SolFocus hopes its solar panels mounted on moveable trackers will soon bring low-cost energy to power plants and commercial rooftops everywhere. Founded in 2005 by retired semiconductor executive Gary Conley, Palo Alto, California-based SolFocus developed solar concentrators to bring solar power down to pennies per kilowatt-hour, making it cheaper than fossil fuels. “It’s basically solving the world’s electricity problems, without subsidies,” says Mr. Conley. “We’re trying to compete with classic energy—not other solar—and we’re doing it on a global basis.”

Much like a magnifying glass, or the “burning mirrors” Archimedes invented around 200 B.C., concentrators amplify the sunlight that hits solar photovoltaic (PV) cells. Instead of using solar tiles across an entire roof, concentrators collect sunlight from a larger area and direct it to fewer solar cells. The SolFocus system consists of reflective hexagon-shaped concentrators that use small lenses and curved mirrors to direct sunlight onto tiny solar cells in the center of each concentrator. The concentrators are tiled together in a honeycomb pattern to make a panel, which is mounted on a moving tracker to catch sunlight at different times of day.

SolFocus is hardly the only company chasing the solar dream. The worldwide solar market grew from $8.3 billion in 2004 to more than $12 billion in 2005, according to CLSA Asia-Pacific analyst Michael Rogol. Mr. Rogol expects the market to top $16 billion this year and $40 billion in 2010.

Many companies make large PV rooftop panels, while concentrators are far more rare. Utilities deployed them in the first solar farms going up in the 1980s. In fact, they had nine large solar plants using concentrators in the United States by the end of the decade.

But energy prices dropped, and they never really caught on, racked as they were with reliability problems on top of everything else. Parts malfunctioned and it turned out some concentrators were a fire risk, analysts say.

But now, with energy prices sky-high, and growing environmental and security concerns about fossil fuels, the concentrator idea has been recharged with new materials, designs, and manufacturing techniques. “It seems like some of the fringe stuff—concentrator deals and [thin film]—are gaining a lot more traction,” says Vincenzo La Ruffa, a senior associate with NGP Energy Technology Partners, which so far has not invested in concentrating solar. “Two years ago, a lot of people—including me—would have said these technologies didn’t prove themselves on the market. But we were wrong.”

The Long Journey

Last year, SolFocus was spun out of Saratoga, California-based H2Go, which Mr. Conley founded in 2001 to “enable the hydrogen economy.” For all intents and purposes, he has left the hydrogen faith for the sun god, no longer believing, as he once did, that hydrogen would replace oil. The big idea, in fact, came from Jeffrey Gordon, a professor at Israel’s Ben-GurionUniversity. He was developing a “mini-dish” design to concentrate the sun’s energy into a fiber-optic device for surgery, delivering the same or more energy as a laser surgery device. “It’s basically a poor man’s laser surgery using sunlight,” says Mr. Conley.

Using that technology, SolFocus claims it can deliver solar power for half of the current price—with cells that use germanium instead of the more commonly used silicon. Silicon is already the most expensive part of most solar cells, and germanium—which can convert more than three times the sunlight into electricity—is even more expensive.

But SolFocus uses such a small amount of it—1 sq cm per panel—that the company says it can cut the price of solar from today’s $7 per watt to $3.50, and still make a healthy margin. Right now, it’s targeting an average cost before shipping and margins of $2.40 per watt in the first year, and plans to push that down to $0.50 within a few years of commercialization.

Because the cells are so small, they can be cooled “passively,” without fans—avoiding malfunctions that earlier concentrators ran up against at the first solar concentrator plants, SolFocus says. The module still has to track the sun so it uses moving parts, but off-the-shelf trackers have improved and are reliable, says Scott Elrod, manager of the hardware systems laboratory at the Palo Alto Research Center (PARC), a SolFocus partner. And with the SolFocus version of concentrated solar, the mirrors are all enclosed, so there’s no risk of energy build-up igniting adjacent materials, as before.

SolFocus claims its systems, once they’re finally up and running, will last for up to 20 years. Mr. Conley says the first-generation technology, targeting large field power plants worldwide, will be commercially available in a year to 18 months, possibly sooner. Right now, he says, SolFocus is working on agreements to ramp up manufacturing at numerous sites, including New Delhi, Shanghai, and Barcelona.

Second Generation

At the same time, SolFocus is working with PARC, a Xerox subsidiary, to develop second-generation technology, expected to roll out in about two years. As part of the two-year agreement, PARC gets equity and royalties from SolFocus in exchange for incubating the company, providing research capability and office space. Those non-cash items, considered “in-kind” investment, are worth about $1 million through 2007, according to Mr. Elrod, though Mr. Conley values them at $1.5 million.

“We were impressed by SolFocus,” says Mr. Elrod. “Among all the designs out there, their approach really did have the elegance where we could envision it being manufactured at high volume and low cost.”

Using PARC’s expertise in optics, cell mounts, tile pressing, and other processing technologies, SolFocus says the second-generation product will be even cheaper. The systems could reach $0.32 per watt, before distribution or margins, and be lighter and smaller than current systems.

The second-generation tiles will be for commercial rooftops, but can only be made in modern electronics assembly plants—which means they probably can’t be produced in developing countries, where the need for cheap electricity is greatest.

Mr. Conley says SolFocus is now closing a $30-million Series A round of funding. In February, the company had been seeking $8 million to $10 million. “What a difference a few months makes,” he says.

That money would add to the $800,000 of seed financing Mr. Conley brought to the company, which has grown from two people in February to 10 employees now. Mr. Conley says he plans to add another 14 in the next few months.

Not everyone believes SolFocus holds the key to solar success, of course. B.J. Stanbery, CEO of thin-film solar company HelioVolt, says concentrators only make sense in large power fields. Even then, he isn’t convinced they’re the best way to take advantage of a resource that—unlike oil or coal—is spread fairly evenly around the globe. And while concentrators could be more efficient in direct sunlight, they don’t generate juice on cloudy days or in indirect light.

The Competition

SolFocus isn’t the only company in the concentrator game, of course. There’s a small pile of them, including Pasadena, California-based Energy Innovations (which closed a $25-million Series C round of venture funding in May, bringing its total funding to $54 million); Pasadena-based Practical Instruments; Freiburg, Germany-based Concentrix Solar; Stone Ridge, New York-based Prism Solar Technologies; and Cambridge, Massachusetts-based Stellaris (which won first place in the Massachusetts Institute of Technology’s Ignite Clean Energy Business Presentation Competition in May).

Joel Makower, a principal for market research firm Clean Edge, says concentrators make sense—if they work. “The idea makes perfect sense and could provide a genuine breakthrough for the PV industry, but when you look at them up close and really see these devices in action, they look kind of flimsy. For them to be able to withstand 20 years of the pain and suffering up on a rooftop—wind, rain, birds, leaves, and everything else—it seems so far to be an unsolvable problem.”

Contact the writer: JKho@RedHerring.com