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Analysis: Solar startups plough ahead despite Solyndra

LOS ANGELES | Mon Sep 19, 2011 5:59pm EDT

(Reuters) - Solyndra's collapse has cast a harsh spotlight on rival start-ups backing a promising solar technology that, despite the flameout by a leading player, remains on the verge of cracking the renewable energy market.

Undeterred rivals from HelioVolt to Nanosolar continue to espouse non-silicon copper indium gallium selenide (CIGS) panels that many industry experts continue to argue is cheaper to make. Solyndra failed because of its inability to bring down costs, not the fundamental promise of its technology.

"I don't think this says anything about CIGS," said a person familiar with the market. "It says something about a company that had a very attractive product, but engineered for a market that was a little less hostile."

The biggest challenge for surviving CIGS makers is not their technology, but rather their ability to raise the millions of dollars needed to ramp up manufacturing and get their products into an increasingly competitive marketplace.

Solyndra, which had won a U.S. loan guarantee to fund a new plant before its demise, was once at the forefront of the effort to sell CIGS solar panels to win a share of the growing solar market, which is dominated by silicon-based equipment.

While the thin film panels using CIGS, or copper indium gallium selenide, have been slow to penetrate the market, one maker, Heliovolt, got a boost on Monday when it announced that South Korea's SK Group would make a $50 million investment to help commercialize its technology.

Still, even HelioVolt acknowledged it's not easy out there for start-ups that must work quickly to bring down costs and boost the efficiency of their panels.

"In this kind of an environment where there are a lot of claims being made by a lot of start-ups in the thin film PV sector... it's a buyer's market," HelioVolt Founder and Chairman B.J. Stanbery said.

Valuations in the solar industry have plummeted since the financial crisis and venture capitalists have increasingly shied away from capital-intensive bets. Solyndra's bankruptcy and a 40 percent drop in the price of solar panels this year will only exacerbate that trend.

"If you are out there trying to raise money right now for almost anything in solar manufacturing, you are probably going to have a harder time than you did a year ago and probably a month ago," said Shayle Kann, managing director for solar industry research at GTM Research.


Last month, Solyndra succumbed to industry pressure -- saying it could not get its costs down quickly enough to compete with Chinese rivals and had failed to secure additional funding. It filed for bankruptcy a few days later.

Solar makers have suffered this year as a glut of polysilicon-based panels have driven prices down by more than a third, squeezing profits as the industry struggles to cope with declining subsidies.

That has pushed some manufacturers into bankruptcy and made selling the newer CIGS products riskier.

"The question is, how important is the next big thing?" said Ron Pernick, managing director of clean technology research company Clean Edge Inc.

CIGS solar panels have long been seen as potential challengers to traditional silicon-based panels because they cost less to manufacture and have the potential to generate close to as much electricity from the sun's light.

Both Nanosolar and Miasole, two of the top venture-funded CIGS start-ups, said in recent interviews that their expansion and cost-reduction goals have not changed.

Nanosolar, which has raised about $400 million in venture funding, said its manufacturing costs will be below $1 per watt next year. That compares with manufacturing costs of about $1.10 for the lowest-cost silicon manufacturers, but is still well above the 75 cents a watt of industry cost leader First Solar Inc, which uses cadmium telluride in its panels.

Nanosolar's vice president of worldwide sales, Brian Stone, said the company will be able to get its costs below those of First Solar once it doubles its factory capacity next year. To do that, however, Nanosolar needs to raise money later this year. Stone declined to say how much the company will need to raise, but said he was not worried Solyndra's collapse would make it more difficult to secure that funding.

"Investors, particularly visionaries, have the stomach to invest in the future," he said.

Nanosolar's investors include Benchmark Capital, Mohr Davidow Ventures, Energy Capital Partners, EDF Energies Nouvelles SA and AES Solar.

Miasole, which has raised more than $400 million from investors, including Kleiner Perkins Caulfield & Byers, VantagePoint Capital Partners, Firelake Capital Management and Passport Capital, says its manufacturing costs will be well below $1 per watt by the end of this year.

Getting to First Solar's cost levels "will depend on a lot of factors," said Rob DeLine, the company's vice president of marketing, without being specific.

He would not say when the company needs to raise more money, but acknowledged the difficulty raising money in the public markets.

"Access to capital markets is a little tough and I don't think Solyndra did anybody any favors on that," he added.

(Reporting by Nichola Groom; editing by Andre Grenon)

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