For those readers who missed Green Wombat’s feature story on the solar land rush in the July 21 issue of Fortune - available here at Fortune.com - I reprint below.

The Southwest desert’s real estate boom

From California to Arizona, demand for sites for solar power projects has ignited a land grab.

By Todd Woody, senior editor

(Fortune Magazine) — Doug Buchanan grins with relief when he sees the carcasses. He has just driven up a steep dirt road onto a vast, sunbaked mesa overlooking the Mojave Desert in western Nevada. There, a few feet from the trail, lie the corpses of two steers. A raven perches on one, the only object more than three feet above the ground on this pancake-flat plateau. Cattle, dead or alive, qualify as good news in Buchanan’s line of work. If cattle are present, that means grazing is permitted, and that in turn means that this land is most likely not protected habitat for the desert tortoise.

Buchanan, 53, is scouting sites for a solar power company called BrightSource Energy, an Oakland-based startup backed by Google and Morgan Stanley. The blunt, fifth-generation Californian, who used to survey the same area for natural-gas power sites, knows that the presence of an endangered species such as the tortoise could derail BrightSource’s plans to build a multibillion-dollar solar energy plant on the mesa.

BrightSource badly wants these 20 square miles of federal land on what is called Mormon Mesa. The company was in such a hurry to stake its claim with the U.S. Bureau of Land Management that it applied for a lease sight unseen. That’s an expensive gamble for a startup, given that application fees alone run in the six figures. “I usually like to go out and kick the tires before filing a claim,” Buchanan says, “but there’s a lot of competitive pressure these days to move fast.”

That’s putting it mildly. A solar land rush is rolling across the desert Southwest. Goldman Sachs, utilities PG&E and FPL, Silicon Valley startups, Israeli and German solar firms, Chevron, speculators - all are scrambling to lock up hundreds of thousands of acres of long-worthless land now coveted as sites for solar power plants.

The race has barely begun - finished plants are years away - but it’s blazing fastest in the Mojave, where the federal government controls immense stretches of some of the world’s best solar real estate right next to the nation’s biggest electricity markets. Just 20 months ago only five applications for solar sites had been filed with the BLM in the California Mojave. Today 104 claims have been received for nearly a million acres of land, representing a theoretical 60 gigawatts of electricity. (The entire state of California currently consumes 33 gigawatts annually.)

It’s not just a federal-land grab either. Buyers are also vying for private property. Some are paying upwards of $10,000 an acre for desert dirt that a few years ago would have sold for $500.

No doubt the prospect of potential riches is overheating expectations. But California and surrounding states have mandated massive increases in renewable energy in the next few years. That has led some experts at Emerging Energy Research of Cambridge, Mass., to predict that Big Solar could be a $45 billion market by 2020.

Meanwhile, the land rush is setting the stage for a showdown between solar investors and those who want to protect a fragile environment that is home to the desert tortoise and other rare critters. The Southwest is on the cusp of what could be a green revolution. And the biggest obstacle of all may be … environmentalists.

***

Over the past year a parade of executives bearing land claims have made the trek to a stucco BLM office just off the interstate in the dusty city of Needles, Calif., a 110-mile drive south from Las Vegas. (It’s the town where the late “Peanuts” cartoonist, Charles M. Schulz, briefly lived as a boy; in the comic strip, Snoopy’s brother Spike is a resident.) The Bush administration has instructed the BLM to facilitate renewable-energy projects (along with nonrenewable ones). But Sterling White, the BLM’s earnest Needles field manager, is also concerned about what could happen if they transform the Mojave into a collection of giant power stations. “One of our biggest challenges is the cumulative impact of these projects,” he says.

Nearly 80% of the land that White’s office oversees is federally protected wilderness or endangered-species habitat. That leaves about 700,000 acres for solar power plants, only some of which are near transmission lines. Land leases are handed out on a first-come, first-served basis, but White is also supposed to weed out speculators from genuine solar developers based on loose criteria such as who is negotiating with utilities and who is applying for state power licenses. White has yet to approve a single lease, but he has summarily rejected four because they lie in protected-species habitat.

***

Solar prospectors tend to be as secretive about their land as forty-niners were about the veins of gold they discovered. Most bids are placed by limited-liability corporations with opaque names that conceal their ownership. And no one has been as quick to move into the Mojave - or as tightlipped about it - as Solar Investments.

That entity, it turns out, is Goldman Sachs’s solar subsidiary. The investment bank’s designs on the desert are a topic of intense interest and speculation. Goldman declined to comment. But here’s what we know:

Solar Investments filed its first land claim in December 2006 and within a month had applied for more than 125,000 acres for power plants that would produce ten gigawatts of electricity. Many of the sites lie close to the transmission lines that connect the desert to coastal cities. (Goldman has also staked claims on 40,000 acres of the Nevada desert.)

Nobody expects Goldman to begin operating solar plants. It will probably either partner with another developer or sell its limited-liability company (and its leases) outright. The firm has been making the rounds of solar developers. “The conversation’s been pretty wide-ranging, primarily as an investor interested in financing deals,” says one solar energy executive approached by Goldman. “But there’s clearly an element of interest in our technology.” Goldman has requested permission to install meteorological equipment on its sites and is evaluating “competing technologies, including solar dish systems, power towers, and large-scale photovoltaic arrays,” according to a letter Goldman sent to the BLM in August 2007.

Competitors are lining up behind Goldman, staking claims on some of the same sites in hopes the bank will abandon them. PG&E and FPL, for instance, are in the queue after Goldman on one site. Solel, an Israeli solar company that last year scored a contract to deliver 553 megawatts to PG&E, is third in line behind Goldman on another.

“I view Goldman as a very interesting indicator of things to come,” says Brian McDonald, PG&E’s director of renewable-resource development. “They’re usually ahead of the curve - you can extract a huge amount of value if you get in early.” There’s other smart money here too. A Palo Alto startup called Ausra received $40 million from the elite green venture capitalists Vinod Khosla and Kleiner Perkins Caufield & Byers. Ausra has signed a deal with PG&E and announced its intention to construct a gigawatt’s worth of projects a year.

Most of the power production contemplated for the Mojave will rely on solar thermal technology - the common approach in large-scale generation projects - in which arrays of mirrors heat liquids to produce steam that drives electricity-generating turbines. But a secretive Hayward, Calif., startup called OptiSolar has filed claims on 105,300 acres to build nine gigawatts’ worth of photovoltaic power plants, which employ solar panels similar to those found on residential rooftops. (The company also has applied for leases on 21,800 acres in Arizona and Nevada.) To put those ambitions in context, the biggest photovoltaic power plant operating today produces 15 megawatts. Says OptiSolar executive vice president Phil Rettger: “We have a proprietary technology and a business approach that we’re convinced will let us deploy PV at large scale and be competitive with other forms of renewable energy.”

***

With the prime BLM sites quickly being snapped up - recently the agency temporarily stopped accepting new land claims while it develops a desertwide solar policy - competition is growing for private land. Here, too, the emphasis on secrecy borders on the obsessive. A request to view a piece of desert that is up for sale is treated as if I had asked to visit Area 51.

Waiting outside a roadside diner in southwestern Arizona - I’ve promised not to say where - with BrightSource senior vice president Tom Doyle, I expect to see a weather-beaten farmer come chugging up in a battered pickup. Instead, a pale-green Volvo SUV driven by a physician glides into the parking lot. The doctor, who wishes to remain anonymous, acquired the land two years ago as the renewable-energy boom got underway. “We thought we’d put solar on it - that’s the reason we bought it,” the doctor says as we pile into the Volvo and head into the desert to visit the site. After about five miles we turn off the road and come to a stop in a rocky patch of desert framed by low-slung mountains and buttes. Doyle quizzes the physician about water rights, endangered species, and access to transmission lines before moving out of earshot to talk dollars. The whole process takes only about 20 minutes - the two sides ultimately decide not to do a deal - and then Doyle is on to visit the next potential property.

Such is the land frenzy that farmers in Arizona were paid $45 million for 1,920 acres by Spanish solar company Abengoa so that it could build a 280-megawatt power plant; the land had an assessed value of a few hundred thousand dollars. The company also plunked down $30 million for 3,000 acres in the California Mojave that had traded hands for $1.25 million nine years earlier. That prompted developer Scott Martin to put his adjacent 300-acre parcel - land he had bought only a few months earlier for $457,500 - on the market for $3 million. Also for sale: a $15 million, 3,000-acre tract near Palm Springs, which Martin began shopping around to solar executives like Ausra’s Perry Fontana. When I join Fontana to check out the site, a onetime World War II air base outside the Mojave ghost town of Rice, he says, “I probably get three calls a day from brokers or landowners.” As if on cue, his Bluetooth earpiece lights up with a cold call from a broker peddling some land near Needles.

***

Green energy is not about to get a green light from all environmentalists. “We’re going to challenge these big solar projects, and there’s going to be tremendous environmental battles,” says veteran California activist Phil Klasky, a member of several green groups who helped lead a campaign in the 1990s that scuttled a radioactive-waste dump planned in tortoise territory in the Mojave. “Large solar arrays will have an impact on surrounding critical habitat for the desert tortoise and other threatened species. We have to fight global warming, but just because it’s solar doesn’t make it right.”

The developers are worried about resistance. “I remember the spotted owl,” says Fred Morse, a former Department of Energy official who is a senior advisor to Abengoa’s U.S. operations. The widespread logging of ancient forests, home to the northern spotted owl, set off epic environmental fights in the 1980s and ’90s. As Morse puts it, “The Mohave ground squirrel or the desert tortoise - any one of them could become a cause.”

Solar energy companies may make for less tempting targets than timber barons, but development of the desert has never been attempted on such a scale. The result is that some environmentalists find themselves anguished over which side to take. “We’ve had our share of conflicts over endangered species in this state, no doubt about it,” says Kevin Hunting, a biologist and a deputy director of the California Department of Fish and Game, which enforces the state endangered-species laws. “We’re actively looking to strike that critical balance between the state’s renewable-energy goals and conserving species that are vulnerable. It’s challenging.”

California wildlife regulators, for instance, have peppered Ausra with requests for more biological surveys on the site of a 177-megawatt solar power plant to be built in San Luis Obispo County. The feds could also require Ausra to prepare a plan to protect the San Joaquin kit fox, a process that could take years and shred the project’s economic viability.

Worse for developers, state and federal law require wildlife officials to consider the total impact of multiple projects when weighing whether to approve any individual facility. Next door to Ausra’s solar farm, for example, is OptiSolar’s planned 550-megawatt power plant, which would cover 9 1/2 square miles of potential endangered-species habitat with solar panels. Will the regulators approve one? Both? Nobody knows.

In the meantime, the solar land rush is unlikely to cool down. Which is why Morse wants to keep quiet Abengoa’s $30 million real estate deal. The company is applying to build a 250-megawatt solar power plant on the site, and it may be in the market for more land. “We don’t want to publicize that purchase,” he says, “as the speculators will be coming out of the woodwork.”

When it comes to solar companies, First Solar is the Google of renewable energy. The Tempe, Ariz.-based solar cell maker backed by the Wal-Mart (WMT)’s Walton family has seen its stock skyrocket over the past year, hitting a high of $317 on May 14. (It was trading at $275 Friday.) Now First Solar, which makes “thin film” solar modules, is getting into the utility business, winning approval Thursday from California regulators to build the state’s first thin-film photovoltaic solar power plant. The 7.5 megawatt project - expandable to 21 megawatts - will sell electricity to Southern California Edison (EIX) under a 20-year contract.

While First Solar (FSLR) supplies solar modules to power plant builders in Europe, this is apparently the first time it has acted as a utility-scale solar developer itself. First Solar tends to keep quiet about its projects and did not return a request for comment. But a troll through the public records reveals some details of what is called the FSE Blythe project. The solar farm will be built in the Mojave Desert town of Blythe by a First Solar subsidiary, First Solar Electric. The company paid $350,000 in January for 120 acres of agricultural land in Blythe, providing a tidy profit for the seller, which had purchased the property for $60,000 in June 1999.

Approval of the contract by the California Public Utilities Commission Thursday came on the same day that SunPower (SPWR) announced a deal to build two photovoltaic power plants - a 25-megawatt one and a 10-megawatt version - in Florida for utility Florida Power & Light (FPL). PV plants are essentially supersized versions of rooftop solar panel systems found on homes and businesses. Thin-film solar prints solar cells on flexible material or glass and typically uses little or no expensive (and in short supply) polysilicon, the key material of conventional solar cells.

Most large-scale solar power plants being developed in the United States use solar thermal technology that relies on huge arrays of mirrors to heat liquids to create steam that drives electricity-generating turbines. In fact, there is a solar land rush underway in the desert Southwest as solar developers, investment banks like Goldman Sachs (GS), utilities and speculators of every stripe scramble to lock up hundreds of thousands of acres of federal land for solar power plants. (See Green Wombat’s feature story on the solar land rush in the July 21 issue of Fortune.)

PV power plants, on the other hand, have not been cost-competitive with solar thermal and have been most popular in countries like Germany, Spain and Portugal, where generous subsidies guarantee solar developers a high rate for the electricity they produce. The situation in the U.S. seems to be changing, though, judging by the deals utilties are striking with companies like First Solar and SunPower. Meanwhile, thin-film startup OptiSolar is moving to build a gigantic 550-megawatt thin-film solar power plant on California’s central coast but has yet to sign a power purchase agreement with a utility.

In a sign that solar industry and its political allies are starting to flex some real power, the federal government reversed course Wednesday and announced it would continue to accept new applications to build solar power plants on government land while developing an environmental policy for assessing the projects.

Green Wombat had been off the grid on holiday the past week and so was surprised to log back on to find the mainstream media and blogosphere ablaze over the Bush administration’s supposed move last month to halt big solar power plant projects in California’s Mojave Desert and elsewhere.

“Citing Need for Assessments, U.S. Freezes Solar Energy Projects,” read the headline on The New York Times story about the Bureau of Land Management’s decision to temporarily stop accepting new applications for solar power plants until it studies the environmental impact of industrializing the desert. “How to strangle an industry,” proclaimed Grist, a respected green policy blog about the move. Solar executives and politicians meanwhile slammed the BLM and predicted dark days for renewable energy. “This could completely stunt the growth of the industry,” the Times quoted Ausra exec Holly Gordon.

Problem is, those stories were dead wrong: The feds did not freeze a single solar power plant project currently under review. What was left unsaid, or just briefly mentioned, was the fact that the BLM is continuing to process the 125 solar power plant proposals already in the hopper. Those lease applications cover nearly a million acres for solar power plants that would produce 60 gigawatts of electricity if all are built, which they won’t be. Those projects alone will keep companies like Ausra, BrightSource Energy, FPL (FPL) and PG&E (PCG) busy for years to come, moratorium or not.

“We don’t even like to call it a moratorium,” says Alan Stein, a deputy district manager for the BLM in California. Stein called me on my mobile just as I was about to step into a kayak at Elkhorn Slough near Big Sur. I had spent several months talking to Stein and other BLM officials while criss-crossing the Mojave with solar energy executives for a forthcoming Fortune story and he seemed taken aback by the tone of the media coverage.

But the higher-ups in Washington got the message. “We heard the concerns expressed during the scoping period about waiting to consider new applications, and we are taking action,” said BLM Director James Caswell in a statement. “By continuing to accept and process new applications for solar energy projects, we will aggressively help meet growing interest in renewable energy sources while ensuring environmental protections.”

The head of the solar industry’s trade group, the Solar Energy Industries Association, declared victory. But SEIA president Rhone Resch complained in a statement that, “BLM has only resolved half the problem. They have yet to approve a single solar energy project. Expediting the permitting process is the next step in developing solar energy projects on federal lands.”

He’s right that the process - which is intertwined with California’s extensive environmental review of projects in that part of the Mojave - takes far too long. But developing a desert-wide environmental policy is absolutely essential for huge power plants that in total would cover hundreds of square miles of a fragile landscape home to protected wildlife and rare plants. Otherwise, watch each individual project get bogged down in endless environmental challenges.

What really threatens the nascent solar industry right now is not the BLM. Rather it’s the imminent expiration of the 30 percent investment tax credit that all these solar energy startups and their investors - which include companies such as Google (GOOG) and Morgan Stanley (MS) - are depending on make Big Solar economically viable. Congress has failed several times in recent months to extend the tax credit, which expires at the end of the year. If only solar energy execs and their supporters in Washington could exert the same influence on recalcitrant Republicans as they have on the BLM.

LAS VEGAS - Hard by the Las Vegas airport, the industrial infrastructure of the solar economy is rising in a former furniture factory. Phalanxes of orange robots swivel and dip as they practice assembling components for solar power plants to be built by Silicon Valley startup Ausra.

It’s North America’s first solar power plant factory and it went online Monday when Ausra CEO Robert Fishman and U.S. Senate majority leader Harry Reid, D-Nevada, flipped the switch to start the production line. Ausra’s automated 130,000-square-foot factory is key to the Palo Alto company’s aim of cutting manufacturing costs to make solar energy competitive with fossil fuels.

A large robot picks up 78-square-foot pieces of glass and places them on a conveyor belt so a machine can apply strips of adhesive. Other robots transfer the glass to another line where a dozen bots weld together 53-foot-long steel frames. The completed solar arrays will be trucked to California where Ausra is building a 177-megawatt solar power station for utility PG&E (PCG) on 640 acres of agricultural land in San Luis Obispo County. (To see a video of the robots in action, click here.)

The arrays focus sunlight on water-filled tubes to create steam to drive a turbine. Ausra manufacturing exec David McKay points to where standard-issue boiler pipe will be fed into a machine and treated with a proprietary coating that transforms it into a solar receiver. At peak production the plant will churn out more than 700 megawatts’ worth of equipment year to keep 1,400 solar power plant construction workers employed. “We can produce a lot faster than what we can install,” says McKay.

However, the future of those jobs – and billions in future investments in renewable energy - hangs on whether Congress extends a crucial investment tax credit that the solar industry and utilities are relying on to make large-scale solar power plants competitive with the carbon-spewing variety. The investment tax credit expires at the end of the year and several attempts to pass legislation extending the ITC have failed despite support on both sides of the aisle.

Green Wombat met with the chairman of the Solar Energy Industries Association, Chris O’Brien, last week when he was in San Francisco to get an update on the ITC’s chances. “It’s an election year and it has become part of the political stalemate,” says O’Brien, who heads North America market development and government relations for Swiss-based solar cell equipment maker Oerlikon Solar. “I don’t see an imminent breakthrough.”

The pending demise of the tax credit is “having a significant effect on the development of new business,” according to O’Brien. Solar energy executives, of course, are reluctant to admit that deals are getting dashed, but there’s no doubt the loss of a 30 percent tax credit gives financiers and utilities pause when considering whether to green-light solar power plants that can cost a billion or two to construct.

O’Brien thinks the best-case scenario for the long-term extension of the ITC will come after the presidential election during the lame-duck session of Congress. Otherwise, he says, don’t expect action until around September 2009.

In the meantime, Ausra will keep its robots busy cranking out components for its first California power plant, which is scheduled to start producing green electricity in 2010.

California utility PG&E will buy 106.8 megawatts of electricity from a hybrid biofuel solar power plant to be built by a Portuguese firm in the state’s Central Valley.

The hybrid technology will allow two 53.4 megawatt plants to tap the sun and agricultural waste produced in surrounding Fresno County to generate green energy around the clock, according to San Joaquin Solar, a subsidiary of Portugal’s Martifer Renewables. For PG&E (PCG), 107 megawatts is just enough to keep the air conditioners running for some 75,000 homes. But if the biofuel solar hybrid performs as billed and can be scaled up, it’s a win-win - recycling ag waste - a huge and expensive problem in California - into electricity.

The percentage of electricity to be produced by solar versus biofuel and other details of the project’s design are sketchy. Andrew Byrnes, an executive with Spinnaker Energy - the San Diego company developing the project for Martifer - told Fortune that such information is “confidential” as are images of what the hybrid plant will look like and the identities of the company’s U.S. investors.

Here’s what we do know: San Joaquin Solar 1 and 2 will be built on private land outside the farming town of Coalinga. They will use long arrays of curved mirrors called solar troughs to focus the sun on liquid-filled tubes to produce steam that will drive electricity-generating turbines. That’s a standard solar technology currently operating in California and elsewhere. The biomass component of the plant will use agricultural waste, green waste and livestock manure to create heat that will generate steam.

It appears the biofuel will be used to keep the plant running at night or on overcast days. “The technologies can run simultaneously,” said Byrnes in an e-mail. “And when a cloud passes overhead (and after the sun sets) the solar facility can still generate energy, since the generation process is dependent on heat rather than direct solar radiation.”

While there is a natural gas-solar hybrid power plant under development in Southern California - see Green Wombat’s “The Prius of power plants” - San Joaquin Solar 1 and 2 will apparently be the world’s first biofuel solar hybrid.

Each power plant will each need 250,000 pounds of biomass a year to operate. Finding that fuel shouldn’t be a problem: Byrnes says a study shows that Fresno County alone produces nearly 2 million tons of ag waste annually.

In another sign that technological innovation will drive solutions to global warming and the United States’ energy dependence, technology born of Hewlett-Packard’s imaging and printing research will be used to make more efficient and cheaper solar panels. HP is licensing its transparent transistor technology, which will eliminate the need for mechanical trackers to follow the sun, to a Livermore, Calif., startup called Xtreme Energetics

Here’s how it’s supposed to work: XE’s solar panels concentrate sunlight onto highly efficient solar cells that use a fraction of the expensive silicon found in standard solar modules. A layer of HP’s clear transistors will funnel light to the solar cell as the sun moves across the sky.

“Basically, we don’t have any mechanical gears or cogs,” says XE chief executive Colin Williams, a veteran of JPL/Caltech and a former Stanford University professor. “From an outward appearance the panel appears to be fixed, but internally light is being steered to the solar cell through the electronics.”

Doing away with bulky mechanical trackers means that more panels can be packed onto commercial rooftops, allowing energy-hungry facilities like data centers to draw more of their power from the sun. The panels will be transparent and can be colorized to blend in with building facades. Williams says XE will also produce panels for large-scale solar power plants.

That’s the goal, at least. XE, which is currently funded by its founders, is two years away from producing solar panels with HP’s (HPQ) technology and its claim that they will be twice as efficient at half the cost of conventional solar systems has yet to be proven.

For HP, the solar licensing deal is an unanticipated benefit of collaborative research by HP Labs, engineers at its imaging and printing operation in Oregon and researchers at Oregon State University. “They were looking for future ways to display images,” say Joe Beyers, HP’s vice president of intellectual property licensing. “It just turned out that Colin and his team became aware of the work we were doing with Oregon State and started the dialog.”

Beyers says other potential applications for the technology - developed as part of HP’s new approach to commercializing R&D that my colleague Jon Fortt wrote about recently - include video displays for car windshields.

eSolar, the solar energy startup founded by Idealab’s Bill Gross and backed by Google, has signed a 20-year contract to supply utility Southern California Edison with 245 megawatts of green electricity.

The solar power plant will be built in 35-megawatt modules, with the first phase set to go online in 2011. As Green Wombat reported in April, eSolar scored $130 million in funding from Google.org, Google’s (GOOG) philanthropic arm, and other investors to develop solar thermal technology that Gross claims will produce electricity as cheaply as coal-fired power plants.

Like Ausra and BrightSource Energy - which have deals with PG&E (PCG) - eSolar will use fields of mirrors to heat water to create steam that drives electricity-generating turbines. Gross says that eSolar’s software allows the company to individually control smaller sun-tracking mirrors - called heliostats - which can be cheaply manufactured and which are more efficient and take up less land than conventional mirrors. According to Gross, that means eSolar can build modular power plants near urban areas and transmission lines rather than out in the desert, lowering costs.

eSolar’s cost claims got Southern California Edison’s (EIX) attention. “It was a competitively priced proposal,” Stuart Hemphill, the utility’s VP for renewable and alternative power, told Fortune. “We found the eSolar team very competent, motivated and willing to do a deal.”

“When it comes down to different solar technologies, competitive pricing is going to be an important part of the equation,” he adds. “They do offer a unique solution.”

eSolar is keeping mum about the exact location of the power plant, only saying it will be in the Antelope Valley region of Southern California.

One potential hitch: Getting eSolar’s electricity to Southern California Edison will depend on the construction of a major new transmission line. That line, the Tehachapi Renewable Transmission Project, has been partially approved to date.

With the eSolar deal, the utility is hedging its bets. Back in 2005, Southern California Edison signed a highly publicized deal with Phoenix’s Stirling Energy Systems to buy up to 850 megawatts of solar electricity from massive solar power plants to be built in the Mojave Desert. (Around the same time, San Diego Gas & Electric (SRE) signed a power purchase agreement with Stirling for up to 900 megawatts. ) Stirling is still perfecting its technology and has yet to file a license application for its first plant. But the company received a $100 million investment earlier this year and Hemphill says Stirling is moving forward.

“We expect that Stirling will meet its contractural obligations,” he says. “Solar thermal is definitely an emerging industry. It’s too early to tell which technologies will be the winners over the long run. It’s a time to be having a portfolio of different technologies so we can figure that out.”

In the world’s single-largest investment in solar technology, the oil-rich emirate of Abu Dhabi announced Wednesday it will spend $2 billion to jumpstart a home-grown photovoltaics industry. The cash will fund what is undoubtedly the planet’s best-financed startup, Masdar PV, which will build manufacturing facilities in Germany and Abu Dhabi to produce thin-film solar modules that can be used in rooftop solar systems or solar power plants.

Masdar PV is the latest project of the Masdar Initiative, Abu Dhabi’s $15 billion renewable energy venture designed to transform the emirate into a green technology powerhouse. Masdar is best known for its plans to build Masdar City, a “zero-carbon, zero-waste” urban center.

Thin-film solar cells are essentially “printed” on glass or flexible metals, allowing them to be integrated into building materials like roofs and walls. Though thin-film solar is less efficient at converting light into electricity, it uses a fraction of the expensive silicon needed by conventional bulky solar modules and can be produced much more cheaply - provided economies of scale are achieved.

Thus Masdar PV’s big solar bet. “You have to be working at scale to drive costs out of the system,” Steve Geiger, Masdar’s director of special projects, told Fortune in a phone call from Abu Dhabi. “We have to do it at scale and we have to do it in volume in multiple markets.”

One of those markets is the United States, where Masdar PV could give established players like First Solar (FSLR) and startups such as Nanosolar, Heliovolts and Global Solar some formidable competition.

The gamble Masdar PV is taking is that it’s investing billions in an older but proven thin-film technology that may well be left in the dust by more exotic, cheaper and efficient technologies under development by a host of startups.

Masdar PV aims to have a gigawatt of annual production capacity in place by 2014. To get there, Geiger says the company has hired a management team that includes former top executives from First Solar and other thin-film industry veterans.

A leading solar technology company that Geiger declined to identify will provide the manufacturing equipment for Masdar PV’s factories. Judging from his description, the likely supplier is Applied Materials (AMAT), the world’s biggest computer-chip equipment maker that has a burgeoning business building the machines that make thin-film solar cells of the type that Masdar PV will produce.

“We usually partner with large companies that have managerial skills, technology and market access, but we were very fortune that we picked up a top management team and thought it was strong enough to do as a 100% Abu Dhabi Masdar company,” says Geiger, who will oversee Masdar’s thin-film solar venture.

Masdar PV’s first plant is scheduled to go online in Germany toward the end of 2009 with the second to begin production in Abu Dhabi by mid-2010. “Very clearly we need to look at expansion beyond those two physical facilities,” Geiger says. “We really have to look at America and the Asian markets as well.

Thin-film is just one of three solar strategies that Masdar is pursuing by funneling petrodollars into green energy startups. In March, Masdar unveiled Torresol Energy, a joint venture with a Spanish company that will build large-scale solar thermal power plants to supply electricity to utilities. Masdar has also made investments in other solar thermal companies as well as thin-film startups pursuing different technologies. Finally, Masdar wants to produce polysilicon, the basic material of conventional solar cells.

As Masdar chief Sultan Ahmed Al Jaber recently told Green Wombat, “We want to cover the whole value chain - from research to labs to manufacturing to the deployment of technologies.”

Geiger uses an analogy for Masdar’s green energy ambitions that may be more familiar to petroleum-dependent Americans - and should serve as a wake-up call to get serious about carbon-free energy. “The model might be the vertically integrated oil industry,” he says. “It clearly makes sense to have a consolidated power provider.”

For some on the right coast, the current renewable energy craze seems like a rerun of that ’70s show, the province of California dreamers and pie-in-the-sky Silicon Valley techies. But increasingly it’s all about Big Business, a point driven home Thursday by a deal struck by two decidedly non-crunchy granola types: billionaire oilman T. Boone Pickens and General Electric chief Jeffrey Immelt.

Pickens’ Mesa Power placed an order for 667 GE (GE) wind turbines for the first phase of a massive 4,000-megawatt, 400,000-acre West Texas wind farm called the Pampa Wind Project. When completed in 2014, Pampa is expected to produce enough clean green energy to light up 1.3 million homes, according to Mesa. Each of those 667 turbines alone can generate 1.5 megawatts of electricity. The first phase of the project will cost $2 billion, with a good chunk of the cash going to GE.

That a legendary wildcatter like Pickens sees big money to be made from renewable energy in an oil state like Texas is just another sign that green is not a fad but the future. “You find an oilfield, it peaks and starts declining, and you’ve got to find another one to replace it,” Pickens said in a statement. “It can drive you crazy. With wind, there’s no decline curve.” (Just how much money Pickens will make off wind will depend on whether Congress extends a production tax credit that makes such projects viable.)

When it comes to energy, Texas is literally its own country, as the Lone Star State is not plugged into the national power grid and must generate nearly all its electricity within its borders. Aggressive efforts by Texas regulators and entrepreneurs to make the state energy independent by upgrading its transmission system and tapping wind power are models for the rest of the country.

The souring economy hasn’t dissuaded green tech investors from making big bets on renewable energy. On Wednesday, solar power plant builder BrightSource Energy announced it had raised $115 million from a group of investors that include Google.org, the search giant’s philanthropic arm, and oil giants Chevron and BP.

The investment in the Oakland, Calif.-based startup is Google’s (GOOG) second big solar energy play in the past two months. In April, Google.org joined a $130 million round for eSolar, a Pasadena solar power plant company whose chairman is Idealab founder Bill Gross.

BrightSource Energy, started by American-Israeli solar pioneer Arnold Goldman, has contracts to supply California utility PG&E (PCG) with up to 900 megawatts of solar electricity from power plants to be built in the Mojave Desert on the California-Nevada border. BrightSource has developed a new solar technology, dubbed distributed power tower, that focuses fields of sun-tracking mirrors called heliostats on a tower containing a water-filled boiler. The sun’s rays superheat the water and the resulting steam drives an electricity-generating turbine. (Artist rendering of BrightSource’s planned Ivanpah plant above.)

Given that a 500-megawatt solar power plant can cost more than $1 billion to build, $115 million is but a drop in the bucket. But it will allow BrightSource, which previously raised $45 million, to proceed with the development of its technology as it seeks project financing for construction of its first power plants.

And it can’t hurt to have such high-profile backers when you negotiate power purchase agreements with utilities. Besides Google, BP Alternative Energy (BP) and Chevron Technology Ventures (CVX), previous investors participating in the new round include Morgan Stanley (MS), VantagePoint Venture Partners, Draper Fisher Jurvetson and DBL Investors.

Another new BrightSource investor is Norweigan oil and gas behemoth StatoilHydro (STO). Apparently, even Big Oil has seen the light when it comes to hedging its bets with green energy.