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That’s when the company hit its first snag. The business model wasn’t working. They had to talk with way too many companies to make sales. Sure, they had three customers, but they had to talk with a hundred companies. Their first plants were seriously underperforming, too. As Goldman put it, “The sun didn’t work like we thought it would.” Even haziness really negatively impacted the performance of the plants, and the southeast was hotter than it was sunny. Predicting how much energy a particular plant would produce was more complicated than it had seemed.41

The Luz dream could have died right then.

But as it turned out, the U.S. Congress had provided a perfect opportunity for a company like Luz—as well as a variety of less savory characters—through a piece of legislation called the Public Utilities Regulatory Policies Act, or PURPA, as it’s known to policy wonks.42

In broad strokes, PURPA created a guaranteed market for any electricity that a so-called “qualifying facility” could produce at what was known as the utility’s “avoidance cost.” To qualify, you needed to generate electricity from a renewable source or to output both heat and electricity from the same power plant. There were various other stipulations, not all of which helped independent power producers. The original legislation limited the size of facilities to just thirty megawatts. Luz’s power plants could have been much more efficient at larger sizes, like other thermal power plants, but the size ceiling was eventually lifted to eighty megawatts and then discarded altogether in 1990 with some help from Luz lobbyists. At a hearing on lifting the size restriction, Senator Tim Wirth from Colorado noted “there was no policy rationale for limiting any of the small power producers.”43 The limit was arbitrary, or as Goldman saw it, “There was not a lot of interest in us getting too big.”44 On the whole, though, PURPA, along with the tax credits provided by the federal government, provided the market opening through which Luz squeezed in the 1980s.45

First, however, they had to prove to outsiders that they could make electricity. The company decided to contract with Bechtel to do a feasibility study that could be passed on to their prospective customers and investors. When the day came to present their technology, twenty Bechtel engineers filed in with coats and ties. Luz sent a single engineer, the young Israel Kroizer, wearing sandals and packing in his stack of books.

After a long meeting, Bechtel’s engineers left impressed and helped complete the study of a design of a power plant for Southern California Edison in the Mojave Desert.46 On Valentine’s Day 1983, Luz signed a “sweetheart” contract with Southern California Edison for its first solar electric generating station. Though the cost of electricity that first plant produced was higher than avoidance cost, Southern California Edison rolled it up with a second plant so that the average of the two deals met the avoidance cost requirement.47 Determining what exactly avoidance cost should be was complex, but it was supposed to reflect what it would cost the utility to provide the same power over thirty years based on standard cost projections.

Although PURPA was a piece of federal legislation, it left implementation up to the states, and California’s Public Utilities Commission (CPUC) had made it clear that it expected utilities to do as much as they could to buy power from qualifying facilities. The CPUC told Southern California Edison and others that they had to offer a variety of formulaic contracts to the small power producers to offset the utilities’ enormous bargaining power. In effect, the type of agreement Luz signed early on—known as Standard Offer Number Four—was a feed-in tariff. The solar company was guaranteed a fixed price for its electricity for a whole decade. Contracts in later years were not offered on such excellent terms, as the price the utility paid was pegged to natural gas prices, which plunged in the middle of the ’80s. But