Hot thin roofs

Cheap power: Nanosolar's Roscheisen with his lightweight, thin-film solar panels.

More from FSB

Help wanted for HR firm A CEO and rodeo queen King of the mountain bike

Current Issue

(FORTUNE Small Business) Palo Alto -- With energy prices soaring, affordable solar power would be welcomed by any entrepreneur looking to trim the electric bill. Trouble is, power generated by the most widely available technology - panels covered with photovoltaic (PV) systems, which translate sunlight into AC current - still costs two to three times more than electricity generated from coal and other fossil fuels. That may be about to change.

Several startups, including HelioVolt in Austin, Miasolé in Santa Clara, Calif., and Nanosolar in Palo Alto, are working on a new technology called flexible thin film that's on the brink of making solar more competitive. Nanosolar has just begun to ship its thin-film solar systems to a German utility.

Made from pliant sheets of foil, the solar panels can be molded onto roof shingles, which are at once more attractive than clunky, heavy glass panels and less expensive to produce. In fact, the cost of making thin film is so much lower than traditional solar panels that experts say it could produce electricity for about the national average of 10.4 cents a kilowatt hour.

To see the promise of the new thin-film technology, it's useful to know why traditional solar is so expensive. The main reason is that standard PV panels must be made of costly silicon in air-tight clean rooms and then encased in heavy glass and steel frames for mounting on a roof. The casing and installation alone can account for half the total cost of a solar system. Japan's Sharp (SRP.F) as well as First Solar (FSLR) in Phoenix now makes PV systems, in which a thin layer of semiconductor material is deposited on a glass panel, which eliminates the need for bulky rooftop mounting systems. Yet these promising panels, which can be fashioned into roof shingles, still can't compete in price with fossil fuels.

Nanosolar and others think they have a better idea. Why not instead make PV systems on thin layers of film or foil? Imagine skyscrapers wrapped in flexible strips of thin-film solar that can generate electricity for lighting. Or picture a layer of thin film on the roof of your car that can help run the GPS system and air conditioning. Konarka, a startup in Lowell, Mass., is working on a thin film that can be woven into the fabric of a jacket. Simply plug your cellphone into your pocket and the energy of the sun will recharge it. "The movement is toward embedding solar - there's no doubt about that," says Ron Pernick, co-founder of Clean Edge, a green-tech consultancy in Portland, Ore.

Most thin-film makers layer different electron-gathering materials evenly over a piece of foil. The process can be tricky - any imperfections can reduce the effectiveness of the product. Nanosolar's breakthrough was to use nanotechnology - manufacturing on the molecular level - to create an ink with the crucial materials already mixed together. This ink can be cheaply printed on rolls of thin foil.

CEO Martin Roscheisen has raised $150 million from investors including Google (GOOG, Fortune 500) founders Sergey Brin and Larry Page and hedge fund magnate Steven Cohen of SAC Capital Partners. Roscheisen says that in many markets his thin film will produce electricity at prices competitive with those for power generated by fossil fuel. Thin-film technology still faces some challenges: It may degrade faster than systems made from silicon, which can last as long as 40 years. Will thin film hold up under a hot sun, rain, and dust storms? Roscheisen says he has overcome that problem and believes Nanosolar has taken an important first step toward tapping what he estimates to be a $250 billion global market.