Will Solar Ever Live Up to the Hype? Paul Allen, Vinod Khosla Bet On Infinia’s Sun Engines

8/31/09Follow @xconomy

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that each unit generates 3 kilowatts, and costs about $15,000, Sitton says. That’s enough to power a U.S. home for a year, he says.

Sitton, a mechanical engineer by training, was hired by Infinia back in 2002 as president and CEO to direct its new commercial strategy. Back then, the firm had a totally different plan and a different name, Stirling Technology. The company was profitable and employed a little more than 20 people, sustaining itself mostly on government contracts.

Now, with the new solar strategy in place, it is up to 170 employees. “We knew the contracts would always provide us a living, but we would never accelerate our growth and prosper, or control our destiny,” unless it pursued the concentrating solar power project, Sitton says.

By 2006, the company had wound down most of its government contract work to place its bet on solar power. The business model, from the start, was all about outsourcing pieces of the manufacturing and supply chain, sort of like the maker of athletic shoes, Nike, Sitton says. By building a vast network of suppliers that already have expensive equipment and expertise to make pieces of its device, Infinia wouldn’t have to spend billions of its own capital to do everything itself. One key example—the chassis that forms the framework for Infinia’s dishes aren’t all that different from an automotive chassis.

And since top-tier auto industry suppliers have the capacity to make chassis for 20 million cars a year—and a lot of that capacity isn’t needed anymore for building cars as demand has dropped—Infinia has swooped in by offering contracts to make chassis for its solar power generating devices, Sitton says. One of the major suppliers for satellite chassis is Cosma, a division of Toronto-based Magna International (NYSE: MGA). One of the big engine suppliers is Stockholm, Sweden-based Autoliv (NYSE: ALV), he says.

Not every piece of the supply chain is in place yet. The day I visited, there were suppliers competing for Infinia contracts, Sitton says.

J.D. Sitton

J.D. Sitton

Even though Infinia isn’t building everything itself from scratch in the Tri-Cities, this sounds like a huge undertaking in terms of managing all the suppliers, and keeping all the trains running on time. The company raised some significant cash to do the job in February 2008, when it got $50 million in a Series B round led by GLG Partners. The round also included Paul Allen’s Vulcan Capital, Khosla Ventures, Bill Gross’s Idealab, Equus Total Return, Wexford Capital, and Power Play Energy. Since switching to the solar strategy, the company has raised a total of $84 million, Sitton says.

Infinia got its original investment from Vulcan in a Series A round in 2007, says Steve Hall, Vulcan Capital’s managing director. Infinia got the money because of its seasoned management team; the Stirling engine technology is proven to be reliable in a number of harsh environments; and maybe most important, it offers cost and efficiency advantages over other well-known solar technologies like thin-film or crystalline solar photovoltaics, Hall says.

“We believe Infinia’s Stirling engine technology provides a unique platform for multiple energy service markets and is positioned to be a major player helping to drive the clean energy economy in the 21st century,” Hall said in an e-mail.

Infinia is now on the fundraising trail again, Sitton says. It sounds like there are still several levels of risk the company needs to remove—a little more technology risk in developing the “fourth-generation” product, as well as execution risk in getting all the suppliers aligned over the next year to fulfill orders from prospective solar power developers.

Competition didn’t seem to worry Sitton very much. He says the Infinia system operates more efficiently than thin-film or crystalline solar cells. More direct competitors, such as Israel-based Solel, also try to generate electricity from concentrating solar heat, but their process requires water, which can be a scarce commodity in the world’s hottest and sunniest places, Sitton says.

Idealab’s Bill Gross, an Infinia investor, recently said in a public forum that concentrating solar heat has the potential to create “multiple Googles.” Sitton doesn’t want to go quite that far out on a limb yet, but he made clear that he wasn’t satisfied sitting back and collecting a steady paycheck from government grants.

“We want to be the most compelling solar power generation player on the planet,” Sitton says.

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