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Brightsource IPO: 6 reasons to invest in solar giant

BrightSource Energy filed for a long-awaited IPO last week. The company has made several huge bets on a fledgling form of solar power, and they’re hoping investors will help finance the costs. Here are 6 reasons to invest in the Brightsource IPO:

1) Betting on solar thermal. Brightsource’s technology has more in common with traditional power plants than the solar panels most of us are familiar with. The company plans to cover swaths of desert land with giant, computer-controlled mirrors that will concentrate sunlight on a “solar receiver.” That receiver will heat water, which will, in turn, power steam turbines to generate electricity.

2) Revolutionary scale. Brightsource has the land and ambition to truly revolutionize the way California gets its power. As it stands, California gets just 1 percent of its power from the sun, according to GreenProphet.com. If Brightsource is able to develop all 110,000 acres of its land throughout the Southwestern U.S., it has the potential to supply 13 percent of California’s energy needs every year.

3) One word: “Ivanpah.” BrightSource broke ground on its massive 392-megawatt Ivanpah Solar Electric Generating System in October. The project’s scale is daunting. When construction wraps up in 2013, Ivanpah should nearly double the amount of commercial solar thermal electricity produced in the U.S., and it’ll yield enough juice to power more than 140,000 homes in California.

The project is currently on hold pending a U.S. Fish and Wildlife Service review of the complex’s threat to an endangered desert tortoise. Brightsource is optimistic, though, that the delay won’t threaten Ivanpah’s 2013 target completion date.

4) Heavyweight investors. You can often judge the quality of an investment by who laid down cash early, and Brightsource has gotten some ringing endorsements. NRG Energy, Inc.’s (NYSE:NRG) chipping in $300 million for the Ivanpah project, and Google’s investing another $168 million. Even the U.S. Department of Energy’s in the game. The agency is guaranteeing $1.6 billion in loans to Brightsource to see Ivanpah through completion.

5) By way of executive order. When California Governor Arnold Schwarzenegger signed Executive Order S-14-08 in 2008, the solar industry went mainstream overnight. The rule stipulates that California must get 33 percent of its energy from renewable resources by 2020. Better yet, the requirement doesn’t count nuclear power and hydroelectric power as “renewable.” That means the push for solar and wind energy is greater in California than anywhere else in the country. Solar producers like Brightsource are big winners in the deal.

6) The bottom line. Brightsource has a long way to go before it’s profitable. The company generated just $13.5 million in revenue last year. It spent $71.63 million during that same period, per Reuters. Still, there’s a lot of work in the pipeline that could add up to big profits down the road. All told, the company “has $4 billion of revenue opportunity for us through sales of our systems,” most of which will come through 14 power purchase agreements California energy companies PG&E and SCE. Brightsource won’t be rolling in the green anytime soon, but barring any other tortoise-related problems, its future definitely looks bright.

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Renewable energy industry growth led by China; U.S. tumbles

While I am, for the most part, an advocate of free markets, I don’t believe energy policies should be set by private corporations. The United States government needs to take an aggressive role in securing a steady supply of energy for the country in the years to come. There is no economic growth without an affordable and uninterrupted supply of power.

And it’s increasingly looking like affordable power is a thing of the past even as the U.S. falls behind foreign countries in investing in renewable energy sources. Germany toppled the United States to become the second-largest investor in renewable energy in 2010 according to new research from The Pew Charitable Trusts. Both Germany and the U.S. lagged China, where the market for renewable energy hit record levels of $54.4 billion. Germany invested $41.2 billion in green energy and the United States fell to third, investing $34 billion in solar, wind, biofuels and other sources of renewable energy.

“The clean energy sector is emerging as one of the most dynamic and competitive in the world, witnessing 630 percent growth in finance and investments since 2004,” says Phyllis Cuttino, director of Pew’s Clean Energy Program.

Cuttino credits foreign governments with spurring spending in alternative energy industries. “Countries like China, Germany and India were attractive to financers because they have national policies that support renewable energy standards, carbon reduction targets and/or incentives for investment and production and that create long-term certainty for investors,” she says.

The Trust warns that global energy demands are expected to grow by 35 percent over the next 25 years, and that could lead to significant geopolitical instability as oil supplies peak and nuclear power gets put on the back burner in the wake of the 9.0 Tōhoku earthquake that struck Japan on March 11.

Globally, governments and investors around the world poured $243 billion worth of finance and investment into green technology in 2010. That was up more than 30 percent from 2009. The fact that Germany, a country with a population that’s almost four times smaller than the U.S. invested more in clean energy than the United States in 2010 is alarming.

The Chinese and German economies are moving toward energy independence – a fact that will insulate their jobs and growth in the event of an oil shock or major disruptive events in the Middle East. Investments in small-scale solar installations in Germany and Italy grew by 100 percent last year. Meanwhile, clean energy investment in the U.S. climbed 51 percent, but the country still fell to third place among G20 members just a year after China toppled the U.S. as the global clean energy superpower.

“With aggressive clean energy targets and clear ambition to dominate clean energy manufacturing and power generation, China is rapidly moving ahead of the rest of the world,” according to the Pew report. “In 2010, it accounted for almost 50 percent of all manufacturing of solar modules and wind turbines.”

The U.S. needs to get aggressive to ensure the country’s economy isn’t at the whim of the price of a barrel of oil or train car full of coal. In 2009, renewable energy sources contributed just 8 percent of U.S. energy consumption. Petroleum, on the other hand, accounted for 37 percent of the country’s energy needs and coal chipped in 21 percent, according to the United States Energy Information Administration.

“The barriers to a 100 percent conversion to wind, water and solar power worldwide are primarily social and political, not technological or even economic,” scientists Mark Z. Jacobson of Stanford University and Mark A. Delucchi of the University of California, Davis, wrote in 2009.

It’s time to pull our heads out of the sand and get serious about the government’s role: ensuring we have the energy to keep our economy from collapsing. That might mean stamping out lawsuits that bog down the construction of solar arrays and wind turbines. It might mean taxing gas consumption and offering tax incentives for adopting renewable energy. It probably means all of the above, but as the turmoil in the Middle East and the disaster in Japan have shown us, we have little choice but to recognize the rules have changed. We need to adapt to stay in the game.

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