Blue Square Energy Turns to “Survival Plan” to Stay Afloat

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logo blue squareYou know the solar industry is hurting when a startup with a promising cell manufacturing technology turns to systems integration to stay afloat. That’s the recent story of Blue Square Energy, which was launched to develop and manufacture low-cost solar cells using upgraded metallurgical-grade (UMG) silicon but has now shifted into a “survival plan” focused on being a systems integrator. Chief Executive Joseph Babin tells us that the North East, Md.-based startup now is generating business by designing and selling small-scale solar arrays and energy-efficient lighting programs for residential and commercial customers.

The company has customers in Delaware and New Jersey, and Babin said he expects to generate revenue of between $3 million and $8 million this year. But why the systems integration business, even if it is temporary? Babin responded: “We have an established business network in this region that is driving inbound opportunity.”

In many ways, Blue Square is a victim of the times. The startup, which had raised about $5 million in funding from individual investors and had intellectual property to boot, was hunting for about $25 million in venture capital in late 2008 when markets for financing largely shut down and the weakening economy and other factors reduced demand for solar products. There were no takers, Babin said. Nor could he find strategic partners to merge with or buy his company. By January 2009, the company had shrunk from a high of 75 employees to just five including Babin, its current size today.

But it should be said that the company’s woes aren’t solely because of difficult economic times. As the Gunther Portfolio blog has well-documented, even in mid-2008, Blue Square failed to raise money largely as a result of concerns surrounding then-CEO Allen Barnett’s leadership abilities. During the summer of 2008, Barnett and his father, Dr. Allen Barnett, who was a consultant for the firm, were asked to tender their resignations.

Still, Babin, who refused to comment on the Barnetts’ ouster and who was a board member before taking the helm, believes that the company’s solar cell Bright Point technology has enormous promise and that the startup’s inability to raise money in late 2008 was a result of a “perfect storm” of market pressures. “We missed our timeline by eight months on a pilot production machine,” Babin said. “That put us behind, and then we ran into the wall of the economy.” Despite the setbacks, Babin hasn’t given up on the company’s initial vision of being a solar cell developer and manufacturer. Once financing becomes more available, he plans to look again for venture capital backing, and in the meantime, he’s talking to unnamed European equipment manufacturers for partnerships.

In November 2008, Blue Square announced that it had produced a solar cell with a 14.6 percent efficiency. The company said it was one of the highest-recorded efficiencies using UMG silicon, a less pure, lower-cost version of silicon than is typically used in solar cells. With further development, Blue Square believes it can produce a high-performance, low-cost solar cell for use in homes and businesses.

But even when venture capital starts flowing more readily to cleantech startups (the turnaround may already be occurring), Blue Square could have a hard sell. UMG-based solar cells were an attractive value proposition when purer silicon was trading for $400 per kilogram in mid-2008. Now it’s plummeted to below $50 per kilogram, and the cost of conventional solar cells has declined along with it. Any company — thin-film solar included — that is developing an alternative technology to conventional silicon cells now has a significantly harder market to penetrate.

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