Solar Is A Four-Letter Word To Many Investors

Editor’s Note: EarthTechling is proud to repost this article courtesy of Colorado Energy News. Author credit goes to Greg Pfhal.

The Solyndra bankruptcy of 2011 tainted the solar industry in the eye of the public. More recently, Abound Solar, a manufacturer of CdTe solar panels, filed for bankruptcy; General Electric/Primestar Solar announced that it would delay a planned 400 MW CdTe manufacturing plant; and Energy Conversion Devices/Uni-Solar announced at the end of July that the United States Bankruptcy Court had confirmed its plan for liquidation.

The NEX index of clean-energy stocks is at its lowest price in nine years as the solar industry battles oversupply and solar panel price issues. Failed or failing solar companies litter the clean energy landscape to the point where CEOs trying to raise money get told by venture capitalists, “I don’t want to get sunburned.”

image via Solyndra

Grim humor and the swamping of the panel market by the Chinese aside, the solar industry is working its way through a rough patch, but there are occasional good signs out there, enough to say that solar doesn’t have to be a four-letter word. I’ll give an example of how technology and financial agility can represent hope of rising out of the clutter.

Technological Ray of Sunshine

Our firm sponsors Colorado Companies to Watch where I sat next to one of the winners, SkyFuel CEO Richard LeBlanc. When I asked him if low solar panel prices were hurting his business, he almost seemed offended, replying that panels had nothing to do with his business. SkyFuel, I’ve learned, is a concentrated solar power designer and manufacturer for utility scale solar generation. The company’s technology comes straight out of NREL in Golden, CO. SkyFuel even hired former NREL scientist Gary Jorgensen, who designed much of the technology the company uses. He leads its research and development efforts.

While I’m in no position to judge whether SkyFuel’s or the concentrated solar power (CSP) industry’s technology on the whole is any better than the others and I realize the topic is debated, the small company seems to be doing something right, and is applying some survival techniques to get to the break-even stage.

SkyFuel makes a glass-free parabolic trough solar thermal collector, called the SkyTrough®. The company claims it is the “highest performance, lowest-cost utility-scale solar power system in the world.” A SkyFuel subsidiary holds an exclusive world-wide license for a high-reflectance silverized polymer film, called ReflecTech® Mirror Film. SkyFuel has won a host of awards, most recently the CSP Technology Supplier Award from the CSP Todaypublication.

Unlike other solar companies, SkyFuel’s product does not incorporate photovoltaic technology. Instead, it concentrates the heat from the sun to heat liquid that is turned to steam. From there, power is generated through traditional technology. This solar thermal technology essentially replaces older methodologies such as the burning of coal to produce steam to generate electricity.

SkyFuel’s system was installed 18 months ago at the SEGS II project in California and LeBlanc says it is “hitting the NREL model right on the numbers at 85 cents a watt.” He says the levelized cost of electricity is 13 cents per kilowatt hour. LeBlanc said the company has sold systems in Canada, Reno, Nev., ($10 million) and Hawaii ($5 million) and is pursuing others in Saudi Arabia, China, India and Brazil. It also won a $2.4 million contract from the Department of Energy. LeBlanc projects to be on a break-even financial basis next year.

Creative Financial Engineering

Of course there are issues for SkyFuel and other solar companies. For venture capital-backed SkyFuel, it wasn’t financing as much as performance bonds that was a problem. A performance bond is standard in the construction industry; it’s purchased to guarantee construction and support of a product over its life. Large CSP players such as Siemens and GE have the balance sheets to forego the bonds, but small start-ups need them to back these big utility projects. For a $10 million project, a bond company typically asks for $5 million cash collateral, LeBlanc said.

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