Subscribe to BusinessWeek

Avi Brenmiller could hardly have been more pleased with President George W. Bush's newfound love affair with solar energy as outlined in the State of the Union address last month. Brenmiller, chief executive of Israel's Solel, has been patiently waiting for nearly a decade for a major breakthrough that would focus attention on his company's method for harnessing the sun's energy.



Solar energy in general and Solel in particular have long depended on legislation that grants tax credits for electricity from renewable sources. California and other states have passed laws that require a higher portion of electricity to come from alternative-energy sources. But it's not just increased attention from the U.S. government to alternative forms of energy that has made Brenmiller upbeat.



"Our technology is already competitive with electricity produced at natural-gas power plants in California," claims the 53-year-old mechanical engineer. According to the Israeli company, the price of producing a kilowatt hour of electricity in California using its technology now stands at about 10 cents -- that's on par with the cost of electricity at a newly constructed gas plant, based on the current natural-gas prices.



AHEAD OF THE GAME.

When you factor in oil prices hovering above $60 a barrel, Brenmiller now believes demand for Solel's solar-thermal energy technology is about to take off.



Solel uses a method known as solar trough, which involves glass, parabolic-shaped collectors that are placed in rows and track the sun's movement during daylight hours. The collectors concentrate sunlight on to steel pipes that contain a heat-transfer fluid. That fluid is pumped through heat exchangers to generate steam of up to 400 degrees Celsius, which in turn powers a turbine to produce electricity.



"They've currently got the only solar-thermal technology that has been demonstrated in power plants and is actually producing electricity on a commercial basis," says Amit Mor, CEO of Eco-Energy, an Israeli based energy-consulting firm. Initially developed by Solel's predecessor, Luz, the technology has been powering nine plants in California's Mojave Desert.



SURGE IN INTEREST.

The power plants have been in operation for 17 years and provide 350 Mw of electricity. In 1991, Luz filed for bankruptcy protection, and its assets were acquired by a group of Belgian investors interested in furthering its technology. But with low energy prices through much of the 1990s and early this decade, the Bet Shemesh [Israel]-based company made little headway. Most of its $2 million to $4 million in annual revenue came from replacing the high-tech collectors at the California plants.



Throughout, the Israeli firm kept busy dramatically improving the efficiency of the heart of its technology, its heat-collection element. The investors have ponied up over $30 million over the past decade. The new generation of collectors is 50% more efficient. "Within five years, we'll bring the price of producing electricity down to 6 cents to 7 cents per kilowatt hour," predicts Brenmiller. At that price, he believes solar thermal energy could change the entire energy picture in many regions around the world.



In the past few months Solel has witnessed a surge in interest in its technology. On Jan. 10, it announced a $12 million deal to supply solar collectors for a power plant being built by Solargenix Energy in Boulder City, Nev. The 64-Mw facility is the largest solar project in the past decade.



CALIFORNIA GOLD.

The Israeli company is also in negotiations for large-scale projects in California, Spain, and Israel. California is seen as a key market for the company as by law renewable energy must account for 17% of all electricity in the state by 2017. California's Governor Arnold Schwarzenegger supports increasing the requirement to 30% in 2020. This is expected to translate into billions of dollars of projects in the coming years.



Brenmiller foresees tremendous potential in other Sunbelt states like Nevada, Arizona, New Mexico, and Texas, where there's growing interest in solar technology.



Solel is also eyeing Spain, where the government has announced one of Europe's most ambitious renewable-energy programs. Brenmiller says he hopes to close several deals in the next few months. Under a new law that went into effect last year, Spain is subsidizing electricity produced at new alternative-energy plants.



FUTURE IPO?

Back in Israel, the National Infrastructure Ministry has approved plans for a 100-Mw solar-power plant at Ashalim in the southern Negev Desert. "The solar thermal technology could meet a substantial portion of Israel's electricity demands," says Eco-Energy's Mor. A recent study by his consulting firm found that Israel could produce 2,500 Mw -- or nearly a quarter of its current demand -- from solar energy by 2025.



Solel expects the increased interest in its technology to lead to an eightfold rise in revenues, to $30 million this year, and more than $100 million in 2007. It's already in the process of hiring dozens of new engineers to meet the growing demand. Solel has already set up subsidiaries in the U.S. and Spain but hopes to keep research and development at its Israeli facility.



Moreover, there are plans for an IPO in 2007 if the company's upbeat projections come to fruition.



PLENTY FOR EVERYBODY.

So far, Solel has the market largely to itself as it has the only proven solar thermal technology currently available. However, Germany's Schott AG, which until recently supplied the Israeli company with the high-quality specialized glass used for the collectors, is planning to enter the field. Other companies are also said to be developing similar technology.



But Brenmiller doesn't seem the least bit concerned about possible competition -- he expects explosive growth in demand in the coming years to provide enough to go around.