Europe's cleantech firms eye young U.S. market

There are some new faces in the American cleantech race, and they're not from around here.

With Europe taking the lead in favorable policies for renewable energy, it's no surprise that its most successful players want a piece of the action in the U.S.

Abengoa is one of those companies. One of several energy titans overseas, Abengoa is a $5 billion corporation in Spain that's been around for 70 years. Its solar arm, Abengoa Solar, has landed several high-profile projects abroad, including the Solana project in Arizona and the Shams project with Masdar in Abu Dhabi.

To find out more about European interest in the U.S. cleantech market, I called up Santiago Seage, CEO of Abengoa Solar, at his office in Spain.

SmartPlanet: Tell me a bit about Abengoa's history.

SS: We started building -- engineering and construction -- power plants and transmission and distribution lines. Over time, we grew into what we now call sustainable development.

One area is solar power, which we started in the '80s. Most of the time, research and development projects for the government. In 2004, we built our first commercial solar plant. Abengoa Solar today is very active in solar power: in development and construction of plants, but also in developing new technologies.

I have been working with Abengoa since 2005, when we really started pushing the solar power business. Before that, I spent many years working as a consultant for McKinsey [and Co.]

SmartPlanet: Abengoa invests in many different kinds of technology. Why solar?

SS: We believe that one of the great challenges we all have is making sure that the world becomes more sustainable. In the early '90s, Abengoa started to think about which businesses could help, and we identified water, biofuels and solar -- what we believe is the most promising technology for developing clean energy.

It's the best renewable energy, for a number of reasons: it's obviously clean, it can be used in all geographies -- any place you can see the sun -- and it's the most abundant energy resource.

Also, some of the solar panel technologies are not intermittent. In the case of concentrated solar power, we can store thermal energy. This is, we believe, is extremely important.

In the case of wind power, you cannot store that energy efficiently, economically. Today there are no batteries that are economically efficient.

In concentrated solar power, we use mirrors to concentrate rays to a tower. The temperature gets hot, and if you have water, it becomes steam, and you can store steam or thermal energy much more economically. Imagine your morning coffee: you store it [on the carafe] to keep it hot. Imagine that times a million. It's our morning coffee.

SmartPlanet: Let's talk about some of Abengoa's key projects.

SS: The first one is the first solar tower, finished in 2006. It has been operating commercially in the south of Spain since then. That tower is included in a solar complex where we are building a number of plants -- solar trough, photovoltaic -- that, in total, are 300 megawatts. In solar, that is very big. It's actually the largest solar complex anywhere.

We present investment of about $2 billion. Today we have about 190 megawatts in operation.

Another project is the first hybrid plant, solar combined with natural gas, in Algeria. This is a new technology. You can build a natural gas combined cycle -- which provides economically competitive power 24 hours, 7 days a week -- but it is not completely clean. So we put a solar field with it, and we are able to have a cleaner mix. We are now finishing construction of the project. It's 150 megawatts.

Another project is in Abu Dhabi, a 100-megawatt plant called Shams, which means "sun" in Arabic. There, we are partnering with Masdar and Total. We are building and operating the plant.

Another project is Solana, in Arizona, a 280-megawatt-gross, 250-megawatt-net plant. In Arizona, it's very important that the utility has enough production in the evening, when people come home and turn on the air conditioning. That's why using storage was key for us.

We also have a project in California, in the Mojave Desert. It's a 280-megawatt project, without storage. We expect to start construction next year.

We also have a number of other plants in different places under construction.

SmartPlanet: Let's talk about the hybrid technology being used at the Shams project. Is that the answer -- not building all-solar installations, but combining solar with existing fossil fuels sources?

SS: It is definitely a technology that's finding its way. Worldwide, there are four plants under construction. There is one in Morocco by Abengoa, there is another in Egypt, and in the U.S., FPL is building a solar field in an existing [natural gas] combined-cycle plant.

As for ourselves, we have worked in a very interesting project in Colorado with Xcel. We have taken a coal plant, and we have built a solar field close to it. It's a pilot, called Cameo, where we are trying to measure how much we can reduce emissions. I definitely think making natural gas or coal plants a bit greener with these solutions is very interesting and will become a market. Still, [power] plants have lots of emissions, so I don't see that as a net gain. But it's definitely improving existing assets.

One of the advantages of using hybrid technology is that doing clean energy plants is expensive. Doing hybrid plants is a way for many countries and utilities to start working with solar power while not footing the whole cost.

SmartPlanet: Do you foresee retrofits like this as a major part of yore business?

SS: I think the vast majority of construction will be new plants. Each [existing] one is different. You need to find plants located in the right places, have enough land, have the right financing structure. It is difficult.

SmartPlanet: Has Spain's precarious economic situation played a part in your decision to look to the U.S.?

SS: I am based in Spain, but I spend 10 days per month in the southwestern U.S. We say we have two domestic markets: Spain and the U.S. From day one, that was the spirit -- we thought those could be two attractive markets for us. We're very aware of what's going on.

The financial crisis worldwide is and will continue to present a challenge to the clean industry in general. We also see that, for governments, in spite of the financial crisis, sustainable development -- reducing emissions -- continues to be on top of the agenda, everywhere. The U.S., Europe, Middle East, China. We don't believe governments are going to stop.

We do see that the industry is going to continue to receive certain support, but of course, we don't want that support forever. Solar's challenge is to make sure that in due time, we become competitive with fossil fuels.

We believe it can be done. I dare say that in 2020, solar will become competitive everywhere. The question is how to go from today to whatever is the right year. Many countries that three, four years ago were not thinking of solar are now pushing solar -- in Asia, and Latin America.

We also see the Middle East, including northern Africa, as promising. Most governments are concerned about diversifying out of fossil fuels, and they have the resources to do that -- the financial crisis has not affected those markets as much. We're seeing Asia [become a player] -- India and China are among the pioneers.

When you look at the renewable energy market from the U.S. and Europe, you can even become pessimistic. When you look at it on a worldwide basis, you become optimistic. Every single country on Earth wants to reduce its emissions.

SmartPlanet: Suddenly, going green makes business sense.

SS: I don't think it's suddenly. First, governments have realized that their people are telling them that this is what they want.

The second thing is geopolitical independence. You don't want to depend on certain regions for fossil fuels. This argument is extremely important in the U.S.

The third thing is reducing emissions and going green and awareness.

In our case, we develop and manufacture some of the components. Most of our business is in concentrated solar power; we have a little photovoltaic, which has definitely become a commodity [market]. We don't care what manufacturer the cells come from. In concentrated, technology players play a less important role at this time. We believe costs will continue to decrease significantly due to improvements.

Photovolatic [solar] today is much bigger than CSP. At the end of 2009, there was 14 gigawatts of PV and less than 1 of CSP. It's more capital-intensive to build CSP, and CSP can only be used in places where you have a high concentration of solar rays: the southwest, Texas, Florida. You need the strength of the sun. Photovolatics work with light, so on a cloudy day, they still work, just less. In New York, CSP would work well three months a year.

There are significant differences in the plants we're designing now versus the plants we built three or four years ago. Technology is evolving -- a lot. Why? We are just starting. In CSP, we built our first plant in 2006. We are at the point in the learning curve, or the R&D curve, where a lot is happening. We're early in the game.

The other thing is size, or critical mass, or experience curve. We haven't built much until now, especially in CSP. We now have, worldwide, a gigawatt in operation. In 10 years, we will have dozens of gigawatts, with more factories, more competition.

SmartPlanet: Has your parent company's largesse been an asset, allowing you to invest where others fear to tread?

SS: We believe it's extremely important. Without the backup of major corporations, with the technical resources, with everything…we are sort of a startup within a corporation. Over the last five years, we have multiplied by perhaps 30 times the number of employees. We wouldn't have been able to do that alone, without a parent company. We have the best of both worlds.

To give you a sense of the size of the projects we do, the largest we do is a project like Solana, close to $2 billion in investment, the smallest in this space is probably $300 million. You have to have funds.

SmartPlanet: What keeps you up at night?

SS: Many things. Probably, lately, financing -- we do lots of projects, and with the financial crisis, financing has been tougher. So we devote lots of time to work with financial institutions.

Secondly, cost reduction. Short-term success relies on financing, and long-term success relies on reducing our costs the way we want.

This post was originally published on Smartplanet.com