NRG Energy (NYSE: NRG) plans to build a 92-megawattsolarthermal power plant and sell the electricity to El Paso Electric (NYSE: EE) in New Mexico, the company said Thursday.

The project would use equipment from Pasadena, Calif.-based eSolar, whose senior vice president of engineering, Craig Tyner, let slip last week that the company would be announcing, along with NRG, a power contract within a week.

NRG, based in Princeton, N.J., plans to bring the plant online in the summer of 2011. It could become the first commercial solar thermal power plant in New Mexico, the companies said. The plant would sit on a 450-acre private land in Dona Ana County, near the border and about 10 miles from El Paso, Texas.

The deal is the first power sales contract announced by NRG since NRG agreed to pay $10 million to eSolar earlier this year for power projects eSolar had been developing (see With NRG Deal, eSolar Shifts from Power Provider to Equipment Maker). The deal with eSolar represented NRG's foray into the solar market, the company said.

Like many other solar startups, eSolar initially wanted to be both a technology developer and power plant owner and operator.

But the costs and other resources required to do both were too high for a startup like eSolar, Tyner said last week. CEO Bill Gross was looking to sell a 10 percent stake in eSolar earlier this year (see Got Money? eSolar Needs New Investors).

The company would focus on selling equipment and licensing its technology for now. ESolar has licensed its technology to the Acme Group, which has vowed to build up to 1 gigawatt of solar power plants over the next 10 years in India (see eSolar's Transformation Continues With Indian Deal and Making Money From the Indian Sun). Acme agreed to invest $30 million in eSolar.

NRG and eSolar said they plan to work together on building up to 500 megawatts of solar farms in California and southwestern states. One of the projects is the 245-megawatt solar farm that eSolar agreed in 2008 to build to sell electricity to the Southern California Edison.

Solar thermal power comes from the use of mirrors to concentrate the sun to heat fluids for generating steam, which is then piped to a turbine for power generation. Solar thermal power developers say they could deliver cheaper electricity than other types of solar technologies, such as the use of solar panels.

Very few solar thermal power plants have been built in the last two decades in the United States and elsewhere in the world. Power plants that use coal or natural gas can produce much cheaper power than those using the sunlight.

At 92 megawatts, the project is small compared with some of the other solar thermal power projects under development in California, Arizona and Nevada.

The largest utility in Arizona, the Arizona Public Service, recently signed a power purchase agreement with Starwood Energy to buy power from a 290-megawatt, not-yet-built solar thermal power plant.

Starwood is hiring Lockheed Martin to design, build and operate the project, which should be completed in 2013.


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