Solar Startups Keep The Lights On Despite VC Indifference, Uncertain Politics

The cost to install solar has dropped by more than 55 percent since 2012, paving the way for more startups to enter the market and making the technology more affordable for both providers to develop and customers to purchase.

Over the last decade, solar has experienced an average annual growth rate of 68 percent in the United States, according to the Solar Energy Industries Association (SEIA). In 2016, solar installed 39 percent of all new electric generating capacity—topping all other technologies for the first time.

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Continuing the trend, in the first quarter of 2017, 2,387 megawatts of solar were installed — marking the largest first quarter in history, according to the SEIA.

But this progress could hit headwinds. There is industry concern that the Trump administration will move forward on imposing tariffs of 35 percent on solar photovoltaic imports. (Photovoltaic devices generate electricity directly from sunlight via an electronic process that occurs naturally in certain types of material, called semiconductors.) Whether or not that will happen has not yet been determined.

However, while we wait on the politics, there are startups innovating in the solar power field. And those startups can give us some indication of what’s going on with funding in the space.

Tech Gets Cheaper

Bedford, Mass.-based 1366 Technologies has developed a more efficient way to manufacture silicon wafers, an essential component in making the cells and modules of solar panels.

Founded in 2008, the company raised $9 million in a Series D round from an undisclosed strategic investor and some previous backers. It has raised a total of more than $100 million since inception.

Laureen Sanderson, the company’s chief communications officer, explained to Crunchbase News that the conventional way of making silicon wafers is considered to be very expensive and very wasteful.

“The same approach has been used for nearly four decades,” Sanderson said. “The whole process requires many machines and uses a lot of consumables, some of which can only be used once before being thrown away. The process to go from an ingot [a casting mold] to a wafer takes under a week.”

1366 Technologies, according to Sanderson, has developed a way to eliminate the ingot sawing process that allows for so much time, expense, energy, and waste.

Instead, the company is able to take silicon material, melt it into a molten bath, and produce a wafer directly from that bath in under 20 seconds  –­ using just one machine rather than multiple pieces of equipment.

“All of that waste associated with sawing is a non-issue – the energy required is reduced by two-thirds,” Sanderson told Crunchbase News. “The time to make a wafer is dramatically reduced, and cell manufacturers don’t need to invest in a whole lot of new equipment or redesign their lines to use our technology since you can just drop the wafer into an existing line.”

1366 Technologies plans to use the $9 million it recently raised to scale and commercialize, according to Sanderson.

Measuring The Sun

Another company in the space that has recently attracted venture investment is Seattle, Wash.-based Omnidian.

Founded in 2016, the startup raised $600,000 via a convertible note. Following its convertible, the company raised $5.1 million, led by Congruent Ventures, in November of this year.

Unlike 1366 Technologies, Omnidian’s technology is focused more on the consumer-facing side of solar. For residential solar systems, the company monitors, maintains, and guarantees solar performance.

Mark Liffmann, Omnidian’s CEO and founder, notes there was a boom and bust cycle for solar leasing companies. This left many businesses or homeowners “holding the bag,” with no backup for the operation of their solar systems.

“We saw an opportunity to provide performance as a service,” he told Crunchbase News.

In 2014, about 70 percent of solar systems were leased and 30 percent bought with cash or a loan, according to Liffmann.

“This year, that’s flipped,” he said. “About 30 percent are leased and 70 percent are bought with a cash or a loan.”

Omnidian has built out a proprietary analytics engine that can take monitoring data from various monitoring programs. It automates the process of detecting when systems are not performing at capacity.

“Without good software and technology, systems could be down or underperforming for months or years,” Liffmann said. “This could also lead to huge electric bills for homeowners.”

Ominidian has grown its assets under management by six times over the last six months, according to Liffmann. It has also grown its team by four times over the same time period. The startup currently has more than 100 megawatts of residential systems under primary management and has 300 megawatts available as a backup service provider. It currently services all 20 major solar states, including California, Colorado, New Jersey, and the emerging markets of Texas and Florida.

As for the possibility of tariffs, Liffmann is confident the solar industry will weather that potential storm.

“The cost of a fully installed residential system has come down about two-thirds in the past 15 years. Tariffs could raise prices and make there be fewer states where solar would continue to be economical,” he said. “But I still have confidence in the solar industry to continue to drive down cost. Policy will change for the positive and negative, and we’ll continue to build this industry.”

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When it comes to raising money, the number of deals and dollars raised are down compared to five years ago. But that could also be related to the fact that costs have lowered.

Crunchbase data found that funding in U.S. solar-related startups totaled $320 million in 2016 across 38 deals, compared to $912 million over 66 deals in 2012.

That said, a number of high-profile bankruptcies in the space hasn’t exactly won over private investors or Wall Street. Back in 2011, the demise of solar panel maker Solyndra likely scared off many investment prospects. More recently, in May 2017, SolarWorld – the European manufacturer of solar panels that had one of the largest manufacturing plants in the U.S. – filed for insolvency.

To Liffmann, the industry is in the process of growing and evolving.

“There’s been some consolidation and other players have been acquired,” he said. “The industry has had to grow up quite a bit. Residential solar in particular has had to grow up, becoming like more mature industry asset classes.”

Demand is reaching an all-time high, but while the sun is able to power our homes, it’s apparently not strong enough to fuel funding in the sector.

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