Solar Survivors: Bay Area Startups Innovate Under the Radar

7/23/14Follow @mlamonica

The solar industry has had a brutal shakeout, making it very difficult for any solar energy startup to introduce next-generation cell technology. But, despite the fierce global price competition—and the flight of many venture investors from solar—there are a few signs that interest in novel solar technology is picking up.

Milipitas, CA-based Solexel on Tuesday said it raised $31 million in a Series D round from new and existing investors. San Jose, CA-based Siva Power earlier this month raised $5 million of a planned $15 million round for technology development. And last month, Elon Musk-backed SolarCity bought Fremont, CA-based Silevo in a deal that could be worth as much as $350 million and said it intends to build a solar panel factory in upstate New York.

These companies were all founded between 2005 and 2007, at the tail end of a wave of venture capital investment in solar startups, many of which were based in Silicon Valley. Using new “thin film” materials and manufacturing technologies, they promised to slash the price of solar from conventional silicon cells. But many of those solar hopefuls failed—who can forget Solyndra?—or were bought at great losses to investors, as Miasole was.

The main problem was that their cost targets didn’t keep pace with the rapid drop in prices, which was largely driven by Chinese solar panel producers. Financing solar startups is complex, too: most venture investors simply don’t have the resources, or the appetites, to spend hundreds of millions of dollars to fund construction of new factories.

To survive, solar manufacturing startups need innovative technology and access to partner companies with big balance sheets. Solexel’s round was led by roofing company GAF, which produces shingles for the residential market and commercial rooftops, says Mark Kerstens, Solexel’s acting CFO. It also brought in money from new and existing financial investors, which include Kleiner Perkins Caufield & Byers, Technology Partners, Northgate Capital, and DAG Ventures. SunPower, a large solar panel maker and project developer, is also an investor.

The money will finance the company for the next year as it plans its next major step: building a multi-megawatt pilot line in California that will use full-size equipment, says Kerstens. The plan is to operate this equipment to work out technical issues and then essentially replicate it at a commercial plant. “We will be taking the identical tools and building a 200-megawatt plant in Malaysia once we have demonstrated manufacturability at scale on our pilot line,” he says.

In the traditional silicon solar manufacturing process, wafers are cut from large cylindrical blocks of very pure silicon called ingots. Those wafers are then processed to make cells, many of which are assembled into a solar panel. Solexel’s process is radically different: it produces flexible silicon cells from a gas, saving costs on the amount of silicon and other materials used. To make its plant in Malaysia, the company expects to receive some government incentives and is considering financial or strategic partners to help finance it, Kerstens says.

Brad Mattson

Brad Mattson

The story at Siva Power also illustrates how the technical and financial hurdles for solar manufacturing startups are far higher than a few years ago. When CEO Brad Mattson joined the company in 2011, Siva Power, then known as Solexant, had plans to build a 100-megawatt factory in Oregon to produce panels with cells made from thin-film material cadmium telluride using a roll-to-roll process similar to printing. Mattson immediately killed that plan and started a complete technology and business overhaul. “Building that plant would have been like running into a brick wall,” he says.

Over the course of more than a year, he developed a roadmap to hit much lower price targets using completely different technology. Ultimately, engineers concluded that the company could only reach competitive prices using thin-film material made of a combination of copper, indium, gallium, and selenide (CIGS) using a process called co-evaporation on very large glass plates.

Telling the board that Siva needed to triple its research and development budget and scrap its founding technology idea was “painful,” says Mattson, who had previously evaluated solar deals as an investor at VantagePoint Venture Partners. “We had spent $30 million on a roll-to-roll pilot line, and that was the straw that almost broke the camel’s back,” he says.

Siva Power now hopes to raise $15 million this summer … Next Page »

Martin LaMonica is a national correspondent for Xconomy covering energy and technology. You can reach him at mlamonica@xconomy.com or @mlamonica. Follow @mlamonica

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