IMPORTANT NOTE: This report was developed by Robert Mulligan in May, 2003 as part of a
consulting contract to examine markets for Thin-Film solar Products, large and small. The contract
was issued to Mr. Mulligan by an investment group that desired to purchase portions of
the former Enron/BP Thin-Film factory, after the auction ended. Much of the equipment that
was sold at auction went to scrap dealers where it was either sold at a very low cost, or was
destroyed for its metal and electrical value.
The investment group never made their investment in any form of alternative energy manufacturing
or production and disbanded last year, therefore the release of the document shown below.
The use of Thin-Film Photovoltaic products for electrical power generation makes more sense now
then it ever did, primarily do to the recognition of large roof-top, BIPV and grid connected electrical
generating stations. Adding to this market change, is the decrease in the availability of Crystalline Solar
Cells to manufacture traditional Solar Cell panels and the increase in prices which all favor a lower cost,
high production method of producing photovoltaic power.
P.O. Box 14457
Bradenton, FL 34280
Robert J. Mulligan
Analysis of the Enron-Nevada Solar Farm Project
On Wednesday, May 15th, 2003, the former BP/Solarex "Millennia" Thin-Film Solar Module factory, located in Toano, Virginia, near Williamsburg, VA., was auctioned for Scrap, Equipment and Parts.
This short-lived, massive investment enterprise (estimated at $30 Million Capital Equipment Cost plus a similar amount from BP at a later date) was a creation of former Amoco/Solarex management and its Joint-Venture Partner, Enron Corporation's, "Enron Renewable Energy Corporation".
In December, 1994, Enron purchased a 50% interest in Solarex from Amoco and formed two Divisions:
-Solarex (Executive Officer: Dr. Harvey Forest):
Responsible for Solar Module Production, Sales, Research and Development.
-Amoco/Enron Solar Power Development ("AESPD") (Executive Officer: Mr. Robert Kelly):
Responsible for the Development of International Power Marketing and Sales, involving Photovoltaic Generated Electrical Power.
During the 1995 to 1999 period, Enron Renewable Energy Corporation, invested not only in Solarex, but also several Wind and Water Generator Facilities as well. (Purchased Zond Wind-Power Corporation in 1997).
The initial Goal of the Solar side of the business, was to construct a high-volume (10 Megawatt) Amorphous Thin-Film Silicon Solar Module factory to take advantage of the (assumed) lower Costs of Thin-Film Solar Module Production, compared to the traditional Crystalline (individual Silicon Wafer Solar Cells, soldered together to form a Solar Module). The "Lower-Cost" concept was based on Thin-Film Silicon Solar Modules not requiring the high Costs of expensive Silicon Wafers and the Equipment/Personnel to assemble them, just Vapor Deposition and Laser Automated Equipment. A very large Thin-Film Silicon Production Facility, it was planned, could finally produce Solar Modules that could be somewhat competitive with Public Utility Generated Power needs, as supplied by traditional Oil, Coal and Nuclear Generation Plants.
The "concept" of large-scale Thin-Film Silicon Solar Module Production was one which had received tremendous U.S. Dept. of Energy Funding for over 15 years. (Approximately $5 Billion).
-Solarex owned many of the U.S. Patents for Amorphous Thin-Film Photovoltaic Technologies, (sued both ARCO Thin-Film Silicon and won, forcing them to close their U.S. Amorphous Thin-Film operations).
-Enron had the contacts and experience in the "Electrical Power Re-Sale" Market to sell "Green/Renewable" generated Solar Power.
The "concept" was a good one and was probably the best opportunity to date, to test the viability of constructing a large and modern Thin-Film Silicon Production Facility, and selling, not just the completed Solar Modules, but the "Electrical Power" that these Solar Modules could generate.
The Toano, VA Millennia Thin-Film Silicon factory was built quickly and went into Production in 1998 with the primary Thin-Film Product being a 43 Watt, 72 Volt/600 mA Tandem-Junction Thin-Film Silicon Plate, in a Double-Glass, EVA Laminated format.
Initially, there was to be no Framing done at this Facility and the Plates would be shipped to the Installation Site where an integral Frame/Support Structure would be utilized to construct the Solar Array. This "flat-shipped" Plate concept would allow for lower Shipping Costs of the Solar Module Plates to the Site, compared to pre-Framed/Completed Solar Modules. Additionally, unlike Crystalline Solar Modules that utilize Tempered Glass which require Factory-Installed Framing to protect the delicate edges from Chipping (Tempered Glass, if Chipped, will crack), Thin-Film Solar Modules use Annealed or Heat-Treated, non-Tempered Glass which does not have the edge Chipping/Cracking characteristics. This allowed the shipment of non-Framed Solar Modules.
NOTE: Framing capabilities were added to the Toano, VA Facility at a later date, after the original "Solar Power re-Selling" concept did not materialize as expected. This allowed the Millennia Solar Modules to be used in traditional Solar Markets.
Analysis and What Went Wrong:
After attending the Auction of the Millennia Thin-Film Solar Module Factory, I thought that it might be appropriate to offer some opinions and comments about why, after the Millions of Dollars of Private and U.S. Government Funding that went into this Project, and after the many years of U.S. Government Promotion of why "Thin-Film" Silicon was the only remedy for producing Low-Cost Photovoltaic Solar Energy, this Project failed so quickly and massively.
It would be easy to simply state that the Project was ahead of its time. The timing was as good as it ever was going to be, and the Site location for both the Nevada Solar Farm and the Site for the Millennia Thin-Film Silicon Factory was perfect. Both received Tax breaks and Incentives for their choice of locations.
There were a number of issues, sometimes at conflict with one-another, that caused this failure. Below is a listing of some of the problems that were encountered.
The original Goal for the 10 Megawatt/Year Millennia Thin-Film Factory was to supply a Pilot 10 Megawatt "Solar Farm" in the Nevada Desert (planned for an eventual 100 Megawatt System), under a Contract from the "Corporation for Solar Technology and Renewable Resources (CSTRR) and the U.S. Dept. of Energy. The Nevada Site was chosen due to the high Irradiation Levels, and the inexpensive "desert" Land. A "Solar Enterprise Zone" (SEZ) was declared, and various Government Agencies (State and Federal), signed onto the Program.
The "CSTRR" organization had been previously set-up (1995) in Nevada to promote the use of this "Green/Renewable" generated Electrical Power. The President of CSTRR was a Ms. Rose McKinney-James, a long-term Nevada Public Service Employee and active in local Democrat politics. (She was also running for Lt. Governor of Nevada).
Another justification for the active Nevada State interest in the Solar Farm concept was that President Clinton had radically scaled back Nuclear Testing at the Nevada Site, displacing 160 employees. In 1994, U.S. Senator Richard H. Bryan (D-NV) introduced Legislation that would create "new" jobs at the Site by shifting the emphasis from the former Nuclear Testing over to Solar Power Generation. Ms. McKinney-James had been on Senator's Bryan's Task Force investigating the feasibility of the Solar Farm Project, and the formation of CSTRR.
During this same time-period (early '90's), Democrat President Clinton was promoting his "Million-Roof" Program for Solar Energy and Vice President Gore was calling for Federal Tax Credits for Homeowners using Solar Energy. President Clinton's "Energy Policy Act of 1992" encouraged Solar Power, especially for Government Buildings. He also signed an Executive Order "12902" (1994) directing the U.S. Dept. of Energy to "make it happen".
Additionally, the local Public Utility, Nevada Power, had a new program where Homeowners could "buy" the more expensive "Green/Renewable" generated Electrical Power for their homes, if they were willing to pay the additional amount. Justification for this "Green/Renewable" Homeowner choice, was a Nevada Power Marketing Survey that indicated that "85% of ratepayers wanted a renewable energy program, and 25% would pay more for cleaner electricity".
NOTE: See the comments below concerning the validity of this Marketing Survey.
There were other forces at work pushing the Nevada Site along, including Trade Unions (a local AFL-CIO official was on the CSTRR Board of Directors (Mr. Claude "Blackie" Evans), along with a number of other local Political characters.
The bottom line is that in 1995, Nevada was being prepped, from a number of angles, to be the first, large-scale "Solar Farm" test Site, whether it actually made any sense or not.
There were three primary Market Targets for the Nevada Solar Farm Test Site generated Electrical Power:
1-The Federal Government
2-Local Native American ("Indian") Communities
Since the direction for the development of Solar Power was "coming from the top", (Clinton's Energy policies), the Federal Government was a natural target Market for this expensive Power. They "had" to cooperate.
The Local Native American Community Market was just another off-shoot of the Federal Government. The justification for them participating in the purchase of this Solar Power, (paid for by the U.S. Government, not the Native American's), was that it would make their Communities more "independent" since they could generate their own Electrical Power. Again, just another Marketing justification for this Program.
The third primary Market, the Public Utilities, were taken care of with the forced Purchase of the Site's Power with the passage of Legislation "requiring" the Public Utilities to purchase this expensive Power.
An Honorable Venture, but Based on "Fluff:
The creators of this Program, justified its existence by artificially creating Buyers and "creating" Markets by Legislation. Also by using faulty Marketing Surveys to indicate a larger Market than was actually present.
NOTE: I mentioned previously about a Nevada Power Marketing Survey that demonstrated that the Public would pay more for "Green/Renewable" Energy. It was later learned that despite an "overwhelming" public approval for "Green/Renewable" Energy, only 400 Customers, about "0.08%, of Nevada Power's total Customer Accounts eventually signed up to pay more for "Green/Renewable" Power for their Homes.
Continuing with the "Marketing" fluff that was self-generating the justifications for this Solar Site, the Federal Government signed "non-Binding" Letters of Intent (from the U.S. DOE, EPA, National Park Service, U.S. Army, Air Force) to buy this Solar Farm Electrical Power. The "Letters of Intent" from U.S. Government Agencies amounted to approximately 72 Megawatts of Solar Power, starting with the 10 Megawatts from this initial Solar Farm Site.
NOTE: An example of faulty "Marketing Justifications" is that while the National Park Service signed their Letter of Intent to purchase the Solar Farm Power, there was no practical way to connect the various Federal Parklands to this specific Solar Generating Station due to their spread out locations. It would appear that someone in "Marketing", looked at the National Park Service annual Electrical Power use, then figured out that "Parks" were "Green" and were a natural target for Solar Generated Power. How that Power was to get to the Parks was something that was not apparently considered. If the Solar Farm pumped its Power into the Public Utility Grid, a claim could be made that the National Park Service was "using" Solar Farm generated Power. The only actual "connection", however, was that they were going to forced to pay higher Electrical Power Rates that were put into the same Power Pot as every other Public Utility Customer. They were going to use more "Green" (money) to pay for "Green Energy".
Enron Enters the Picture:
As a response to CSTRR's 1995 Request for "Solar" Proposals (and its receipt of a $3 million Grant from the U.S. DOE, "to make it happen"), Enron Corporation of Houston, TX, already familiar with the re-Sale of Electrical Power and very close to the Clinton Administration, jumps into the pot and buys a 50% interest in Solarex from Amoco.
In 1997, as Enron is building the new Millennia Thin-Film Factory in Toano, VA, Ms. McKinney-James/CSTRR, convinces the Nevada Legislature to require Public Utilities (Electrical Utilities) to purchase a portion of their Generated Power from "Green/Renewable" sources. The stage was being set for not just the construction and operation of the largest Solar Farm in the world, but also the requirement that its generated Power "had" to be purchased, again, whether it made any sense or not.
NOTE: The Enron Solar Farm profitability numbers were based on a "30 year" payback period and required the Federal Agencies to sign a Contract to purchase this Solar Farm power for that long period. Apparently the fact that Federal Agencies, by Law, cannot sign Contracts for periods over "10 years" was not considered by the Marketer's of this Program. This slip-up caused the U.S. Dept. of Energy to later withdraw their commitment to purchase this Solar Farm generated Power. The Enron "model" for its payback, was based on an 8¢/Kilowatt Hour re-Sale of the Electrical Power generated at the Site, over a 30 year period. To accept the U.S. Government's requirement for only "10 year" Contacts, they estimated that the 8¢/Kilowatt Hour re-Sale Price would rise by at least 25%. This further reduced the viability of the Project.
Additionally, during this same time-period, Deregulation of Public Utilities reduced in many areas, the Cost of traditionally generated Electricity so the higher Cost of Solar Generated Power was further amplified. Las Vegas Casinos which are somewhat Power Hungry with Lighting and Air Conditioning, operate on a "for-Profit" basis and probably do not have much concern about "Green/Renewable" Energy sources. When Deregulation began in 1996, these large Electrical Power Customers could shop for their Energy supplies from whomever offered the best deal. The Solar Farm Site could not compete.
Federal Regulations also demanded that the Government purchase its Electrical Power from the "least expensive source of that energy". Despite all of the emphasis on "Green/Renewable" Energy promotion, including President Clinton's '92 Energy Policy Act and Executive Order, the Federal Regulations were not changed to actually accept the realities of this particular Solar Farm Site.
-Higher Cost per KwHr.
-Higher Up-Front Investment Cost
-Private not State Owned
-Requirement for a longer 30 Year Purchase Contract
To justify the higher Cost of the Site's, Solar Generated Power, Ms. McKinney-Rose (CSTRR President) stated that "low rates for conventional energy are deceptive, because they do not consider externalities, such as the cost of cleaning up pollution caused by fossil fuels, a cost that does not exist with solar". Again, a justification for the Project, based on faulty Marketing and Opinion, not Facts.
Another "minor" fact concerning the primary Federal Government Market for the Site's Solar Power, was that Federal Regulations required the Federal Government to purchase its Electrical Power from Approved local "State" Utilities. The Nevada Solar Farm Site was a Privately Operated Project, funded with both Private (Enron) and U.S. Government Funds. It did not qualify as an "Approved" Supplier of Electrical Power to the Federal Government.
To further complicate the CSTRR situation in managing the Project, in 1996 it chose to request a Tax-Exempt Status from the Federal Government to help reduce its operating Costs. The IRS approved their Tax-Exempt request and then CSTRR attempted to offer Tax-Exempt Bonds to help finance the high up-front Cost of Solar Farm Sites. They were apparently unaware that during the time-period of their Tax-Exempt request, the IRS was changing its Regulations on Tax-Exempt Organizations and the new Rules forbid Tax-Except (Alternative Energy) Organizations from offering Bonds. This eliminated a major source for revenue.
President Clinton's highly touted "Million-Roof" Solar Program, which committed the Roofs of "20,000 Federal Agencies", came with no Funding.
Again, a considerable amount of the justification for the Nevada Solar Farm Project was based on "fluff".
All of these "Market" conditions which appeared to favor the success of the Nevada Solar Farm, which was the key-stone of Enron's Solar Power re-Sale Program, further justified the building of the Toano, VA Millennia Thin-Film Silicon Factory. Additionally, Present Clinton and Vice President Gore, as well as their Representatives, were promoting the Kyoto Protocol that was supposed to reduce Greenhouse Gas's produced by the largest Industrial Countries. (Excepting the especially "dirty" Countries such as India and China). The Kyoto Protocol would have pushed up the Costs of traditionally generated Electrical Power (Oil and Coal) due to the "up the Stack" Gas Emissions, and artificially made Solar and Wind Generation more competitive.
The Bottom Line on the Enron Venture into Solar Energy Production and the building of the Toano, VA Millennia Thin-Film Factory, is that the entire concept was based on:
1-Faulty Marketing in Nevada that created a false impression of Solar Energy.
2-The Public's presumed desire to Purchase/Fund "Green/Renewable" Energy.
3-Political, Environmental and Labor Groups that pushed for the Nevada Solar Farm Site for their own needs.
4-Federal Government Policies (President Clinton and his Representatives) that promoted Funding of Projects based on their value for Public Opinion/Campaign Contributions rather than actual Commercial Viability.
5-Limited Recognition of existing Regulations/Laws that needed to be changed to allow the purchase of the Site's Solar Energy Production.
Other Enron Solar Projects:
Enron, during this same time period, was also negotiating on a 50 Megawatt Solar Farm in Rajasthan, India and a 4 Megawatt Solar Farm in Hawaii (Hawaiian Electric).
In 1996, they signed a non-Binding Letter of Intent with Misawa Homes Company, Ltd/MSK in Japan, to provide Millennia Solar Modules to Misawa pre-Fab Homes (40,000 Homes/Year). MSK was a long-term Solarex Distributor in Japan. (Apparently switched to BP/Solarex PolyCrystalline Solar Modules in 1999, as shown on the Misawa "Hybrid" model pre-Fab Home).
A 50 Megawatt Solar Farm was also planned in Mires, Crete (Greece Public Power Corporation). (Capital Costs were expected to be approximately $18 Million, with $10 Million funded from the European Union and Greece). This Farm was to be completed by 1999 with Electricity Rates of 8.5¢/KwHr.
The Final Blow for the Millennia Thin-Film Factory:
In 1998, BP bought Amoco and then purchased the Enron portion of Solarex for $45 Million in 1999. This officially ended the "Solar Power re-Sale" concept that was promoted by Enron.
Since the Millennia Thin-Film Factory was operating by then (approximately 7 of the scheduled 10 Megawatt Production), some creative Marketing was required to utilize the Solar Modules that were being produced from this Factory. The original design for this Solar Module, was in an unframed, Plate format, to be Framed and Installed at the Solar Farm Site. Since there was no Market for Thin-Film "Raw" Plates, Framing was added as well as other traditional Parts to enable the Millennia Solar Module to enter the traditional Solar Module Market.
-The problem was that, due to the Double-Glass Format, it was extremely Heavy (34 pounds/45 Watts compared to 12 pounds for the typical 50 Watt Crystalline Solar Module). Since the "normal" Solar Module Market in the U.S. relies on shipping by UPS/FedEx, this extra weight added to the Shipping Costs. (Except for very large Projects where the heavy Thin-Film Solar Modules could be shipped by Common Carrier Trucking).
-It was also considerably larger than a Crystalline Solar Module. (26" x 48"/45 Watts compared to 20" x 38"/50 Watts for the Crystalline type).
-Its Power Density was lower than for Crystalline. The Millennia 26" x 48" Size (45 Watts) is about the same size as the BP-SX-75 Solar Module with its 22" x 47" Size (75 Watts).
-Thin-Film Silicon Solar Modules still suffer from the bad-press of the "Stabilization Period" where it loses Power and then Stabilizes.
-Even though the Millennia Thin-Film Solar Module was rated/sold, based on its "Stabilized Power", its Warranty period of "10 Years/80% Power Output" was compared to the normal 20 Year Warranties for Crystalline Solar Modules.
Thin-Film Silicon Solar Modules were originally intended to be a much lower-Cost method of Production Solar Electrical Energy. Additionally, the original Enron concept was that their Solar Farms would pay for the high, up-Front Investment Cost of building a Thin-Film Silicon Factory, by charging the Customers a premium of almost twice the KwHr Cost of traditional Oil/Coal/Nuclear Generated Electrical Power, over a period of years, with a declining Power Cost as the long-term Contract matured. When the "Solar Farm" Power re-Sale concept faded, the Millennia Thin-Film Factory was left with a high-Output Production, but a very expensive, impractical Solar Module Product. Its only Market Target left was to compete into the same Markets as Crystalline.
Complicating the Millennia Factory's early Production and its achieving its targeted Solar Module Efficiency and Production Goals, many of the original R&D Personnel from the former Solarex Newtown, PA Thin-Film facility (0.5 to 1 Megawatt Production), would not relocate to the new Toano, VA Thin-Film Solar Module Factory. This left a considerable void in its ability to Scale-Up to meet the required Goals from Newtown's standard Thin-Film 12" x 12" Plate, to the Toano/Millennia 26" x 48" Plate.
While the Sale Prices of the original Millennia Thin-Film Plate are not known, (as was to be sold to the Enron Solar Farm projects), the Published Retail Prices for the typical, Framed Millennia Thin-Film Silicon, 43 Watt Solar Module was in the $5.25/Watt range. This compares with $4.00/watt for Crystalline Solar Modules. (With Internet Prices down as low as $3.50/Watt).
To assist with the restructuring of the Millennia Thin-Film Solar Module Marketing direction, a Laser Scriber was added to the Millennia Production Line that burned away Opaque Strips on the Thin-Film Surface to allow the Solar Module to be "semi-Transparent". This Laser Equipment was added too late in the game for the successful Marketing of this Solar Module type to Building Designers. This Product-Line was called the "Powerview Semi-Transparent Photovoltaic Module".
After the purchase of the Enron portion of Solarex for $45 Million, BP was successful with several large, International Projects using the Millennia and PowerView Thin-Film Solar Modules. These included the following:
100 kW (2,800, 43 Watt Modules):
Suitland Federal Center (U.S.)
43 kW (1,400, 43 Watt Modules):
BJ's Wholesale Club (U.S.)
Centre for Environment and Technology (Germany)
10 kW x 150:
BP Connect (Spain)
Viebrock Flats (Germany)
Sol 300 (Denmark)
IKEA Office (Sweden)
An interesting comparison can be made between the type of Projects that Enron went after (typically State or Local Government Funded) and those that BP was awarded with essentially the same Thin-Film Product. Aside from the BP Gas Stations (Spain), most of the BP Projects were based on "Designing" Solar Arrays into new Buildings and by working closely with the Designers of the Projects. The "need" for the Solar Power for the Building was established by the Building's Designers, not some "feel-good" desire by a Government Agency to Create Jobs, Appeal to the "Greenies", Create Favorable Public Opinion, Raise Campaign Contributions or any of the other non-Market Driven Reasons why the Enron/Nevada Solar Farm Project failed.
The Designers of these Buildings, probably recognizing that adding a large Solar Array to their Buildings would not solve all of their Building's energy needs, at least go into the Project with a single motivation/target in mind. They want to Design/Build a structure that is somewhat self-Sufficient and is Unique. By the time that the Designer is involved, the Funding is already set-up as are the Regulations to allow its Construction. The Designer is not charting entirely new ground with adding a Solar Array, since the Solar Modules or Solar PV Glazing is simply replacing areas/structures that would otherwise be Roof, Window or other standard Building Components. He is trained to be aware of the Structural Requirements for a Roof-Mounted Solar Array, and by working with the Window Manufacturers on a regular basis, he is able to Specify Solar Glazing that meets standard Design Practices.
In other words, the Designer has a good feel for how to design a Solar Array into his Building.
Compare this with the many Motivations/Justifications that revolved around the Enron Nevada Solar Farm Project. Most were Political in nature or were driven on by an ever-increasing reliance on "make it work", regardless of Viability or Cost. While the original Goal, to produce and re-Sell "Green/Renewable" Solar Power was an honorable one, the System that created the Program was faulty and was based on Opinions, not Facts.
The concept of re-Selling this type of Power at a higher Cost/Price makes sense, IF the normal Energy Market is willing to accept it. However, as described herein, the Project was based on the Creation of Markets through State and Federal Legislation and the Misinterpretation of Marketing Surveys and the Requirements for Federal Energy Procurements.
The difference between the two Markets, "Designers" vs "Government", is that the Building Designer has a more specific, targeted Motivation/Reasoning behind his decision to included a Solar Array for this project and has done his Homework to justify adding Solar to his Building Design.
Robert J. Mulligan
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