In this assignment, you'll apply the Cloverleaf Model to a case study about HelioVolt, a clean energy venture that sought to revolutionize thin film solar. We'll provide you a text to give you the req

In this assignment, you'll apply the Cloverleaf Model to a case study about HelioVolt, a clean energy venture that sought to revolutionize thin film solar. We'll provide you a text to give you the required context. However, outside research is allowed and recommended. A full list of sources is included at the end of the case.

Introduction

It was 2015, and Dr. Billy J. “B.J.” Stanbery had just been appointed as the President of Siva Power, a promising Silicon Valley-based developer of thin-film solar photovoltaic (PV) panels. Dr. Stanbery was to lead Siva Power’s technical programs and was a respected veteran of the solar industry, with an illustrious track record spanning 30 years. His work included pioneering thin film technology at Boeing's terrestrial PV program, where his team had achieved record high efficiencies, and an entrepreneurial stint as the CEO of Texas-based HelioVolt, once hailed as one of the most innovative firms in the industry that developed copper indium gallium selenide (CIGS) thin film solar technology.

Dr. Stanbery had been forced to close operations at HelioVolt, but, in his new role, had the opportunity to continue his work in an industry that had been growing exponentially since the early 2000s. Solar power was then set to be the largest contributor to new power generation capacity globally over the next 25 years, driven by policy changes and high residential and commercial power prices. Small rooftop and building-integrated PV (BIPV) systems (panels loosely or wholly integrated with the roof materials, windows and other structural elements) were once projected to be a key driver of solar innovation. Dr. Stanbery had founded HelioVolt in order to bring about this vision. As he considered the opportunity ahead of him, he reflected on his time at HelioVolt and its forced closure in 2014, gathering the lessons that would inform his next steps.

HelioVolt’s Founding and Breakthrough Technology

HelioVolt was founded in 2001, in order to commercialize Dr. Stanbery's research at MIT Lincoln Labs and Boeing, which had resulted in a revolutionary process called Field-Assisted Simultaneous Synthesis and Transfer (FASST). FASST enabled direct printing of CIGS thin film solar cells on a variety of materials including glass, metals, and composites, and was shown to be 10-100 times faster than existing processes for manufacturing CIGS thin films.

Conventional CIGS manufacturing processes, at the time, typically involved a high-temperature vacuum step to deposit copper, indium and gallium onto a substrate, which was then annealed with selenium vapor to form the basic panel. This necessitated a batch-manufacturing approach, which was inflexible, time-consuming, and expensive. FASST, instead, utilized a two-stage process, based on a nanomaterial coating that could be sprayed onto substrates, and which enabled the direct application of a precursor film onto a printing plate and a substrate plate in stage 1, both using an evaporation sub-step. In stage 2, the substrate and printing plate were brought into close contact with the application of mechanical and electrostatic pressure, which transferred the precursor film onto the substrate and enabled the reactive formation of a CIGS layer. This coated substrate then formed the basis of a value-added product, such as modules for a utility scale installation or as PV materials integrated with a building structure.

As FASST could be completed at lower temperatures and atmospheric pressures, it was cheaper and faster, though the involvement of a precursor vapor deposition step meant that there was significant potential for additional cost savings. In theory, the FASST process enabled HelioVolt to build CIGS as a platform technology that could be used to develop several products for multiple markets. This included BIPV roofing, windows, and other structural elements, as well as standalone mountable modules akin to conventional solar products for utility scale and roof-mounted systems.

Dr. Stanbery had incorporated HelioVolt and assembled a team to commercialize and scale this process, while also developing it further to achieve higher cell efficiencies and durability, for the long lifetimes that solar infrastructure projects required. Raising approximately $1 million from friends and family to execute a plan targeting the BIPV segment which, the team believed, represented a $150 billion/year market in the US alone, the team aimed to reduce the costs of CIGS to a level where they could compete with conventional grid-supplied power. The Holy Grail was to achieve module- and building-integrated photovoltaic material costs below $1 per watt of capacity. In theory, BIPV could avoid the costly balance of systems (racks and other module frame materials) that conventional photovoltaic panels involved.

By 2005, HelioVolt had closed $8 million in Series A funding from New Enterprise Associates (NEA), a leading venture fund based in California, with a track record of energy investments. The very next year, the company entered into a Cooperative Research and Development Agreement (CRADA) with the National Renewable Energy Laboratory (NREL), to develop an alternative to the evaporative precursor deposition step based on liquid precursors to further reduce the costs associated with the thermal energy required for vaporization.

Although the alternative process was never scaled, HelioVolt's core research and development efforts paid off. Over the next three years, HelioVolt was able to achieve higher cell efficiencies, reaching 12.2 % in field settings (the highest at the time for CIGS), while reducing production time to a record-setting 6 minutes. Along the way, a number of investors led by the Paladin Capital Group injected an additional $101 million in a Series B round to build manufacturing facilities to scale the technology.

HelioVolt had been primed to rapidly diffuse CIGS thin films. They acquired a 122,400 square foot production facility in Austin, Texas. In Dr. Stanbery’s words, "Austin and Texas were a mature energy market - investors were knowledgeable about semiconductor technology, were familiar with energy markets and there was ample talent involved with the semiconductor industry that made it an attractive destination."

Finding Product-Market Fit and Industry Evolution

The dominant technology in the market for solar cell products at the time of HelioVolt's Series B round was crystalline silicon (c-Si), whose share in global annual PV production had been above 75% since 2000. Compared to all thin film technologies, c-Si had proven longevity. Monocrystalline silicon cells (cut from a single crystal) were the most expensive c-Si type technology on the market. Polycrystalline silicon (manufactured by melting several silicon crystals together), though quite cheap in comparison, were less heat tolerant and overall less efficient, but rapidly falling costs, meant that it had quickly become the technology of choice, particularly in utility scale installations.

In 2007, the cost of installation of a solar panel was approximately $9 and it was believed that the projected lowest cost for c-Si cells was $1.78 / Watt, of which over 50% was material cost. Thin films, in contrast, showed much greater promise for cost reduction. HelioVolt’s team believed that they could achieve modules that cost 1/4 of conventional c-Si, and over time, hit prices well below $1. A key lever in achieving this lower cost, was to "transform the variable cost component of cells into fixed cost components, and achieve scale quickly, so as to rapidly amortize that component," as Dr. Stanbery recalled.

However, given the state of the rapidly expanding global market for utility-scale installations, supported by policy and falling costs of c-Si technologies, HelioVolt's investors advised the company to target the growing market for standalone modules in order to reach scale, en route to pursuing its targets for BIPV. BIPV systems were yet to take off, and the global market for such systems at the time was less than $1 billion, led largely by Japan. In fact, there were several barriers (regulatory, technical, and innovativeness-related issues) that had to be overcome before the market could truly expand. HelioVolt had begun, in 2009, to ship samples of its modules and other products to customers and for certification, which it received the very next year. NREL verified HelioVolt's module efficiency at 11.8 %, placing HelioVolt among the industry leaders. At the time, however, no real sales had occurred yet. As Dr. Stanbery recalled, "proving system longevity and warranties in the utility scale market was a major challenge. Customers wanted lifetimes of at least 25 years, and higher efficiencies."

By this time the competition in the global solar market had also evolved and stiffened considerably. Other prominent CIGS manufacturers such as Solyndra and MiaSolé had begun shipping, and competitors betting on multiple technologies such as cadmium telluride (CdTe) and amorphous silicon (a-Si) had emerged. No single thin film firm had managed to cost effectively produce modules, apart from the exception of First Solar, which had bet on CdTe, and had shipped 60 MW in 2006. Most notably, Chinese companies, which had originally started as small-scale manufacturers of semiconductors for the IT industry, had progressed in leaps and bounds thanks to a favorable financing environment, overtaking the US, Japan, and Germany to become the world's leading producers of solar power products. This story in itself was incredible – Chinese firms such as Yingli Solar had started as module assembly firms, but with support from the government, quickly acquired the knowledge and capabilities to conduct R&D and upstream manufacturing through joint partnerships and vertical integrations. For instance, in 2011, Solibro and MiaSolé were both acquired by Beijing-based Hanergy. Chinese manufacturers expanded capacity rapidly in response to skyrocketing demand from Europe – the industry had grown at over 100% annually from 2003 to 2008. After the years of the financial crisis, while demand stalled, the growth in capacity continued. Prices crashed and eventually fell to approximately $7.0 / Watt by late 2010. (They would fall to $4.5 / Watt by 2012.)

This manufacturing glut was driven by increased polysilicon manufacturing capacity, as it was a relatively simple and proven technology to acquire in China. Suddenly, the game had changed for most next-generation solar technology players. In a price-driven market, Chinese firms had become highly competitive, largely due to state-supported financing, policy incentives, and learning-derived efficiencies and economies of scale in polysilicon manufacturing. The cut-throat competition inspired a series of reverse acquisitions by several Chinese firms attempting to gain a competitive edge or differentiation ability.

HelioVolt faced a new set of challenges in this environment. Given the tightening market, its investors were unwilling to fund the company further, and its massive R&D efforts were rapidly depleting the firm's coffers. The managing team was forced to lay off at least 15 staff members in an effort to downsize and streamline. It was imperative that HelioVolt gain traction in the market and generate revenue to "mitigate the negative cash flow during the scale-up period." Dr. Stanbery was named to the position of Chief Strategy Officer during this phase. Another industry veteran, Jim Flanary, who had guided First Solar in rapidly scaling operations between 2001 and 2003, was hired to become the CEO.

Acquisition by SK Group and Foreclosure

As 2010 turned to 2011, HelioVolt courted interest from SK Group, one of the largest conglomerates of South Korea, primarily involved in mining, chemicals, and energy. SK led a Series C round with $50 million (the round would eventually close at $85 million) for a controlling stake in HelioVolt. The investment was strategic and was designed to help SK enter the solar industry, while providing HelioVolt an attractive market. The first installations that HelioVolt had planned to ship would serve the SK Group's fleet of buildings. There was hope that capacity at the Austin plant could be expanded, and plans were developed to build another facility in China to serve the Japanese BIPV market. The SK Group appeared to be the white-knight investor that the firm needed. In the very same period, an additional contract was signed with Austin Energy to install HelioVolt's BIPV systems on small-scale projects. It would be the first commercial demonstration of HelioVolt's products in the U.S. Meanwhile, R&D efforts continued to yield benefits, as cell efficiencies reached 12.6% in 2011 even though major reductions in costs had plateaued. Despite the somewhat positive outlook in 2011, a series of black swan events would soon signal the end for the firm.

In 2012, the SK Group Chairman, Dr. Chey Tae-won, was embroiled in one of the largest legal scandals in South Korean corporate history. He was accused of embezzling nearly $40 million from the firms funds, using them to make personal investments. In January 2013, he was sentenced to four years in prison for the offense. In the wake of this event, the SK Group underwent several internal changes, and decided to streamline their operations. Initially bullish on solar, they had loaned HelioVolt another $19 million in August 2013, to continue operations. Even this injection, however, did not help HelioVolt without the associated traction in the market that SK promised. Their consolidation strategy meant that they would no longer invest to supply the Japanese BIPV market, and, finally, in 2014, announced that they would no longer support HelioVolt and the firm halted operations.

Dr. Stanbery recalls issuing the statement: "We are initiating this process because our strategic partner, SK Group, for reasons related to their business strategy, has informed us that they will no longer pursue their prior global solar PV goals. While we continue to highly value the relationship with SK and have made tremendous technical progress in partnership with them, we are disappointed by their decision at a moment when we believe the solar market is poised for exceptional growth." In mid 2014 the firm was forced to sell off its assets and close shop.

Reflections, Lessons, and Questions

In his San Jose office, Dr. Stanbery recounted this experience and the lessons it had taught him. He believed that despite this foreclosure, HelioVolt had made significant technical progress in CIGS thin films and counted it as a success.

If the firm failed to scale, what might he have done differently in the face of global competition and sweeping events beyond his control? HelioVolt had made significant technical progress (in terms of improved efficiencies), but market success was more elusive. While the company had been successful in raising substantial venture funding, going 11 years without making a significant sale had left the firm vulnerable to global impacts and transformations in the solar sector. How might he have responded differently to Chinese competition and slow development of the BIPV segment? As he reflected on his experiences, he pondered a number of questions:

• • • How does one successfully commercialize an early-stage breakthrough technology that seeks to disrupt established incumbents?

    • How can a startup jumpstart a niche market like BIPV?

    • Is there such a thing as raising too much capital?

    • Is it better to seek non-dilutive grant funding when the technology and market risk is still quite high?

    • Would HelioVolt have fared better if it targeted other countries where the BIPV market may have been more mature?

    • What are some dangers of raising venture investment, in particular with the possibility of difference of views between investors and founders?

    • Should a startup set aside its competitive advantage and forgo focusing on a niche market in favor of the mainstream market with the end goal of scaling up enough to be able to then re-penetrate the niche market?

• Apply the Cloverleaf Model to assess HelioVolt's overall readiness and market fit.

Question 1: Technology Readiness

Enter your observations related to HelioVolt's technology readiness. (A general assessment of readiness is fine; you do not need to use the optional Technology Readiness framework.)

Question 2: Market Readiness

Enter your observations related to HelioVolt's market readiness.

Question 3: Commercial Readiness

Enter your observations related to HelioVolt's commercial readiness

Question 4: Management (Team) Readiness

Enter your observations related to HelioVolt's management (team) readiness.

Sources

• • • World Energy Council, World Energy Resources 2016, 2016.

    • B.J. Stanbery, HelioVolt Corporation: The Future of Photovoltaic Power, Presentation made at the University of Texas (Austin), 2007.

    • Frank Andorka, "CIGS Solar Cells, Simplified," Solar Power World, January 8, 2014.

    • International Finance Corporation, Utility-Scale Solar Photovoltaic Power Plants: A Project Developer's Guide, June 2015.

    • Fraunhofer Institute for Solar Energy Systems, Photovoltaics Report: Evolution of Lab-Measured Efficiencies of Different Solar PV Cell Types, March 14, 2019.

    • International Renewable Energy Agency, Solar Photovoltaic Summary Charts,  2016.

    • K.S. Gallagher and F. Zhang, "Innovation and Technology Transfer Across Global Value Chains: Evidence from China’s PV Industry,” Climate Technology and Development Case Study, 2013.

    • "Former First Solar Executive to Lead HelioVolt," BusinessWire, June 17, 2009.

    • Ucilia Wang, "HelioVolt Delays Mass Production Until 2010," Greentech Media, February 5, 2009.

    • Eric Wesoff, "HelioVolt Re-Emerges With Improved Efficiency CIGS Solar Panels," Greentech Media, June 6, 2012.

    • Jeff St. John, "HelioVolt Opens First Thin-Film Plant," Greentech Media, October 24, 2008.

    • Jennifer Koh, "HelioVolt on Nanosolar's Heels," Greentech Media, December 20, 2007.

    • Eric Wesoff, Solar Grim Reaper Alert: CIGS Aspirant HelioVolt Gives Up the Ghost," Greentech Media, February 25, 2014.

    • Jennifer Koh, "HelioVolt Gets More Cash for Thin Solar," Greentech Media, October 22, 2007.

    • Eric Wesoff, "Update: Solar Firm HelioVolt’s VC Round Totaled $85M," Greentech Media, September 23, 2011

    • Eric Wesoff, "HelioVolt Gets $50M From Korean Giant SK Innovation" Greentech Media, September 19, 2011. 

    • Eric Wesoff, "HelioVolt Re-Emerges With Improved Efficiency CIGS Solar Panels," Greentech Media, June 6, 2012.  

    • "HelioVolt Halts Operations as Investor SK Pulls Plug," Optics.org, February 26, 2014.

    • GTM Research, Executive Summary: Building Integrated Photovoltaics: An Emerging Market, 2010.