Experts are anticipating a crop of cleantech IPOs this year, as well, while some, such as venture capitalist Vinod Khosla, are concerned that some greentech IPOs this year may disappoint investors and sour the market for other green IPOs. Stimulus programs, such as the new round of ARPA-E funding announced last week, also are shifting the financing landscape, leading to new tactics as companies try to leverage government funding to advance over competitors.

Shifting market conditions are reshuffling the deck for clean technology, strengthening some companies’ hands while weakening others’ – and spurring new thinking and innovation about how to make progress at a time when traditional financing is harder to come by, according to a new GigaOM Pro report called “Cleantech Financing Trends: 2010 and Beyond” (subscription required) released Tuesday. As a result, we’re seeing some changes, such as new financing models, including investments from strategic partners, community banks and utilities, and new types of partnerships with corporations and cleantech companies from other countries.

Meanwhile, the report predicts that valuations this year will remain lower than their peak in 2008, although they will likely grow from the lows of 2009. That means the funding being raised is more expensive and is also harder to come by. Investors at all stages are requiring startups to meet more milestones, such as offering more demonstrations proving that the technology works or agreements with customers, before doling out cash, according to the report.

Companies are conserving cash, precariously balancing the need to make progress — in order to get to the next funding round — with the need to make the money last as long as possible. Venture capitalists such as CMEA Capital’s Maurice Gunderson say they are seeing less aggressive plans than they did in 2008. As he put it, “You don’t get to have a long run if there’s no short run.”

Project financing also remains more expensive than in 2008, although it is far more available now than last year. Companies having the hardest time are those that have proven their technology in demonstration projects and are ready to commercialize with large, expensive factories. Unless companies can get government loan guarantees – which have accelerated, but are still trickling out slowly –- risk-averse debt financiers are reluctant to finance first commercial projects with less-established technologies.

Some projects have taken on more expensive private equity to fill the debt-financing gap, but that may also be getting more difficult. The Cleantech Group reported earlier this year that venture capitalists are moving away from energy generation and toward energy efficiency plays, which are expected to be less capital-intensive.

Image courtesy of aresauburn’s photostream Flickr Creative Commons.

We recently sat down with Maurice Gunderson, senior partner at CMEA, who previously co-founded venture-capital firm Nth Power, to discuss his thoughts on the future of the greentech industry, and the how CMEA – and its portfolio companies – are prepared to thrive in the new economy. Here are some excerpts from our conversation:

Q: How have your tactics changed in the recession?

A: The question is how do you keep small companies covered and lay out a financing plan from beginning to exit? Certainly we’ve had to be creative and make lots of adjustments to our operating plans. In general, people are looking for more capital efficient investment opportunities and are figuring out ways to scale back or be smarter about how to grow the size of the business. You don’t get to have a long run if there’s no short run. We’re generally looking at plans that require less cash than if we were looking in 2008. And we’re a lot more flexible about where to look for capital.

Q: What do you see as some of the long-term impacts of the industry focus on Washington?

A: Wall Street has not moved to Washington. It’s moved to the emergency room, which happens to be in Washington. But it will move back to Wall Street in a more rational way. The thing about government is it’s very helpful, but it doesn’t require the same kind of returns that we do. With the feed-in tariff in Germany, if you were a solar producer when it started, you could sell all you could make, and it didn’t matter if you were a low- or high-cost producer. That was a good thing.

But [as the tariffs decline] and the market goes back to normalcy, high-cost products go away and low-cost products thrive. It’s the same thing here. If you invest in a company that doesn’t have a path to grid parity, the only way it can survive is through subsidies. But if it has a path to grid parity and subsidies help it grow, cool.

Q: One difference is that the feed-in tariffs in Germany declined steadily to help make renewable electricity competitive, while the stimulus programs are short-term. How will that impact the industry?

A: Feed-in tariffs in Germany were designed to stimulate the market over a preset period, while the government subsidies we’re seeing now were designed to avoid the second Great Depression. We certainly wouldn’t want to slow it down. Everybody’s got to realize this is explicitly a short-term thing. You’ve got to design your strategy accordingly.

Q: If companies are changing their business plans to take advantage of government programs, could that backfire once the programs disappear?

A: Yes, this distorts people’s business plans. It’s an extraordinary situation. To take advantage of this, companies had to change their business plans and maybe distort them. If the stimulus and the reaction to it has the effect of hatching a lot of clean-energy companies that wouldn’t be there anyway, it’s not a bad thing if there’s a little distortion. If you’re going to take advantage of a short-term thing that was not [available] before, yes, you’ve got to change tactics.

Q: Does this mean we’ll see a dip once the stimulus funding ends?

A: You bet. Entities that were propped up by it will go away and those that were incubated by it will survive.

Q: What are some of the biggest potential future opportunities?

A: I see three big breakthroughs in the future that will change everything about the energy landscape. No. 1 is fusion, which is the farthest out there. If we get fusion to work, we don’t need solar or other renewable generation. But it requires fundamental breakthroughs and it’s a harder challenge than humankind has ever taken on – it makes Apollo look like a weekend project. Say it’s 100 years off.

No. 2: grid scale storage. New chemistries that enable bulk storage on the same economic footing as power generation would turn renewables into dispatchables, which triples the value of the power. It also says we can build all we want because we don’t have to worry about grid balancing problems. That would probably make a 10-to-1 difference in the amount of wind we could develop and use. It’s huge, and it’s 10 – 15 years away.

No. 3, the nearest term, is cheap nuclear that lets us get off coal — and that’s now.

Q: Many companies are developing energy storage for the grid today. Why do you believe it’s still 10 – 15 years away?

A: People are trying warmed-over chemistries and are making a lot of incremental advances, but the technologies don’t have the economics and don’t have the life [needed for bulk storage]. I haven’t seen one yet that really could solve this problem, but I know of several breakthroughs coming in the 10-15 year time frame.

The idea behind the technology, developed by Dan Nocera at the Massachusetts Institute of Technology, is to use an intermittent source of energy, such as solar power, to split water into hydrogen and oxygen via electrolysis. When the energy is needed, the hydrogen and oxygen can either be recombined to produce electricity, such as with a fuel cell, or the hydrogen can potentially be converted into a liquid fuel, like ammonia, and used to power vehicles.

If Sun Catalytix’s energy storage technology is successful, it could help spur the deployment of renewable energy. Solar and wind power are intermittent, meaning that the sun doesn’t always shine and the wind doesn’t always blow, and these events can’t be controlled according to electricity demand. Energy storage has long been considered a Holy Grail for enabling large amounts of distributed renewable-power projects.

But so far, energy storage for these applications has been too expensive. Sun Catalytix hopes to change that and is working with cobalt-phosphate catalysts consisting of compounds in solution, instead of the usual metal surfaces. “The real benefit is that the materials are dirt cheap,” said Metcalfe, who is also a general partner at Sun Catalytix investor Polaris Ventures and the former CEO of defunct biofuel startup GreenFuel Technologies.

Aside from the catalysts, the rest of the device also is made of cheap materials, such as plastic, he added. “All the materials we have [on the device] running in our office now come from Home Depot – we’re talking PVC, not stainless steel.”

Because the compounds deposit themselves on the electrodes, constantly repairing themselves as the device splits water, this technology can also use salty or dirty water, he added, a big advantage where clean water is in short supply. While normal electrolyzers shut down in minutes if they’re run on dirty water, Sun Catalytix’ electrolyzer has already run for days at a time with no degradation, Metcalfe said. In addition, if the hydrogen is converted back into electricity, the reaction produces clean water as a byproduct, a potential plus, say, off the grid in Sub-Saharan Africa.

Sun Catalytix hasn’t yet decided whether its ultimate product will be electricity or fuel, Metcalfe said, adding that the technology could potentially address any application that currently relies on a big diesel generator. For example, the technology could be used to provide backup power for telecommunications towers or mobile land bases for the military – and the hope is the technology could eventually target residential and commercial markets, as well, he said.

Make no mistake, the startup is still years away from commercialization and doesn’t yet have a market plan in place. It’s currently working to meet technology milestones under the two-year ARPA-E contract, Metcalfe said, adding that Polaris generally aims to invest for five to seven years. Sun Catalytix will have plenty to prove, including its efficiency, stability and reliability, as well as its ability to manufacture its devices cheaply and at scale and volume, before it can meet its potential.

The Evora hybrid is expected to look like this regular Evora sports car, which came out in September.

The Evora 414E Hybrid concept car is a plug-in hybrid version of Lotus’ currently available Evora (pictured above), which represented Lotus’ first new vehicle since 1995 when itstarted rolling out in Europe in September. The hybrid concept includes two EVOdrive motors, each providing 204 horsepower and 295 pounds of torque per foot, as well as EVO’s electric generator technology to help run a 35kW range extender system.

Jeremy Walker, a cleantech startup strategist and an advisor to EVO, called the deal “exceptionally important” for the startup. The deal could potentially lead to a commercial partnership if Lotus decides to commercialize a range-extended electric vehicle like the Evora hybrid, he said. “More importantly, it will make the rest of the hybrid powertrain engineering world sit up and take notice. Lotus has a global reputation for being some of the finest automotive engineers on the planet, so their decisions on what technologies they include are watched closely. Other people follow where Lotus leads.”

EVO is a spinoff from Imperial College London, where Chief Technology Officer Michael Lamperth works as a lecturer in mechanical engineering. The startup is developing what’s called an axial flux motor, or a disc-based motor. Instead of the usual cylinder rotating in another cylinder, these motors consist of a disc rotating facing another disc. “It’s the best usage of space,” Lamperth said.

While the concept of an axial flux motor isn’t new, the technology previously hasn’t succeeded because it’s so powerful that past iterations have fallen apart, Walker said. New materials, a new design and different manufacturing processes fix that problem, Lamperth added. The result is a motor that EVO claims is smaller, lighter, more powerful and more cost-efficient than current electric motors.

The motor can essentially get more performance out of the batteries, a major advantage as batteries – including the limited electric range they enable and their high price – have been a major sticking point for electric and plug-in hybrid vehicles. “There has been a lot of focus on batteries, but drive systems are almost as big a market” and haven’t been getting the same attention, Walker said.

A vehicle that can travel 80 miles on a single charge today would be able to drive 100 miles with EVO motors, Lamperth claims. And that’s for a cost expected to be at least 40 percent lower than current motors, in mass production, because the motors use at least 40 percent less material, he added. Price has been a critical challenge for plug-in hybrid and electric cars, which is why the first such vehicles have been high-end sports cars, such as the Tesla Roadster.

Aside from plug-in hybrids, EVO plans to target electric vehicles and regular hybrids. But the company expects to start with plug-in hybrids, which it expects will hit the market in about two years, because – considering the long development cycle for vehicles – manufacturers are evaluating motor providers for those vehicles now, Lamperth said.

EVO is in small-volume manufacturing now, making motors on its own in “fives and tens,” and already is seeing revenues from demonstration and beta vehicles and from the retrofit market, Lamperth said. It plans to partner with automotive suppliers for mass production and already is in talks with other potential partners, he added.

The company, which already has raised $5 million from Imperial Innovations, the venture arm of Imperial College, and angel investors, is now seeking a second round of about $10 million. While it has commitments from existing investors, it really hopes to attract a U.S. venture capitalist to help it target the U.S. market as well, Lamperth said, adding EVO plans to close its funding by summer.

Related GigaOM Pro Research (sub required):

• Hot Topic: Opportunities in the Electric Vehicle Market
• Report: IT and Networking Issues for the Electric Vehicle MarketRead more: http://pro.gigaom.com/archives/green-it/briefings/#ixzz0h2c79WVL

At the Cleantech Forum in San Francisco last week, Conley claimed b2u’s technology can deliver the equivalent of 40 to 60 cents per watt – and 2.5 to 4.5 cents per kilowatt-hour – by generating heat directly, instead of producing energy that is then used to make heat. That makes it potentially competitive with natural gas today, and the economics look even better if the heat is also used for air conditioning, as well as heating, Conley said. (It may sound counterintuitive, but heat can be paired with a chiller to generate cool air).

Other solar companies that are developing ways to utilize the sun’s heat include Sopogy, which installed its first commercial project in Hawaii last year, Focal Point Energy, which is developing systems that produce hot water and steam for industrial applications, HelioDynamics, Chromasun, and the Center for Architecture Science and Ecology.

These solar heat systems are generally based on the same type of technology as the big projects that BrightSource Energy, Abengoa Solar and others are installing in the desert. A reflector directs the sun’s heat to a tube in which fluid circulates, and the hot fluid then provides heat for other applications.

But companies like b2u Solar are working to make the systems viable for applications that can use the heat directly — and at smaller sizes so the systems can be installed where the heat is used, avoiding transmission losses. In b2u’s case, the design utilizes an evacuated tube collector, normally used for hot water heating, and Conley claims the system can capture and convert diffuse light, not just direct light like most concentrators.

B2u’s technology generates heat of between 135 and 200 degrees Celsius. But one issue with these types of technologies has been the difficulty of using all of the heat. Even though making heat is cheaper than producing electricity, “if a system generates more heat than [a customer] can use, that’s not a payback,” said Jenny Chase, lead solar analyst at Bloomberg New Energy Finance. Solar-thermal cooling has proven more difficult than expected, with Chase saying she has yet to see a company make it work on a commercial scale and volume.

B2u believes its ability to use diffuse light will allow it to tap into the elusive cooling market. A case study comparing production on a cloudy day with a sunny day found only 16 percent lower production on the cloudy day, Conley said. And a demonstration project has been cooling successfully since Dec. 1 at a third of the current electricity cost for air conditioning during the day, he added.

With that ability, along with its temperature range, b2u believes its technology has plenty of industrial applications, including concrete curing, paper finishing, wastewater treatment and commercial cooking. “ConAgra drying onions and garlic for McDonald’s – that’s the temperature range you need,” Conley said. The company also hopes to replace some of the natural gas used to inject water for oil production, he said, and has just bid on one such project in the Middle East. All together, b2u estimates its technology could potentially address 30 percent, or $90 billion, of the market for industrial process heat and commercial heat.

B2u, which is seeking $6 million to $8 million in its first round of funding, is in final negotiations with contract manufacturing partners and plans to begin shipping commercial collectors in the second quarter of this year, said Conley. The company already has several demonstration projects installed in China and the United States, including one at the NASA Ames Research Center at Moffett Field, Calif. that has been running for nearly two years. B2u also has formed a partnership with the Gas Technology Institute, a nonprofit to develop new energy technologies, and, together with its partner, won a $400,000 grant from the California Energy Commission for a demonstration project in Southern California.

Image courtesy of Sopogy.

A chart that Sheeraz Haji, president of the Cleantech Group, presented Thursday shows that while worldwide private investment in cleantech fell below $150 billion in 2009, from just above $150 billion the previous year, global stimulus spending added an estimated $76 billion to the total pool of cleantech funding in 2009 and is expected to reach $182 billion this year (see chart, above). The chart is based on analysis from the Cleantech Group, as well as numbers from the World Economic Forum, the International Energy Agency’s World Energy Outlook, Bloomberg’s New Energy Finance and HSBC.

These numbers mean that governments, in essence, have become the biggest cleantech venture capitalists – with China as the largest player, by far. And just as the U.S. stimulus has changed the game for cleantech entrepreneurs and investors in the U.S., with both entrepreneurs and investors paying far more attention to Washington as private capital follows the public capital in a challenging economy, the new money from China is bound to bring plenty of changes to the industry as well, Haji said. As Maurice Gunderson, a senior partner at CMEA Capital, put it:

“It’s an opportunity, a threat and a wake-up call.”

For one thing, getting government funding makes a company more attractive to investors because it’s free (i.e. nondilutive) financing that essentially multiplies the effect of their dollar, so investors have to put in less cash. The down side is that Beijing, as with Washington, can only pick so many companies, and companies that don’t get government funding will have a harder time raising more private funding, Haji said.

Also, Beijing is likely to favor domestic companies in picking its winners. This doesn’t only happen in China, and is simply an effect of making funding a political process, Haji said. “Politicians are going to care if they’re giving their money to a domestic company.” For U.S. companies, the deeper pockets of Beijing’s stimulus program – as well as other government support for cleantech – may give Chinese competitors an advantage, especially in the potentially enormous Chinese market, he added.

Take Denmark, which largely grew the wind industry with government support. “Wind companies in the U.S. are disadvantaged because of that,” Gunderson said. (The world’s largest wind-turbine manufacturer, Vestas, is Danish.) China can bring orders of magnitude more resources to bear on cleantech than Denmark, he added. “Whatever they decide to do is going to be big.”

In addition to the greater government funding, the Chinese economy has been booming as of late and 69 percent of the total cleantech IPOs last year came from China. “Capital flows more freely in China,” Haji said, adding that debt markets also are doing better as loans are cheaper. The availability of provincial loans, for example, for its contract manufacturing partners helped lower SolFocus’ capital expenditure in the country. “Our capex was zero,” said Gary Conley, chairman of the concentrating photovoltaic company. “China makes it real simple for us.”

Companies aiming to target the Chinese market are aware that the government has a big influence on the business decisions and are making more trips across the Pacific, Haji said. And some U.S. companies also are considering manufacturing in China because of the lower costs, although the decision is balanced out by issues such as lower intellectual property protection, he added.

Silicon Valley investors also are taking more trips to China. “There’s pretty good awareness that if you want to be a credible cleantech VC, you have to go to China,” Haji said. Many big venture-capital companies have opened offices there. CMEA doesn’t have an office there, but does have one investment in China and has funds with which it can cooperate in the country, Gunderson said.

Still, Conley said that early-stage funding remains a Silicon Valley specialty, as Chinese stimulus money is more similar to later-stage funding – and he expects that market will slowly swing back in about two years after the stimulus program ends.

But even though the worldwide stimulus programs only are meant to last a few years to help counteract a global economic downturn, they way the money is spent now will influence the course of the energy and cleantech markets over the next 100 years, Haji said. “If we’re not careful, the U.S. will cede global competitiveness to China,” he said.

Finally, all the stimulus programs will likely cause a dip when they end, and it’s unclear how quickly the industry will be able to bounce back afterward, Haji said. “It might hurt.” Companies propped up by the funding will go away, while those that have been incubated by it – and are able to compete on their own once the government spending ends – will survive, Gunderson said.

With net metering, as the arrangement is called, customers pay only for their net electricity usage. Their meters run forward when they are using more electricity than they are producing and run backward when they are producing more electricity than they are using. The absence of net metering could cut out much of the economic benefit of building solar systems, at least in places without other financial incentives, such as a feed-in tariff.

In California, the solar installation industry faced the possibility of suffering from a lack of effective net metering rules up until last week. Utilities in the state were limited to accepting only up to 2.5 percent of their electricity from net-metering customers, and one utility, Pacific Gas and Electric, is expected to reach that amount this year. Last year, Adam Browning, the executive director of Vote Solar, said installations would “grind to a halt” in PG&E territory if the net-metering cap wasn’t raised. And Assemblywoman Nancy Skinner, D-Berkeley, who wrote the bill to raise the cap, called net metering “absolutely fundamental” to the success of solar in the state.

The California Assembly last Thursday approved a plan to double the cap to 5 percent, a move which the Senate had already passed the previous week. Gov. Arnold Schwarzenegger is expected to sign the bill into law this week. The extension “sends a clear signal to the growing solar industry that California intends to be open for business tomorrow and for years to come,” said Sara Birmingham, western policy director for the Solar Alliance, in a press release.

Meanwhile, net metering advocates in New York are cheering after the state legislature on Tuesday passed an amendment that will allow non-residential customers to participate in the the state’s net metering program. When the state extended its net metering program in 2008, it turned out that the wording of the law inadvertently restricted the program to residential customers.

New York’s new amendment will allow schools, businesses and other energy consumers with systems of 2 MW or less to be able to get credit for feeding solar power into the grid. “The amendment passed today means the expanded net metering law will finally function as it was meant to and that millions of dollars in green energy systems can be installed,” said Carol E. Murphy, executive director of the Alliance for Clean Energy New York.

Vote Solar didn’t immediately have estimates on the expected size of the non-residential market for these small systems. But Rosalind Jackson, director of communications at the advocacy group, said that even if the implications of the amendment are modest in today’s market, it could help support significant growth in the years to come.

Overall, the two net metering wins are part of a trend toward net metering around the country. According to a Vote Solar report released in November, 27 states have solid net-metering standards (which received A or B grades from the group), up from 13 in 2007.

That’s not to say the policy hasn’t had its share of opposition. Opponents, including some electrical and utility workers, have expressed concern that more net metering could reduce the stability of the grid and raise costs for other customers. Other solar advocates favor other policies, such as German-style feed-in tariffs, in which solar customers sell power directly to utilities, instead of net metering, while still others want both.

Image courtesy of SolarCity.

Because while DuPont, one of the world’s largest chemical companies, has been actively providing critical materials to the solar industry for the last 25 years, solar is one of the last industries that the company’s name conjures up for most people –- well behind, say, chemicals, agriculture or materials like nylon and lycra (commonly called spandex). Now DuPont is looking to change that.

DuPont has an aggressive goal to boost its solar business from $400 million in 2008, to more than $1 billion in solar sales in 2012 — a big number in the solar biz, but a figure that would actually make up less than 4 percent of DuPont’s overall 2009 sales of $27.33 billion. Doyle told us DuPont is on track to meet that goal. Its sales in the solar PV market grew more than 30 percent in 2009 and are expected to rise 25 percent this year.

DuPont has been ramping up its solar production capacity in recent months. The company is spending $295 million to expand its production capacity for Tedlar backsheet films — which provide electrical insulation and protect panels from UV light, moisture and weather — by enough to enable a whopping 10 gigawatts of panels. Earlier this month, DuPont opened a new photovoltaic lab in Geneva, and its thin-film solar factory in Shenzhen, China is now up and running at full capacity.

DuPont has also introduced new substrate materials for thin films, as well. It’s a change for a company that has been providing essentially the same materials – albeit ever new and improved versions – to the solar industry for decades. DuPont claims its polyimide and polyester films, on which thin-film companies deposit conductive solar materials, can handle higher temperatures without expanding as much as other films, leading to potentially greater reliability and productivity.

The solar segment gets “more than our fair share” of research dollars and attention from leadership, Doyle said. As proof, Doyle pointed to the fact that Ellen P
Kullman, DuPont’s CEO of four months, recently spent half an hour talking with him about grid parity.

DuPont’s growing commitment to solar is part of a larger trend of massive, multi-faceted manufacturing companies entering clean energy and energy efficiency from other industries, said Ron Pernick, a principal at research firm Clean Edge. Other examples include networking giant Cisco moving into the smart grid and semiconductor-equipment manufacturer Applied Materials, which sells thin-film solar manufacturing equipment.

The company faces its share of challenges, however. With prices for conventional silicon-based solar panels falling steadily, and a risk-averse economic climate making it difficult for new technologies to score financing, thin-film technologies are “really taking it on the chin,” as Doyle put it to us. Even in its conventional solar business, DuPont has the difficult task of trying to predict how much the market is going to grow or shrink and has to prepare for it, often years in advance:

“We have such a significant market share position in some of these materials that we have to be ready if the market goes up 30 percent, 60 percent or 90 percent – and it’s hard for chemical companies to risk sitting around with an empty plant [if we overshoot the target]. It’s not the type of industry where you can get it on the dot.”

Right now, DuPont’s factories are far from sitting empty. After seeing a dip last year, its solar business began to see a pickup in the fourth quarter as manufacturers began ordering in anticipation of increased demand, Doyle said. “Things are really tight for a lot of materials right now, and everyone’s waiting to see if that will continue.”

In spite of its challenges, DuPont has the potential to make an increasingly serious impact on the solar industry if it stays committed, analysts say. Its materials could play a key role in helping to improve both cell and manufacturing efficiency, reducing the price of solar modules. And Pernick says a company like DuPont — with plenty of experience in the construction industry – could be what the industry needs to finally integrate solar into building materials in a way that could make solar power more ubiquitous. And DuPont certainly has more solar plans in the pipeline: You can expect the company to announce a couple of new products and new partnerships in the next few months, Doyle said.

Gottesfeld also told us CellEra already is working with a major manufacturer and is integrating its fuel cells into backup power systems. CellEra plans to use its new cash to turn its working prototype into its first commercial product, he said, adding that the company aims to have products ready for the market in two years.

According to the release, CellEra believes it can cut fuel-cell development and manufacturing costs by more than 70 percent by eliminating the most expensive material – platinum. The precious metal, which is by far the costliest part of a fuel cell, is normally used as a catalyst to create the electrochemical reaction that converts hydrogen, air and water into electricity.

The key to CellEra’s platinum-free fuel-cell technology is its proprietary electrodes, Gottesfeld said, which are the positively and negatively charged areas where the reaction takes place. The company isn’t developing the platinum-free catalysts itself, instead working with partners that use raw materials such as iron, cobalt or silver, he added.

CellEra’s plans to initially target stationary applications, such as providing backup power for hospitals, which already spend more than $3 billion for lead-acid batteries each year. CellEra also plans to target the diesel-generator, telecommunications and information-technology markets.

Further into the future, the company also seems to be considering the elusive vehicle market. Christian Schütz, a partner at BrainsToVentures, told the Financial Times’ German edition that he expects CellEra to introduce fuel cells for hybrid cars by 2015.

Gottesfeld shied away from giving a date, saying that “given the flux in this market today, I would not venture to make any projections.” Still, he added that the technology could work “very nicely and cost-effectively” with batteries to extend the range of electric vehicles in the future.

If CellEra succeeds in significantly lowering costs, it could help fuel cells overcome one of its key obstacles. Fuel-cell companies, delivering huge promises and few mass-market products for decades, have long been an easy target for skeptics. The technology’s ability to convert fuel, such as hydrogen, into electricity with no emissions other than water vapor has led automakers to tout fuel cells as the next big thing for vehicles since at least 1993, when Ballard Power Systems originally demonstrated a fuel cell in a vehicle and planned to make it available in just a few years. But high costs, as well as infrastructure issues and some technical challenges, have kept the technology in the wings.

The CellEra announcement is part of a spate of recent news, including advances from automakers, customer announcements (see here and here) and new government programs in the U.S. and the UK, that may help to bring back a bit of optimism about the potential for fuel cells.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Report: IT and Networking Issues for the Electric Vehicle Market
• Why iPad 2 Will Lead Consumers Into the Post-PC Era

The new cash comes after 1366 raised $4 million from the U.S. Department of Energy’s Advanced Research Projects Agency-Energy (ARPA-E) program, becoming the first (and so far, the only) photovoltaic startup to be selected. The MIT spinoff, founded in 2007, also previously raised $12.4 million back in March.

1366 is developing technologies to boost the efficiency – and lower the cost – of manufacturing conventional multicrystalline solar cells, starting with two machines: one that “texturizes” solar cells, giving them a surface texture that increases internal light refraction and boosts solar panel efficiency, and another that produces thinner conductive metal “fingers” on the cells, which cut costs and reduce shading, again increasing efficiency.

Craig Lund, director of business development for the Lexington, Mass.-based company, tells us the company is about to sign on its third customer for testing these tools and plans to install them in its customers’ pilot lines in the first half of next year. The company has signed confidentiality agreements and can’t yet disclose the names of its customers, Lund said, adding that all three are based in Europe. The company last year had expected to deliver a machine for its first customer this March.

In September, chief technology officer Emanuel Sachs said 1366′s technologies have already produced cells of almost 18 percent efficiency, and the company expects to hit 19 percent this year, at a cost only pennies per watt more than that of producing cells with 16 percent efficiency. Standard multicrystalline cells average approximately 16 percent efficiency, although the most efficient multicrysalline cells, such as those made by Kyocera, already have exceeded 18 percent efficiency.

With its ARPA-E money, 1366 also is researching a new way of making wafers by molding them directly from molten silicon, cutting out many steps in order to potentially cut costs by 70 percent, reduce silicon waste by 50 percent and further boost panel efficiencies to up to 20 percent, Lund said. Such low costs could make it more feasible to produce wafers in the United States instead of in China, especially if the U.S. market takes off, he added.

If the technology works as 1366 hopes, the company plans to manufacture wafers – instead of supplying equipment as it is with its other technologies – and sell them to solar-cell manufacturers, the same customers that it’s targeting with its first machines. It hopes to have a factory up and running by 2012, Lund said, adding that the company is hoping to help fund the manufacturing facility with a federal loan.

1366 also is hiring, Lund said. The company has grown from 12 to 26 employees and expects to reach 30 employees by next month, he said.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Why iPad 2 Will Lead Consumers Into the Post-PC Era