Solar Eclipsed?

The sleek headquarters of SolarEdge Technologies are nestled in the high-tech industrial zone of Hod Hasharon, a city 30 minutes outside of Tel Aviv. The company was founded in 2006 by five young Israeli men who met in a technology unit in the army. I meet one of them, Lior Handelsman in the company’s Silicon Valley inspired office, where twenty-somethings, mostly men, dressed in jeans and wire-framed glasses mill about.

As we sit in a conference room named after the 19th-century English scientist Michael Faraday (in typical “geek chic” aesthetics all of the company’s conference rooms are named after renowned scientists—the one in the New York office is called Einstein), Handelsman explains SolarEdge’s “edge.”

Usually solar photovoltaic (PV) panels convert sunlight into usable electricity by feeding the direct current (DC) to an inverter for conversion to alternating current (AC) and then to the grid. But the power output can drop if a solar panel is misaligned, in the shade or even just dirty. SolarEdge’s system makes it possible to convert DC to AC on each individual panel as well as to monitor panels individually, thereby increasing the output by 25 percent, according to the company’s studies. “It was a breakthrough,” says Parnass of the Renewable Energy Association of Israel. David Faiman, who was the director of Israel’s National Solar Center at Ben Gurion University until this past October compares SolarEdge’s innovation to Harry Tabor’s black surface in terms of a “game-changing” idea that originated in Israel.

SolarEdge sells its system in 36 countries and has offices in the United States, Germany and Japan. And while the company has received accolades abroad for increasing the efficiency of the panels and was recently named one of Global Cleantech’s 100 best companies for 2012, it has not received the same adulation at home. “We sold systems and products in 10 other countries before we sold in Israel,” says Handelsman, “It’s absolutely not true that Israel is encouraging solar development. And if someone from the government thinks otherwise, I am happy to talk to them.”

What role government should play in the solar business is a contentious issue not just in Israel but the world over. It was a flashpoint in the 2012 U.S. election with Solyndra, the solar company that received $527 million in loans from the federal government before declaring bankruptcy in 2011. Republicans aggressively attacked it as an example of governmental mismanagement. However, countries such as Germany that are solar leaders are also ones where governments heavily subsidize the industry via incentives, feed-in tariffs and tax breaks. This comes at a price, and critics note that Germans pay some of the highest electricity rates in Europe.

At the same time, the solar industry worldwide is in turbulence. “We are in an unstable period right now,” says Meir Ukeles, partner at Israel Cleantech Ventures, a venture capital fund focused on emerging clean technology companies in Israel. “If you were to look at a list of public companies [in the United States],” he adds, “half of them are gone.” One reason for this is that a huge volume of readily available low-cost PV panels, many made in China and subsidized by the Chinese government, has oversaturated the market. “People couldn’t compete with the Chinese and they lost their shirts,” says Jonathan Shapira, attorney and founder of Boston Israel Cleantech Alliance, which connects cleantech entrepreneurs, investors, researchers and government officials in Israel and Boston. But Shapira doesn’t think the future is necessarily bleak. He compares this situation to when the dot-com bubble burst in 2000 leaving the strongest companies standing. “The Internet survived.”

The low cost of PV panels flooding the market also has an upside: a big jump in solar utilization. In the United States, for example, more solar panels were installed in 2012 than in any previous year, according to a new report, with residential use of solar power up 70 percent over 2011. Parnass of Renewable Energy Association of Israel believes that the low cost of PV panels can be good for Israel as well. Already, half of Israel’s solar panels now come from Suntech, a Chinese solar power company based in Wuxi, China. Suntech is also collaborating with an Israeli company to set up a renewable energy test center for new solar power technologies in a suburb of Eilat.

The falling costs of PV panels have hurt solar thermal plants, with some consumers opting for PV panels rather than the more expensive installation. In October, the German company Siemens admitted that due to changed regulatory conditions, lower growth and strong price pressure in the solar markets, “the company’s expectations for its solar energy activities have not been met.” Among other investments, it will sell Solel, the company founded by Luz alumni that makes equipment for solar thermal power plants; Siemens bought it just three years ago for $418 million.

Funding for solar is also in flux. Global venture capital investments in solar dropped almost 50 percent to $992 million in 2012 from $1.9 billion in 2011, according to a report by Mercom Capital Group, a global clean energy communications and consulting firm. Isabel Maxwell, Director of Israel Venture Network (IVN focuses on environment, economic and educational social entrepreneurship) and an adviser to Or Capital Boutique Environmental Investments, worries that this will negatively impact Israel since in an unstable market investors may take their business to more solar-friendly countries such as Australia or Brazil. “If they [the Israelis] don’t fix the red tape, the players will no longer play in the Israeli sandpit,” she says. “Even the local ones are going abroad.”

Ben-Gurion University’s David Faiman also worries about potential implications. “If investors withdraw their funds from too many innovative companies, it may require a new generation to reinvent the solar wheel.”