolar can plant its equipment closer to population centers, making them cheaper and easier to connect to the grid. This should also make permitting and the land use process easier as the equipment can be placed on property that's already been developed instead of virgin desert.


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Tags: ausra, brightsource, esolar, nrg, solarthermal