Cleantech’s Solar Conundrum

The solar market is still going strong, despite the financial crisis, and turmoil in some of its key markets. But that doesn’t mean all is well on the venture financing end.

As a number of longtime Silicon Valley solar darlings start to demand even more serious money to build plants for commercialization, the financing picture gets clouded. Conventional wisdom has been suggesting it’s market issues. Maybe so, and then again, maybe not.

Greentech Media has been reporting on the funding efforts of Solyndra, including a recent discussion of struggles by Goldman Sachs to raise structured finance for the startup, which claims it is shipping some of its very weird looking CIGS product, though little evidence let alone field data exists.

It’s not the only one. Recently CPV darling SolFocus was reportedly struggling to raise capital arranged by Advanced Equities. The cash was to fund the buildout of a commercial manufacturing plant, and at least twice the company drastically cut its pre money valuation ask.

The conventional wisdom is that the finance crunch is hurting solar. I have another thought. Perhaps its just the riskiest solar technologies and businesses coming home to roost. Both of these companies have been pitched to investors as late stage, helping to justify massive capital needs and valuations. I’d argue they are actually very, very early stage, with all the risk still in front of them.

Maybe it’s not the market? Maybe its the ludicrous suggestion that the first plant should be 420 MW in size. How about two new ideas: 1) Stage gate, or 2) Walk before you run.

Take Solyndra, which has raised hundreds of millions to coat CIGS on a glass cylinder. Perhaps the question shouldn’t be is solar getting hurt by the credit crunch, but should be who exactly thinks its a good idea to invest hundreds of millions to build a plant to coat CIGS in a circle, at “pre IPO style prices”? The question everyone I know has been asking is, if they really can coat CIGS with good yields, why didn’t they just do it? That’s world beating on flat plate glass, if it works as advertised. Why wrap the same amount of solar material around a long glass paper towel roll?

With SolFocus, maybe its just that CPV isn’t as good an idea as applying manufacturing process improvement to CdTe and tandem cell thin film?

Who knows, but let’s look a bit closer at the particular technologies before we just blame it on the the financial crisis.

Neal Dikeman is a partner at cleantech merchant bank Jane Capital Partners LLC, and Chairman and CEO of Carbonflow, Inc. He edits the Cleantech Blog and chairs

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