Solar start-ups learning from mistakes of the past

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Solar start-ups have struggled to raise capital and maintain credibility in recent years, thin-film companies in particular. Solar's popularity on Sandhill Road has dropped dramatically since its almost 40% peak in 2008 [see slide 1]. We all know what happened to Solyndra and MiaSolé's fate was not much better with a distressed sale earlier this year that must have displeased investors such as VantagePoint Capital.

But at least three start-ups are showing that a different, low-capital progression to scale can work, at least in the early stages.

Scifiniti, a San Jose company that has developed kerfless silicon wafer and cell technology, bucked the downward trend in June with the announcement of US$10 million series B funding from Alloy Ventures and Firelake Capital Management, among others, bringing its total paid-in capital to US$26.56 million.

At the Solarbuzz North America PV conference last week, Curt Vass, executive vice president of business development at Scifinti, said: “We think it's a very strong sign that we recently just received another investment. In this market if anyone is trying to do fundraising they know just how difficult it is to even mention the word solar to a venture person, they'll run.”

But as the industry faces an “effective” 45GW in global overcapacity [see slide 2], what is the demand for Scifiniti's “drop-in” crystalline solar wafer replacement?

Solarbuzz forecasts that 2013 will see a “most likely” scenario demand of 35.1GW, an increase of 16% year on year. In 2014, the global market is forecast to be 40GW, rising to more than 60GW by 2017.

Most analysts agree that the market will start to balance from 2015. Will Scifiniti's technology be ideal for that growth?

Vass pointed to the 22GW of multicrystalline cells predicted to be produced in 2013 – a market worth US$6 billion.

“The challenge is to make money. [People said] you guys are crazy – how are you going to compete? But our product fits in the existing ecosystem and enables existing module companies to continue down the cost curve and improve efficiency.

“We're really trying to innovate our portion of the supply chain versus replacing all of it, which is what a lot of other small start-ups have done or tried to do.”

Vass said that Scifiniti's SmartWafer process could cut the costs of cell production in half and “plug and play” with existing production technology and boost margins manufacturer margins by 50%.

The company's business plan also assumes that manufacturing capital investment is US$14 million per 100MW, which allows scale to happen in increments, breaking even at 200MW of production a year.

“We're still in this challenge where no one has higher than 5-6% market share,” he said. “So there's a need … for disruptive material [and] we see this as a game changing profitability.

“I apologise in advance to all these companies that have invested hundreds of millions of dollars on facilities. But there's a way to do this better, to eliminate large capital operational expenses [such] as building a factory, it takes 2-3 years to build a facility.”

First Solar's acquisition of Tetrasun in May was a stamp of approval for business models in solar that do not rely on large capital commitments for multi-MW fabs.

Reel Solar, which has a pilot plant tucked off the 280 interstate highway in San Jose, is another Silicon Valley company hoping to reach revenues without building a commercial fabrication plant.

Reel Solar is a CdTe thin-film company started in 2009 by Kurt Wiener and Guarav Verma, two Stanford PhD engineering alumni. On a site visit last week, the first thing the founders show me is a First Solar sized panel at two feet by four feet next to their panel, an industry first at 1.5 metres square. The company will start making them at two metres square next year.

At this size, costs are dramatically reduced by 20-30% over c-Si and any other thin-film technology, said Wiener. “If you double the area it doesn't cost you twice as much for the equipment. For the solar industry it's the same. By processing an area three times larger than First Solar our capital equipment costs will only go up by about 40-50%.”

In many ways, the processes at the pilot fab are similar to those at First Solar, including a gap fill step. But the crucial difference is that instead of CdTe deposition using evaporation, Reel Solar uses electroplating – a holy grail process for thin-film that has eluded others such as BP Solar.

“It makes it easy for us because everything else that is used on the line is off-the-shelf equipment that First Solar uses,” said Wiener.

Reel Solar has recorded efficiencies of between 13% and 13.5% with its demonstration six-inch cells. Its 1.5 metres square panels are now approaching 10% efficiency and the company expects to be at 12% within the third quarter.

BP Solar attempted to make electroplating for CdTe in the 1990s and into the early 2000s. BP Solar's traditional electroplating for CdTe was done by contacting the panels at the edges to apply the voltage that would drive the electroplating, Wiener explained.

But where Reel Solar may succeed where BP Solar has failed is through innovation in distributed contact plating – the 1.5 metres square panel uses 6,000 tiny S-shaped springs. Reel Solar was issued a patent in January this year for its distributed contact plating.

“With our technology we create a lot of contacts like a bed of nails that are perpendicular to the substrate and contact the actual face of the solar module,” said Weiner. “That allows us to put in much more current and use panels of any form factor which then allows us to build much larger solar panels than have been built by either electroplating or with the higher temperature technologies that First Solar and Prime Star use.

“The fundamental innovation there is that when we plate we actually put defects into the film and we leave holes where our contacts touch the substrate and in a normal process those would be defects.”

These “defects” look like silvery watermarks on the finished product that have an unintended benefit as a highly visible signature of the patented process.

“That same step fills up the hole that we leave in the CdTe,” said Weiner. “So we were able to move to this new type of plating which allows us to plate very rapidly and on very large areas at very low cost and we didn't have to change the process at all past that point because the defects that we left in the film were repaired by a process step later on in the process that already existed and so represented no more cost.”

CalCEF, an US$30 million evergreen fund of funds established out of the ashes of the Pacific Gas & Electric bankruptcy, invested an undisclosed sum in 2010 along with CMEA and Pangaea.

Paul Fox, a partner at CalCEF's Clean Energy Angel Fund, said in an email: “We prefer not to talk about the specific allocation of individual investors within a syndicate. But the company has raised less than US$20 million without government money to get where it is today. Compare that to the hundreds of millions raised by other solar companies.

“A good analogy for the benefits of larger panel size is flat screen TVs. They get bigger and bigger, yet the cost gets lower especially if measured US$/square inch. As you deposit on larger and larger substrates, the processing cost per unit area falls in a non-linear fashion. It is not quite Moore's law, but the impact is significant.”

Fox says the company is keen to avoid hyperbole over efficiency, which is why the company stayed in stealth mode until it was able to show its full-sized panels that “produce more power than any other CdTe module, regardless of efficiency”.

“So while you will hear Kurt give guidance on current efficiency and targets for efficiency, he will not make any official claims until he has third party certification. So you probably will not see a press release on efficiency until later this year.”

Instead of high volume manufacturing the company aims to license its intellectual property (the only two machines in the fab I wasn't allowed to take photos of). There will be a royalty bearing licence fee based on the number of plates produced and the company will build two of the tools that embody the IP.

The company already has a memorandum of understanding with a company in India and since they came out of stealth mode in July, two further companies in Europe and one in South Africa have approached the company.

Ed Grady, Reel Solar's chief executive, said: “Our start-up is different from some of the earlier start-ups in this space – we've learned from the mistakes that many in the past have made who have tried to come to market.

“We've studied the successes and the failures – First Solar is a huge success, Solyndra we think was a failure. We have also understood that we have to be capital light – we're not going to raise tonnes of money and build big factories.”

If the business model works out and Reel Solar signs up six to seven licencees, there may be enough revenue to build a factory of its own.

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