The Exchanges

Q them together into a single system. They believed they could beat out the competition. So silicon PV is starting to come on the scene at this point, but describe a little bit about how that looked and what the price was and why there were some advantages around this technology, especially because I know there's, you know, you've essentially got a thermal energy Storage medium associated with these plants, right?

A Yeah, so to think of it in just terms of what it takes to build something dollars per watt is maybe the easiest term for everybody to think of, and then capacity factor, how much energy you can produce. So silicon PV was around nine dollars a watt, and the tower technology we had was around six dollars a watt, dropping to five dollars a lot. So it was more or less half the price, And it could produce, if you put it in the right site, it could produce at around a 30% capacity factor versus more like a 23, 24% capacity factor. So lower capex cost and higher production gave you about a half of the LCOE, if you want to use that term. So about half the cost of delivered energy in the 2005, 2006 time frame.

AI assessment note: “silicon PV was around nine dollars a watt, and the tower technology we had was around six”

Q still generating power, right? So it, by many financial metrics, it's a big success, but fundamentally, I think it sounds like where the disagreement with your board lay was in the next couple of projects, and the questions around, could you build concentrated solar projects after that? So say a bit more about, kind of, how you were thinking about those next projects, and what ultimately happened with the company.

A Yeah, so to close off Ivanpah, Ivanpah had some awkward parts ramping up, but ultimately delivered and ramps and produces power and energy today at about 90% of its original design capacity. One of the next projects was the Ashaleem project in Israel, which was subsidized, smaller, and it was subsidized by the Israeli government, but it was a good project, but I think it was ultimately probably the last large solar thermal project to get built. Once that was done, It's really hard to see where solar thermal is competitive. It's just the, the economics of photovoltaic power have gotten, they've gone down from three dollars a watt in 2009 to 30 cents a watt for a module today. Now it's nudged up to 35 cents or something, but the, that price decline was so extreme, and the price decline of lithium ion storage has been so notable that even with the attributes of molten salt storage, it's hard to see how solar thermal can be Competitive today. That's not to say somebody can't find a new design and a new application for industrial heat or something in the future, but it's likely to emerge, if at all, as a niche where you have strong sun, strong DNI, and some reason to have heat rather than just electricity.

AI assessment note: “One of the next projects was the Ashaleem project in Israel”

Q permitting process? Was there something that they saw from the pilot that helped them understand this was really going to be a good economic deal? I'm curious to understand, like, what did you prove to them to get them to say this? And then secondly, what's in it for Morgan Stanley? Like, at the end of the day, there are other tax equity deals they could do. Why this one?

A Well, that's a good question. So they wanted to get into a new market with solar. There was tax equity for wind. PV was expensive and small. And so, you know, this was really viewed as the next interesting market for tax equity. But what, importantly, what they looked at, when the pilot started to generate steam to spec, I believe that was a condition precedent to Morgan Stanley putting their capital into the company. But remember where we are in time. So this was 2009, and the financial crisis hit. So we bridged, we, I believe we took the capital for Morgan Stanley in 2008, and then the financial crisis hit, and guess what disappeared? All the taxable income of all of the Wall Street banks. So they, their tax equity appetite went from very large to zero, overnight. Everybody was fired from Morgan Stanley, we lost our board member, we lost our tax equity sponsor, and that was the pivotal part of a very complicated financing that disappeared in 2009.

AI assessment note: “they wanted to get into a new market with solar... pilot started to generate steam”

Q think, you know, in some fairy tales we'd love to say, and then they all owe Tapley ever after, but let's get into what it was like doing construction, because that's not quite how it was, right? Maybe we can start by talking about some of the, some of the heart-stopping moments you had related to some of the environmental challenges that started coming in as you're constructing this site.

A Yeah, so some of the environmental challenges were happening before construction. It was around desert tortoise. So we had to make some concessions through the permitting process. One was to reduce the size of the site from over 4000 acres to 3500 acres. Uh, we also then started and agreed to do what's called a head start program for tortoise, where basically of the, of the eggs that are actually laid, uh, only two percent survive. So we took pregnant tortoise, we found them, and we moved them, we took Eggs, we, and we created this nursery, and we actually inverted those numbers to where over 90% survived when we had them in a nursery, and then we moved them to other lands and other areas that were better habitat. Um, and then we had construction starting. Um, there we had some really interesting, I mean, some things you couldn't even believe. We had a on-site, large tent facility that was a temporary manufacturing We had a facility complete with a robotized automated assembly line where we were going to assemble a 173,000 heliostats because it made more sense to assemble and do the manufacturing on site rather than do it remote and take a fragile facility manufactured piece and run the risk of damaging it. So we've just had mirrors, steel posts, and motors shipped to the site and then assembled in this automated process. We happened to have a brown cover to that temporary, 18 …

AI assessment note: “CEC, California Energy Commission, uh, tried to stop all construction”

Q the permitting front, but as you're doing this, there's really a gathering storm on the horizon when it comes to some shifts in the solar market, and specifically the cost of silicon PV. So talk a little bit about When and kind of how you were observing the cost reductions that were coming through solar PV, and when you started to realize that you might have a cost competition problem?

A So, go back to, when we first started, and I mentioned it was, we were about half the price on an LCOE basis. PV started to make some improvements. The raw silicon was starting to be produced in China, lower input cost, and PV was dropping. By the time you got to 2009, it was down to maybe three dollars a watt. And three dollars a watt became an interesting number. So, That's when the U.S. team started to pay attention and say, you know, this is something that is now, it's been cut in half. It's gone from six dollars a watt to three dollars a watt. Two years later, 2011, it was lower than you could do the next gen of CSP at in just two years. So we started, we had, um, we had a lot of land, we had PPAs, we had development assets, and so the, um, development team basically said we Should consider moving and using all of our development assets for PV, which is a hard thing for a engineering-led technology company to do because you'd like to believe that your design is better, and it takes a lot to say it's not. It's now no longer cost-competitive. And the truth is it wasn't, and so we basically said, let's present data, let's talk about information, let's talk about the price, and let's look at different possibilities. In the end, a lot of the engineering team that was based in Israel and had formed there had a strong belief, as did some of the venture capital money that had inve…

AI assessment note: “By the time you got to 2009, it was down to maybe three dollars”

Q There are some incredible incentives, obviously, particularly in the IRA, and so a lot of folks are looking at, I think, potentially using tax equity as a way to finance So was that easy? Was that hard? Were your Morgan Stanley folks already bought in by the time they were kind of joining the board and knew that they were going to put this tax equity financing together for you?

A Well, it was hard in that we didn't want to, nobody on our side, we weren't going to do it in a faith-based way that we will trust you, Morgan Stanley, to take great care of us later. We said we need to pre-negotiate the terms. So we had to, we had to basically create a framework That was accessible to us and acceptable to Morgan Stanley, but that was a framework around the market that was changing. So, right, you can't, you couldn't just lock in exactly what the terms were because the financing was going to occur 18 to 24 months in the future. So, but we created a framework around it that basically floated based on changes in rates and interest rates so that we were, we knew that it was going to be financeable and acceptable to us and to them.

AI assessment note: “Well, it was hard in that we didn't want to... do it in a faith-based way”

Q Okay, so you've got the financing here together. So you have now Google and NRG providing tax equity financing. You have the DOE loan guarantee, which enables you to get bank debt. Were there any other key sources of financing for this project?

A If you look at the financing structure, you had debt being the biggest component. And then everything else flowed from there. So once you had the debt able to close, which really came down to several things, but a lot of it was Bechtel being willing to stand up and say, hey, if BrightSource goes away, we will make sure the project still gets built. Because Bright, you know, the U.S. government didn't necessarily want to back, even though we were a well-financed startup, we were still a startup. And Bechtel was willing to step in and say, we've got This, which is an interesting position to be in when you're the, the group who's originated the project and the big gorilla is saying, they don't matter. You know, we can do it without them, but it was really important to get the financing. That effectively was Bechtel saying, we're going to help you eliminate that technology risk layer.

AI assessment note: “a lot of it was Bechtel being willing to stand up and say”