LUZ International Ltd
Founded: 1979 by Arnold J Goldman
Sector: Solar (Solar Thermal Power Plants)
Business Status: No longer trading (but 'LUZ II' is trading)
Location: California and Israel
Website: www.brightsourceenergy.com
Status 1991:
Berle included LUZ International Ltd., (LUZ) in his appendix on companies who ''might be of special interest to investors searching for environmentally friendly companies'' (Berle, 1991, p.181 and p.184) [1].
Founder:
Arnold Goldman was raised in Israel, and went on to gain a master's degree from the University of Southern California. In 1969 Goldman was involved in the founding of Lexitron, a company which produced one of the first word processors. In 1977, this company was acquired by Raytheon, and Goldman returned to Israel with his family to concentrate on writing his book based on his philosophy on the meaning of life.
In 1979, Goldman founded Independent Household Products, with the vision of starting cities that would be energised by solar projects. He later changed the name to LUZ International, and re-established it as a company that manufactured solar-powered plants. Patrick Francois, a French entrepreneur and businessman based in Israel, asked to join the company after meeting Goldman and seeing his business plan. They each put up $100,000, and raised a total of $950,000 for the first round of equity in the company.
Although Goldman and Francois both held Israeli citizenship, they incorporated LUZ in California in 1979, as this offered a more favourable regulatory environment and avoided potential investor worries over tax issues and currency flow, or Arab boycotts should the company be based in Israel. Goldman and Francois initially targeted small American companies such as textile mills that required steam for manufacturing, but investment in the new technology was often perceived as too risky. Between 1979 and 1983, LUZ lost up to $13.5 million, and at the age of 39 Goldman suffered a heart attack [2].
During this period domestic oil increased from $13 per barrel to over $26, making solar power far more attractive to utility companies, so LUZ adopted a change of approach. In 1983 they agreed a 30 year contract to produce electricity for Southern California Edison (SoCal Edison). LUZ adopted an
approach that involved limited partners who would invest in building the solar plant, whilst Luz would manufacture most of the necessary equipment in Israel. Finally in return for operating the finished facility, LUZ would receive one percent of the revenues.
LUZ opened its first two solar electric-generating systems (SEGS) plants in 1984 and 1985. During this period LUZ's costs for producing a kilowatt hour of electricity dropped from 24 cents to 12 cents, and prices were projected to drop to approximately 8 cents as a result of a $1.2 billion expansion planned
for 1988. By 1989 LUZ had built seven solar SEGS, and was producing 194 megawatts of electricity (enough power to serve 270,000 residents) for SoCal
Edison. LUZ's plants only generated one percent of SoCal Edison's power, but this electricity was provided during the hottest part of the day, when
air-conditioning demand reached its peak.
In 1988 LUZ had revenues of $153 million mainly from the construction and sale of solar plants, however the future of LUZ became uncertain when federal and state tax incentives ended in 1989. President Carter originally initiated renewable energy tax credits in the late 1970's after he called for a 20 percent reliance on renewable energy resources by the year 2000. In 1983 the federal government was offering SEGS backers 25 percent investment and energy tax credits, and the state of California allowed a 13.5 percent energy tax credit. However under the Public Utility Regulatory Policies Act (PURPA) companies like SoCal Edison found themselves in a position where they had to pay approximately 8 cents per kilowatt hour for solar energy, when it could purchase hydroelectric power for approximately 4 cents [3].
PURPA was designed to support the transition to alternative energy, and energy companies were required to spend part of their overall budgets on the building of solar energy power plants. Hence the LUZ approach of providing finance for the building of power plants, in return for energy companies undertaking to purchase electricity from LUZ for 30 years. Falling oil prices harmed federal motivation to support alternative energy projects, and by 1991 LUZ could no longer meet the conditions of the market, and had to declare bankruptcy [4].
By 1990 LUZ had built and installed nine solar power stations in California (in the Mojave Desert). For the tenth project it was hoped that investors from previous projects would continue as before, however LUZ could not guarantee the same fiscal conditions as were offered on previous projects. In addition LUZ had also been exempt from property tax, and this exemption also ended in 1991. In a 2008 interview Goldman recalled "in his last few minutes in office governor George Deukmejian vetoed the legislation [to extend their property tax exemption] and this made it impossible for us to
finance the 10th project. Congress finally passed the exemption but by that time LUZ had run out of money. In California at the time we employed about 2,500 people. That alone generated a lot of income and tax revenues"[5].
Status 2010:
Goldman went on to develop other entrepreneurial ventures in medicine and the internet. Goldman was also one of the founders of Arotech Corporation (originally founded as Electric Fuel), which by 2007 had a market capital of $45 million. In 2004 Goldman returned to clean energy and founded LUZ II, a subsidiary of BrightSource Energy Inc. of Oakland California, which is also owned by Goldman. Fifteen members of the founding team for LUZ II came from LUZ, most of whom were research and development engineers. They initially worked on a voluntary basis, in addition to their own paid jobs. After a financing round in 2006 led by US Venture capital funds, the company's volunteer staff became paid employees, and most of them resumed the roles they
filled in LUZ I.
According to Goldman, LUZ II's technology was newer and more advanced (though not invented by LUZ I or LUZ II). The company had developed plans to build a solar energy field with a production capacity of 400 megawatts - more than the combined capacity of all of the nine plants that had previously been built by LUZ I. In 2007 LUZ II filed an official application (through its parent company BrightSource) to build a new solar energy power plant in the Mojave Desert. This was the first application to build a solar power plant in California since 1989, although it can take between three and five years until such a plant would begin operating [6].
In 2009 it was reported that BrightSource Energy had signed the world's two largest deals to build new solar-power capacity. It was projected that a series of 14 solar-power plants will collectively supply more than 2.6 gigawatts of electricity, enough to serve approximately 1.8m homes [7].
In March 2010 the California Energy Commission recommended that plans for LUZ II solar plants be approved after a two-and-half-year review of its environmental impact on the Mojave Desert. The recommendation must still be accepted by the commission board. BrightSource made a revised proposal based on a smaller version of the project to mitigate against damage to several protected plant species on the site. However environmentalists continue to argue that the project will harm rare plants and animals, and will mar the visual beauty of the desert[8].
Sources:
[1] Berle, G. (1991) The Green Entrepreneur: Business Opportunities That Can Save the Earth and Make You Money. United States: Liberty Hall Press.
[2] Weiss, M. J. (1989) Everybody Loves Solar Energy, But..., The New York Times, 24th September, Late Edition, Section 6; Part 2, Page 64, Column 1; Business World Magazine.
[3] Weiss, M. J. (1989) Everybody Loves Solar Energy, But..., The New York Times, 24th September, Late Edition, Section 6; Part 2, Page 64, Column 1; Business World Magazine.
[4] Ankori, M. (2007) Solar Power unto the Nations, Israel Business Arena, 28th October.
[5] Blum, R. (2008) Reaching for the sun, The Jerusalem Post, 12th June, Features Section, p.13.
[6] Ankori, M. (2007) Solar Power unto the Nations, Israel Business Arena, 28th October.
[7] The Economist (2009) The other kind of solar power, The Economist, U.S. Edition, 6th June, Section: Technology Quarterly.
[8] Woody, T. (2010) Major California Solar Project Moves Ahead – Green Blog – NYTimes.com [online].
Sector: Solar (Solar Thermal Power Plants)
Business Status: No longer trading (but 'LUZ II' is trading)
Location: California and Israel
Website: www.brightsourceenergy.com
Status 1991:
Berle included LUZ International Ltd., (LUZ) in his appendix on companies who ''might be of special interest to investors searching for environmentally friendly companies'' (Berle, 1991, p.181 and p.184) [1].
Founder:
Arnold Goldman was raised in Israel, and went on to gain a master's degree from the University of Southern California. In 1969 Goldman was involved in the founding of Lexitron, a company which produced one of the first word processors. In 1977, this company was acquired by Raytheon, and Goldman returned to Israel with his family to concentrate on writing his book based on his philosophy on the meaning of life.
In 1979, Goldman founded Independent Household Products, with the vision of starting cities that would be energised by solar projects. He later changed the name to LUZ International, and re-established it as a company that manufactured solar-powered plants. Patrick Francois, a French entrepreneur and businessman based in Israel, asked to join the company after meeting Goldman and seeing his business plan. They each put up $100,000, and raised a total of $950,000 for the first round of equity in the company.
Although Goldman and Francois both held Israeli citizenship, they incorporated LUZ in California in 1979, as this offered a more favourable regulatory environment and avoided potential investor worries over tax issues and currency flow, or Arab boycotts should the company be based in Israel. Goldman and Francois initially targeted small American companies such as textile mills that required steam for manufacturing, but investment in the new technology was often perceived as too risky. Between 1979 and 1983, LUZ lost up to $13.5 million, and at the age of 39 Goldman suffered a heart attack [2].
During this period domestic oil increased from $13 per barrel to over $26, making solar power far more attractive to utility companies, so LUZ adopted a change of approach. In 1983 they agreed a 30 year contract to produce electricity for Southern California Edison (SoCal Edison). LUZ adopted an
approach that involved limited partners who would invest in building the solar plant, whilst Luz would manufacture most of the necessary equipment in Israel. Finally in return for operating the finished facility, LUZ would receive one percent of the revenues.
LUZ opened its first two solar electric-generating systems (SEGS) plants in 1984 and 1985. During this period LUZ's costs for producing a kilowatt hour of electricity dropped from 24 cents to 12 cents, and prices were projected to drop to approximately 8 cents as a result of a $1.2 billion expansion planned
for 1988. By 1989 LUZ had built seven solar SEGS, and was producing 194 megawatts of electricity (enough power to serve 270,000 residents) for SoCal
Edison. LUZ's plants only generated one percent of SoCal Edison's power, but this electricity was provided during the hottest part of the day, when
air-conditioning demand reached its peak.
In 1988 LUZ had revenues of $153 million mainly from the construction and sale of solar plants, however the future of LUZ became uncertain when federal and state tax incentives ended in 1989. President Carter originally initiated renewable energy tax credits in the late 1970's after he called for a 20 percent reliance on renewable energy resources by the year 2000. In 1983 the federal government was offering SEGS backers 25 percent investment and energy tax credits, and the state of California allowed a 13.5 percent energy tax credit. However under the Public Utility Regulatory Policies Act (PURPA) companies like SoCal Edison found themselves in a position where they had to pay approximately 8 cents per kilowatt hour for solar energy, when it could purchase hydroelectric power for approximately 4 cents [3].
PURPA was designed to support the transition to alternative energy, and energy companies were required to spend part of their overall budgets on the building of solar energy power plants. Hence the LUZ approach of providing finance for the building of power plants, in return for energy companies undertaking to purchase electricity from LUZ for 30 years. Falling oil prices harmed federal motivation to support alternative energy projects, and by 1991 LUZ could no longer meet the conditions of the market, and had to declare bankruptcy [4].
By 1990 LUZ had built and installed nine solar power stations in California (in the Mojave Desert). For the tenth project it was hoped that investors from previous projects would continue as before, however LUZ could not guarantee the same fiscal conditions as were offered on previous projects. In addition LUZ had also been exempt from property tax, and this exemption also ended in 1991. In a 2008 interview Goldman recalled "in his last few minutes in office governor George Deukmejian vetoed the legislation [to extend their property tax exemption] and this made it impossible for us to
finance the 10th project. Congress finally passed the exemption but by that time LUZ had run out of money. In California at the time we employed about 2,500 people. That alone generated a lot of income and tax revenues"[5].
Status 2010:
Goldman went on to develop other entrepreneurial ventures in medicine and the internet. Goldman was also one of the founders of Arotech Corporation (originally founded as Electric Fuel), which by 2007 had a market capital of $45 million. In 2004 Goldman returned to clean energy and founded LUZ II, a subsidiary of BrightSource Energy Inc. of Oakland California, which is also owned by Goldman. Fifteen members of the founding team for LUZ II came from LUZ, most of whom were research and development engineers. They initially worked on a voluntary basis, in addition to their own paid jobs. After a financing round in 2006 led by US Venture capital funds, the company's volunteer staff became paid employees, and most of them resumed the roles they
filled in LUZ I.
According to Goldman, LUZ II's technology was newer and more advanced (though not invented by LUZ I or LUZ II). The company had developed plans to build a solar energy field with a production capacity of 400 megawatts - more than the combined capacity of all of the nine plants that had previously been built by LUZ I. In 2007 LUZ II filed an official application (through its parent company BrightSource) to build a new solar energy power plant in the Mojave Desert. This was the first application to build a solar power plant in California since 1989, although it can take between three and five years until such a plant would begin operating [6].
In 2009 it was reported that BrightSource Energy had signed the world's two largest deals to build new solar-power capacity. It was projected that a series of 14 solar-power plants will collectively supply more than 2.6 gigawatts of electricity, enough to serve approximately 1.8m homes [7].
In March 2010 the California Energy Commission recommended that plans for LUZ II solar plants be approved after a two-and-half-year review of its environmental impact on the Mojave Desert. The recommendation must still be accepted by the commission board. BrightSource made a revised proposal based on a smaller version of the project to mitigate against damage to several protected plant species on the site. However environmentalists continue to argue that the project will harm rare plants and animals, and will mar the visual beauty of the desert[8].
Sources:
[1] Berle, G. (1991) The Green Entrepreneur: Business Opportunities That Can Save the Earth and Make You Money. United States: Liberty Hall Press.
[2] Weiss, M. J. (1989) Everybody Loves Solar Energy, But..., The New York Times, 24th September, Late Edition, Section 6; Part 2, Page 64, Column 1; Business World Magazine.
[3] Weiss, M. J. (1989) Everybody Loves Solar Energy, But..., The New York Times, 24th September, Late Edition, Section 6; Part 2, Page 64, Column 1; Business World Magazine.
[4] Ankori, M. (2007) Solar Power unto the Nations, Israel Business Arena, 28th October.
[5] Blum, R. (2008) Reaching for the sun, The Jerusalem Post, 12th June, Features Section, p.13.
[6] Ankori, M. (2007) Solar Power unto the Nations, Israel Business Arena, 28th October.
[7] The Economist (2009) The other kind of solar power, The Economist, U.S. Edition, 6th June, Section: Technology Quarterly.
[8] Woody, T. (2010) Major California Solar Project Moves Ahead – Green Blog – NYTimes.com [online].