David Mills, co-founder, chief scientific officer and chairman of solar thermal startup Ausra, is convinced that solar thermal technology will one day replace coal. “It has to,” he told us at AlwaysOn’s GoingGreen conference earlier today. No other technology, he argued –- including geothermal, nuclear technologies, […]

millsausra.jpgDavid Mills, co-founder, chief scientific officer and chairman of solar thermal startup Ausra, is convinced that solar thermal technology will one day replace coal. “It has to,” he told us at AlwaysOn’s GoingGreen conference earlier today. No other technology, he argued –- including geothermal, nuclear technologies, or even sequestration -– will be ready to offer such a large-scale source of clean power to utilities as quickly. Ausra could, theoretically, supply the majority of grid needs for a state like California, he said; and due to innovations in low-cost energy storage and cooling technologies, could also do it for a price of just 10 cents per kwh. Mills also said the company has gigawatt solar thermal power plants in its sights.

The company just announced a round of over $40 million in financing from Khosla Ventures and Kleiner, Perkins, Caufield & Byers, which we wrote about on Sunday. We asked Mills today what he thinks is the one thing needed to help solar thermal replace coal. His answer? Loan guarantees:

Mills: It is difficult for us to get down to low cost because of the financing risk. You’re talking about debt financing for 80 percent of the cost of a project, which typically would be $2 billion or $3 billion. It is a very considerable sum, and the small amount of money, (relative to the capital cost of a plant, he adds), that Khosla and Kleiner Perkins gave us doesn’t cover that at all.

Because we are a newer technology we are charged a higher interest rate — because we are riskier and we are paying around 12 percent for debt. When we are around for a few years, we might get down to 6 percent or 5 percent, which would make a huge difference. The single thing that could help with us would be a loan guarantee. It’s what they may give nuclear plants and what they should give us.

A loan guarantee means the government gives us a guarantee, so that if we defaulted on our loan, to the bank for any reason, they would pay the default. We wouldn’t intend to default – if we did then our company would fail – for us it is not a thing we would do. But the point is that from the bank’s perspective, they will get their money back, and that would mean they could give us a low interest rate. Immediately the costs will drop. And we’re talking about prices between, like, 2 cents and 4 cents a kilowatt lowerhour. That single thing would cause the industry to explode.

There is quite a lot of discussion about loan guarantees at the congressional level in the US.. Many people have been advocating that, but so far such a thing has not passed through Congress. We’re not looking for handouts, but that money would change the landscape. Any new technology that comes in has got to have this system.

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