As the Price of Oil Soars, Many Turn to Renewables
New Business Models, Technology Tap Into Trend

By Steven Mufson
Washington Post Staff Writer
Monday, November 26, 2007

Thomas M. Rainwater spent 25 years in what people today call the traditional, old-fashioned energy business. An engineer by training, he worked at nuclear and coal-fired power stations, was a marketing executive for a natural gas producer and pipeline, and finally a top strategist for a Canadian power-generation company with a market capitalization of $5.5 billion.

Then in July Rainwater moved to the Washington area to become chief executive of SunEdison, a Beltsville company that is building and servicing solar panels on the rooftops of warehouses, supermarkets and other commercial buildings around the country. SunEdison is a tiny fraction of the size of his former employer, but Rainwater said "there is growing recognition across the land, across the globe, that we need to do something different to fire the economy."

More and more people like Rainwater are joining the emerging green economy -- and many of them are doing it in the Washington area. While many companies in this region are doing small things to burnish their environmental credentials, a few companies like SunEdison are inventing new business models, coming up with new technology or arranging new financing on a large scale.

Doing that is not easy. Green businesses face many hurdles -- regulatory obstacles, technology limitations, high costs or simply old habits that prevent firms from thinking in new ways. But with the price of crude oil above $95 a barrel and worries about climate change mounting, there is more interest than ever in the field.

At its core, the business of climate change -- at least the really big business of climate change -- is an energy business. The United States in 2006 produced 5.9 billion metric tons of carbon dioxide by burning oil, natural gas and coal for energy. Finding ways to use those sources more efficiently or to replace them with energy generated by solar, wind or other renewables is the key to bringing greenhouse-gas emissions down to a level that will slow global warming.

Many of these businesses are substantial already. Perhaps the biggest in the Washington area is AES, a traditional, largely coal-based power-generation company that is pouring money into renewable energy. It has 1,000 megawatts of wind generation in operation and 4,000 megawatts under construction, and it is teaming with General Electric to develop large-scale greenhouse-gas-reduction projects in the United States.

At the other end of the spectrum is GridPoint, a small company that makes and monitors devices that can let consumers and utilities control residential electricity use without anyone being in the home. The four-year old firm, which has 75 employees, has attracted high-powered people to its board, including executives from Goldman Sachs, Duke Energy and private capital firms. Goldman Sachs led a group that last month committed $48.5 million in financing for GridPoint.

GridPoint's goal is to create systems that make energy use more efficient and allow utilities to lower demand at times of peak usage. That way the utilities might not need to build or run backup power plants burning natural gas or oil.

At the firm's K Street offices, it has demonstration equipment. One device resembles a fuse box; the other is a box the size of a small refrigerator. The former can identify and control individual appliances, and consumers and utilities can see exactly how much energy each appliance is using.

The big box is used to control solar panels and store excess energy from the panels in batteries. It retails for $12,500. As solar use spreads among big retailers and homeowners, the box will enable utilities to draw on solar energy stored in scattered arrays of batteries the way they would draw on a peak generating plant.

Currently, said Karl Lewis, the firm's chief operating officer, on a hot summer afternoon when air conditioners are running full blast and straining the capacity of power plants, utilities telephone the managers of commercial buildings and ask them to adjust thermostats or slow down elevators, which are big energy users. But with GridPoint's equipment, the utility would also be able to tap power from batteries in different office buildings or homes and turn down energy-gobbling devices all over the power grid, rather than crossing its fingers and hoping that building managers cooperate.

Lewis said the need for such control equipment will become even greater if electric cars catch on. General Motors has said it would start selling plug-in hybrid cars in three years. Imagine, Lewis said, if people come home at dinnertime and plug in the car when electricity demand is already high on a hot afternoon. The car will double or triple a home's peak energy use. That could overwhelm the utility's capacity and lead to blackouts.

"Plug-in hybrids are the utilities' best friend and worst enemy," Lewis said. He thinks they will force changes. With more sophisticated control equipment and dedicated car-recharging outlets, a utility could make sure the cars recharge only at night when there's spare electricity.

So far, though, GridPoint is mostly a product in search of a market. GridPoint has eight trials in progress with utilities; there are five to 10 units being used in each trial. If all goes well, it will move to pilot projects that could involve thousands of units within a year.

SunEdison, by comparison, isn't coming up with new ideas. Instead it has a financing model that makes it easier to sell the existing technologies of major solar manufacturers.

Because solar panels are unfamiliar devices, and because they're expensive with relatively long payback periods, many individuals and companies don't consider buying them. So SunEdison doesn't sell solar panels. It buys them and puts them on the rooftops of big retail stores or warehouses. The customers then sign 20-year contracts to pay SunEdison for the power the panels generate. SunEdison continues to own the panels and maintain them.

"Solar is virtually maintenance free, but not [completely] maintenance free," said Jigar Shah, founder and chief strategy officer of SunEdison. He said that while many utilities in San Diego and Los Angeles lost power lines in the recent fires, SunEdison's panels worked 91 percent of the time. After the fires died down, though, SunEdison sent its workers to check and clean the panels.

In September, Kohl's department stores turned on the first of 63 solar systems it plans to install with SunEdison on its California stores. Together the stores will eventually generate 25 megawatts of electricity -- the equivalent of electricity used by 3,087 California homes. Other SunEdison customers include the federal government, Wal-Mart, Staples, Whole Foods, the City of San Diego, the California State University system and Caltrans.

Shah, 33, won the backing of Goldman Sachs for a $60 million fund to buy and deploy the panels. Goldman also shares the tax benefits the federal government gives solar installations. SunEdison just lined up another $250 million fund with support from Wells Fargo and HSH Nordbank.

Shah said that regulatory and tax policies in New Jersey and California have made those states the company's biggest markets. But he said that new state initiatives in Maryland and Delaware should spark more sales, and hiring, in this region.

Rainwater said that utilities are starting to realize that solar installations of this size are competitive economic ideas.

"We know people don't like coal," he said. "No matter what we do to call it clean, it's not; it's coal. This notion of clean coal technology is at least a decade out. And yet there's an almost insatiable appetite for energy."