SoCal Edison to Build 2nd Solar Plant in Desert : Energy: If the facility proves commercially practical, it may be the model for others capable of providing power for up to 200,000 homes.

Using a technology that stores energy in molten salt, Southern California Edison and two other California utilities will announce plans today to build the world’s most advanced solar power plant in the Mojave Desert near Barstow.

If it proves commercially practical, Solar Two--to be constructed at the site of an earlier Edison solar plant that just missed being profitable--would be the model for larger plants capable of providing enough energy to light 100,000 to 200,000 homes.

Edison is moving forward with the experimental, $39-million plant after deciding against an investment in troubled Luz International Ltd., the Westwood-based company that is the largest private solar-power producer in the world.

Squeezed by competition in the energy market from fossil-fuel prices far lower than anyone had predicted, Luz only last week went through a wrenching change of management. The firm--under an admitted threat of bankruptcy--recently has shut its manufacturing facilities and laid off half its work force.

Edison buys all of Luz’s energy production and looked closely over the past six months at the idea of acquiring or otherwise supporting the company, according to William von KleinSmid, program director for renewable and alternative projects at Edison.

But the utility concluded that its new molten salt technology had a better chance of commercial success than Luz’s newest plants, which store energy in oil, a less efficient medium.

Indeed, Edison believes that the Solar Two design could compete with conventional power plants--without the help of tax credits or other government support--by the end of this decade. The experimental plant would be jointly funded by Edison, the Los Angeles Department of Water and Power, the Sacramento Municipal Utility District and the federal Department of Energy.

“I’m optimistic that if Solar Two is successful, down the road a solar plant could look better to us than other energy options, such as updating a fossil-fuel power plant,” Von KleinSmid said.

In part due to dwindling government support, renewable energy companies of all kinds are having a tougher time than ever competing with fossil fuels in the energy marketplace.

Environmentalists and renewable energy producers have fought the deterioration of federal and state tax credits, research funding and other government supports, contending that the economics of energy production remain skewed in favor of fossil fuels.

But now, advocates say the future of alternative energy--particularly solar power--lies in arrangements such as the one Edison contemplated with Luz, in which the financial might of big utilities can be harnessed to the entrepreneurial spirit of smaller firms.

“Photovoltaics and thermal solar both require some sort of participation by utilities, maybe as a banker if not an owner,” said V. John White, executive director of the Sacramento-based Coalition for Energy Efficiency and Renewable Technologies, or CEERT, which represents alternative energy businesses.

“Tax credits played a big role, particularly with wind and solar,” White said. “But when we try to bring these in on a large scale, the need for capital and the obstacles to companies in the regulatory scheme are formidable.”

To build plants, the smaller energy companies must seek short-term, high-interest construction loans and then find investors willing to take a long-term risk. Utilities, by contrast, have access to cheaper financing by selling bonds.

Solar plants, in particular, initially cost more to build than fossil-fuel burning plants, driving up the need for capital. The Solar Two plant is feasible for Edison and its partners, White said, “because they had 12% money for 30 years.”

Efforts to team up independent energy producers with major utilities could face regulatory hitches, however.

One of the major criticisms of Edison’s now-scuttled merger with San Diego Gas & Electric Co., for instance, concerned its dealings with Mission Energy, an unregulated sister company from which Edison purchases electricity. Merger opponents accused Edison of giving Mission more favorable terms and conditions than other potential suppliers of electric power.

White and others believe that a way must be found to overcome regulatory constraints and financing problems--particularly since the small, independent entrepreneurs have been the staunchest advocates of renewable energy.

“Luz or other small companies--the entrepreneurs, the wildcatters--are the ones who have advanced the technology,” White said. He has called for talks between state regulators, the utilities and private companies.

Though Edison declined to invest in Luz, utility officials want the firm to have a future.

“I hope they survive,” Von KleinSmid said. “They are a real gutsy outfit.”