World of Renewables.com | The World's #1 Online Renewable Energy Network!: Israeli Solar Gets Its Moment in the Sun

Israeli Solar Gets Its Moment in the Sun
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pangea on 03/11/2009 12:41:00
 
On Oct. 15, German engineering giant Siemens made headlines by paying nearly a
half-billion dollars for Israel's Solel Solar Systems, a pioneer in solar
thermal technology. Solel has spent two decades perfecting a system that uses
mirror-lined troughs to capture the sun's energy and drive steam turbines that
produce electricity. With Siemens (SI) as a parent, Solel will have access to
deeper pockets, world-class manufacturing, and vastly broader global
distribution.
Almost lost in the hoopla was another deal the same day that also involved
Israeli solar technology—but in this case, even more state-of-the-art. Startup
SolarEdge Technologies, based just north of Tel Aviv in Herzliya, said it had
secured a $23 million round of financing, the largest such infusion to date into
Israel's fledgling solar energy industry. SolarEdge is working on advanced
technology to improve the efficiency of photovoltaic cells. Among its new
funders: giant General Electric (GE), in its first direct investment in the
local solar scene.
Vote of Confidence
Taken together, the moves by Siemens and GE were seen as a powerful vote of
confidence in Israeli solar technology. With the global renewables industry
booming and growing interest in Israel as a source of cutting-edge technology,
SolarEdge and other companies hope to become major players in the energy sector.
"Israel developed solar thermal, and now we want to harness our high-tech
expertise to bring new solar technologies to the market," says Guy Sella, the
founder and chief executive of SolarEdge.
The 44-year-old Sella, a former venture capitalist and commander of an elite
Israeli military intelligence unit, is typical of the new breed of Israeli solar
entrepreneurs. Many like him have already succeeded in the country's info tech
sector and view solar energy as the new frontier. They also believe Israel
stands a chance of playing an outsize role in renewables, thanks to top
scientific and engineering talent, a vibrant entrepreneurial culture, a paucity
of local energy sources—and abundant sunshine.
In the past few years about three dozen homegrown startups have joined the
global race to reduce the cost of producing electricity from the sun. Most are
focused on photovoltaic and solar thermal technologies. "Israel can't expect to
compete with China as a low-cost manufacturer but has tremendous potential when
it comes to innovation," says Adam Bergman, senior vice-president for cleantech
investment banking at Jefferies & Co. (JEF).
A VC Infusion
To be sure, the industry is still small, employing perhaps as few as 1,000
people. But nearly a half-billion dollars have been invested in Israeli solar
startups in recent years—not counting the Siemens-Solel deal—primarily from
local and foreign venture capital funds. "We're seeing very strong deal flow and
an increasing number of local entrepreneurs entering the field," says Jack Levy,
founder and managing partner at Israel Cleantech Ventures, a Tel Aviv-based firm
that focuses on renewable energy and water technologies. His fund has already
invested in three solar ventures in the photovoltaic field and is looking at
several more deals.
Most of the startups are in the early stage, though a few are looking to enter
the market next year.
SolarEdge, for instance, has developed an improved inverter that lowers the
average cost of electricity from standard photovoltaic arrays and can increase
power output by as much as 25%. CEO Stella predicts revenues next year of $20
million to $30 million. "We've got a backlog of 20 megawatts," he says.
SolarEdge has struck partnerships with industry leaders such as BP Solar (BP)
and Schott Solar, which plan to embed its technology into photovoltaic panels.
And the GE deal could lead to bigger things. "We view our investment as the
beginning of a broader collaboration that could include joint product
development and distribution," says Alex Urquhart, president and CEO of GE
Energy Financial Services.
Another potential Israeli winner is B-Solar, which says it has developed a
process to manufacture two-sided (or bifacial) photovoltaic cells capable of
generating 15% to 20% more electricity. The company is keeping details of the
process under wraps and at present doesn't even have a Web site. "We're planning
to build a manufacturing facility in 2010 with an initial capacity of 65
megawatts that will reach 500 megawatts within five years," says Yossi Kofman,
founder and CEO of B-Solar. Kofman previously scored a tech home run with
Modem-Art, a fabless semiconductor company acquired for $145 million in 2005 by
Agere Systems, now part of LSI (LSI).
Plenty of Sunshine
One advantage enjoyed by Israeli solar startups is that they can test their
technology locally, thanks to ideal climatic conditions and a substantial home
market—though many entrepreneurs are critical of the government for moving too
slowly to support and advance the use of solar energy. In April, for instance,
startup Zenith Solar began operating a commercial demonstration plant to test
its unique concentrated photovoltaic technology for producing electricity and
hot water. The plant now provides both to 250 families at a kibbutz in central
Israel. The next step is to build two full-scale pilot plants in India and
China.
Israel had a head start in harnessing the sun's energy through the widespread
use of solar water heating. The relatively simple technology has been around for
decades—and nearly every rooftop in Israel is covered with solar water-heating
panels. But the more challenging technologies used to convert sunlight into
electricity got only lip service from the government and short shrift in
university research funding.
Things got especially bad in the early 1990s, after a brief solar bubble.
Solel's predecessor, Luz Industries, went bankrupt in 1991 after building nine
thermal solar power plants in Southern California. A group of Belgian investors
bought the intellectual property for a mere $2 million and relaunched the
company under the Solel name. That gamble paid off handsomely with the Siemens
acquisition. Solel predicts it will book revenues of $200 million this year.
Arnold Goldman, the original founder of Luz, didn't give up either. He went on
to found BrightSource Energy, which has developed a new solar thermal technology
that uses thousands of small mirrors to reflect sunlight onto a boiler sitting
atop a tower in the center.
The boiler produces high-temperature steam that powers a turbine to create
electricity. The company has signed the largest solar power agreements ever with
Pacific Gas & Electric (PCG) and Southern California Edison (EIX) and has
brought in construction giant Bechtel Group to build the power plants.
A Tariff for Solar
The growing global success of Israeli solar startups has finally prompted the
government to pay more attention to the sun's potential to meet domestic energy
needs. In January of this year, the previous government of Prime Minister Ehud
Olmert approved a feed-in tariff for solar electricity producers and set a 2020
target of 10% of all electricity production from renewable energy.
"This coming year will be crucial in determining whether the government is
serious about solar energy," says Hezi Kugler, former director general of the
National Infrastructures Ministry, who was instrumental in gaining government
backing. Now a private businessman, he also chairs a newly established lobby
focused on persuading the government to move forward in renewable energy. Kugler
figures the government will have to allocate 80 to 100 square kilometers (20,000
to 25,000 acres) of land in the Negev Desert to meet its target. So far,
bureaucratic issues have delayed the first tenders for large solar power plants.
On Oct. 20, Prime Minister Benjamin Netanyahu announced the establishment of a
national council to find alternatives to oil within the next decade. The aim is
to formulate a plan of action for developing solar energy and other alternative
fuels to tip the economic balance away from oil producers and reduce the
concentration of wealth now in their hands. Many in the fledgling solar industry
say the rhetoric will have to be backed up by funding. "Israel has a tiny
national solar energy lab with an insignificant budget, while Germany has half a
dozen institutes devoted to solar energy with hundreds of scientists and massive
government funding," complains Roy Segev, CEO of Zenith Solar.
With global giants like Siemens and GE now investing in Israel's solar energy
sector, its chances to become a global force now seem much greater. But Israel's
government, which played a crucial role in getting the country's booming
high-tech sector off the ground, may need to lend more of a hand to the solar
industry if its potential is to be fully realized.