June 09, 2011, Patrick White, Globe and Mail: Solar legend guides startup across Valley of Death
“The company founded by 32-year-old Morgan sits on the cusp of a major solar power breakthrough… They cracked the code on CPV…
“Late last December, Asif Ansari looked at the rain falling outside his Southern California mansion and his heart lifted a bit. It was that unnerving kind of Pacific deluge that liquefies hillsides and makes kindling of dream homes. Newscasts flashed clips of daring car-top rescues and highways submerged in muddy brine. But all was well in Ansari’s world. With every climatic calamity, his impending move to Toronto made a little more sense. “The snow doesn’t look too bad right now,” he said.
“But from every other angle, the cross-border relocation of one of the world’s foremost sun-power executives seems puzzling. Ansari is a solar guy – a solar legend, even – the mastermind behind a dozen start-ups (four of them in solar energy) and, most famously, one of the guys who persuaded Google to make a well-publicized investment in solar panels. (The search giant put $10 million U.S. into Ansari’s company, eSolar Inc., and has since invested tens of millions more in other solar technologies.) In North America, the place to reign as a solar guru is California. It has the sun, the rivers of venture capital and the rickety power grid.
“Ontario has none of these – at least not on a golden California scale. What it does have is green legislation that singlehandedly put the province on the map of worldwide renewable-energy hotspots, a city Ansari loves, and a tiny start-up, based in a once-abandoned warehouse, whose solar panel designs Ansari thinks could revolutionize the industry he helped pioneer. This is a relationship forged in brain cells and ambition – a small Ontario company desperate for someone to shepherd it across the so-called Valley of Death from grand idea to mass production, and an industry sage scouring for the Next Big Thing. Ansari is abandoning his dream home, leaving a promising company, eSolar (which designs and develops solar thermal power plants), and uprooting his wife and three kids – all for an opportunity to pilot Morgan Solar toward the entrepreneurial promised land: a proven product, international customers, a 10-figure market cap.
““It was an awkward decision, one I never anticipated making, but I could see Morgan Solar was at a critical juncture,” he says. “They were incredible on the science end of things, but science alone doesn’t get you across the Valley of Death, especially in solar.”
“By 2013, solar energy is expected to be a $100-billion (U.S.) industry. Already it has created 100,000 jobs in North America and fuelled expectations of 42% annual growth in the U.S. into the next decade. The trend has been more pronounced across the globe, with worldwide solar energy production increasing 3,750% between 2000 and 2009.
“But Morgan Solar faces a rapidly shifting investment climate. Over the past two years, the poor economy has tempered investor enthusiasm for a sector that still relies on government subsidies and tax credits for growth. In Spain and Germany – the world’s solar leaders – government spending cuts have trimmed support for the industry and unnerved investors.
“Ansari is undaunted. The company that convinced him to give up California lies on a worn-out triangle of land at a “Y” formed by diverging downtown train tracks. Directly across one set of tracks is a reeking pig slaughterhouse. The old warehouse was surrounded by weeds when Morgan Solar took it over, and it’s eventually slated to be demolished and replaced with condos. Depending on the day, about 32 people work here. Ansari’s new office is chilly and dark, and it neighbours the office belonging to company founder and resident wunderkind John Paul Morgan.
“Today, the company founded by 32-year-old Morgan sits on the cusp of a major solar power breakthrough. The walls of his office are covered in whiteboards scrawled with incomprehensible mathematical equations. Having formally hired Ansari as CEO in October (he was advising the company for months before that), he doesn’t worry as much about being the company’s poster boy. His laissez-faire façade includes several days’ worth of stubble, bed-head and an untucked powder-blue button-up.
“By 2006, at age 27, he’d already led several storied lives. After graduating from an optics program at the University of Toronto, he quickly rose through the ranks at JDS Uniphase. Deciding he needed a little more purpose, he enrolled in grad school in 2003, specializing in medical imaging, a field that introduced him to inverse theory – a kind of backwards problem-solving that involves formulating mathematical explanations from observed phenomena. He lapped it up and used the medical experience to land a logistics position with Doctors Without Borders in eastern Congo. Managing one hospital, 10 clinics and a number of construction projects, he realized that his many talents extended to management. “I learned that I love to manage,” says Morgan.
“At the end of a one-year contract, he left for Chile, his parents’ country of birth, to work part-time at a university in Santiago. By day, he worked as a researcher; by night, he pondered the next move in the unrelenting ascendancy of his life. Doctors Without Borders urged him to take a management position in Sudan. As he prepared to go, his dad stepped in. Eric Morgan is a formidable figure, in business and family. With a resumé that includes six kids and stints as CEO of the Canadian and Iberian branches of Capgemini, an IT services and management consultancy with over 100,000 employees worldwide, he had a sobering challenge for his son. “He told me that going to Sudan then was the easiest thing I could possibly do because I couldn’t possibly fail,” Morgan recalls of the father-son chat. “He said I had more to offer the world and that I needed to find the hardest thing I could possibly do and go for that. Anything less would be selling myself short. It was a taunt, in a way.”
“The more he thought about it, the more Morgan got his dad’s point. Maybe there was some other way of changing the world, something worth fertilizing in his own big brain. A decade earlier, as an optical engineering student, he’d become intrigued with solar energy, and a few years later started looking at perfecting a new kind of concentrated solar generation, using mirrors or lenses to focus the sun’s radiation on a piece of film. It was a technology with a wealth of potential but a lack of recent innovation. With his optics background and a peculiar love of inverse problem-solving, he felt he could change that – and just maybe change the whole energy industry in the process.
“And so the son listened, descending into a hermitic fit of genius befitting Iron Man’s Tony Stark. First, he looked at flaws in existing technologies. The most common photovoltaic applications use large pieces of film or crystalline materials to convert solar radiation into electric current. But these products are pricey, and they have a theoretical efficiency rate – a measure of total surrounding sunlight they can absorb and convert to electricity – of only around 28%. Concentrated photovoltaics (CPV) cuts the cost and increases the efficiency. It uses a mirror or lens (Morgan Solar employs a thin piece of transparent plastic) to concentrate solar radiation on a small piece of film – the same principal employed when kids fry ants with a magnifying glass. The design shrinks the most expensive component and ups the theoretical efficiency rate to over 40%, but existing models are clunky, box-like configurations in which the lens is only about a foot from the film. They are prone to crosswinds, moisture – and huge production costs. The world’s best optics engineers have said there was no way to flatten the design and, thus, the cost.
“Morgan was about to prove them wrong. For one month, he worked at a laptop propped up on an old sewing table in his cramped apartment overlooking Cerro San Cristóbal, a massive hill in downtown Santiago. When he needed simulation software, he wrote it himself. When he hit a mathematical wall, he deployed inverse theory. Within a month, he’d solved what the optics guys couldn’t – theoretically, at least. “I got lucky,” says Morgan. “I asked a lot of the right questions.”
“By the summer of 2007, he’d applied for patents, moved back to Toronto, maxed out his credit cards and borrowed money from his dad for seed capital. Then he hired the smartest engineer he could find, Philip Chang (who studied mechanical engineering at U of T), and opened up shop in a small garage downtown. His brother Nicolas, who was a project manager at a Web start-up in Spain, came on board full-time in 2008.
“Even with a bare-bones staff, the technology was turning heads. “A lot of solar start-ups are not bringing new intellectual property to the table,” says Tom Rand, a serial entrepreneur, venture capitalist and clean-energy adviser at MaRS, a Toronto-based not-for-profit organization that links promising tech companies with capital. “Immediately you could see Morgan Solar was not like that. They cracked the code on CPV. The net result is that they present a danger to the entire marketplace. That’s what we like to see.”
“Rand latched onto the company, shopping the tiny firm to a number of investors and pitching in some cash himself. But even with potentially game-changing technology, there was one huge barrier between Morgan Solar and commercial success. In the years Morgan had been working on the CPV problem, the entire solar industry has shifted. Heavy investment in the sector has streamlined production methods and pulled down costs considerably, making it tougher to get noticed with an innovation promising to save a few more pennies. At the same time, debt-laden European governments have begun trimming renewable subsidies as a cost-cutting measure. While unsettling, those trends make Ontario all the more attractive for Morgan Solar. The province has held firm on its Green Energy Act, which brought in feed-in tariffs that pay renewable energy producers – be they farmers with windmills or conglomerates with vast solar farms – a premium to pour their energy into the grid. The generous incentive program has already attracted over $8 billion in domestic and international investment.
“A lean competition was coming, and Morgan knew that if his company didn’t start mass-producing soon, it risked being left behind. With startling self-awareness and humility, the Morgan brothers admitted they couldn’t do it themselves. They had the brains for engineering and science, but the Valley of Death beckoned, and they needed a sure-handed shepherd.
““I’m good at certain things,” says Morgan. “I can write a program, figure out costs, build things, and I can manage people. Some day I might learn to be a CEO. But I’m 32. This company could really change the way people make energy in the world. I don’t want to put that goal at risk just because my ego wants to be the one who accomplished it.”
“The Morgans hired a headhunter who knew Asif Ansari. When he included Ansari’s name on a list of potential candidates, Morgan balked. “Everyone knows he has a job already,” he remembers saying. “He won’t give us a look.”
“Little did the brothers know that Ansari had spent three agonizing years with the best optical scientists in the business trying to do exactly what Morgan achieved in one month. So convinced was Ansari that CPV panels couldn’t be flattened that he flew to Toronto as soon as the headhunter told him what the company was up to. “I told them I wasn’t in the market, I wasn’t interested, but that I was willing to see what they were all about,” Ansari recalls, chuckling at how quickly the interest consumed him. “When I saw it firsthand, I knew they were on to something, that this could be a real game-changer.”
“Not just a game-changer – a potential world-changer. Over the course of several visits, Ansari’s life was transformed. His outlook on life and work shifted. Old assumptions died. He felt like Eric Schmidt after he happened upon a couple of boy geniuses named Larry Page and Sergey Brin in 2001. Today, the three Google guys are worth a combined $35.5 billion (U.S.), according to Forbes. “They knew they were inventing this cool new stuff,” says Ansari of the brainy Morgan staff. “But I’m not sure they’d thought through how utterly breathtaking the market implications of the technology were. I felt that I just could not walk away for the sake of the impact this technology could have on the world.”
“The holy grail of renewable energy is called grid parity, the point at which it becomes at least as cheap as conventional grid sources – coal, nuclear, hydro and all the rest. Current solar technologies run about 20 cents per kilowatt hour. Grid parity lies at around 10 cents. Ansari thinks Morgan Solar could promise that elusive milestone early next year, once the current round of testing and development is finished and limited commercial production begins. He’s circling the globe spreading the message to his Rolodex of contacts.
“But even with a knockout technology, selling solar is a chore. “It’s harder than any other technology company because you’re signing a 20-year power-purchase agreement with an electric utility that needs iron-clad energy delivery guarantees,” says Ansari. “And there are huge penalties if you don’t deliver, or even under-deliver. The financial risk is huge.”
“Bankrolling CPV projects is particularly difficult. The technology doesn’t have nearly the track record of fixed PV. “The concentrated PV space is still an emerging niche,” says Jon Worren, co-founder of ClearSky Advisors, a renewable energy research group. “The older technologies have a long record that people are confident in. That’s a bit of a hurdle for a company like Morgan. Proving their reliability is key.”
“Part of the reason CPV has been in the shadows so long comes from the complex arrangement of mirrors and lenses, which have to be aimed directly at the sun to work. That requires a tracking system that will constantly align the panel to the sun. That’s a whole extra layer of complication that scares off some investors.
“By hiring Ansari, Morgan Solar gained instant credibility. So, what’s next? Cash is one part of the answer. At press time, the company was in final negotiations for $10 million-plus in additional funding.
“Another part of the answer lies in a cavernous warehouse space adjacent to Morgan’s office. Inside, sparks fly, hammers thud and winter seeps through the walls. It’s a crude laboratory and fabricating site where the company pumps out prototypes. “Here’s our generation-two product line,” says Morgan, pointing to a lens that looks no thicker than a CD case and no more complex than Saran Wrap. “They’re now in three test sites, in Toronto, Ottawa and California.” He shows off the components of a finished installation – five simple pieces, all of them manufactured using off-the-shelf machines. The company has 30 patents in the works and some forthcoming products that Ansari calls “out of this world.” Morgan will move beyond this R&D stage soon. Thanks to Ontario’s feed-in tariffs, mass production for customers will begin in Ontario later this year, slowly ramping up around the world over the next three years.
““For me, the imperative right now is getting to revenue,” says Ansari. “Venture-backed start-ups have this habit of getting used to easy money. You haven’t earned it, but you spend it. That’s a bad habit.”
“And by 2015, 2020? “We expect to be a multibillion-dollar company,” says Morgan with a straight face. “If you set your costs of energy low enough, people will buy it. If the cost per kilowatt hour of natural gas is 12 cents and we can offer solar for 10 cents, people will line up to buy it. At that point, you can sell as much as you can make.”
“It may sound optimistic, even far-fetched, but they have some high-profile believers. Morgan’s biggest investor is Iberdrola, a $50-billion Madrid-based company and the world’s largest renewable energy firm.
“That’s the kind of backing that persuaded Mr. Solar to leave the Golden State. Actually, Ansari says he didn’t need much prodding. “I told the Morgan board that if the company was in any city in the world other than Toronto, I wouldn’t move.” He grew up in Alaska and went to school in Minnesota, so he’s no stranger to snow. And the city is packed with so many relatives that the Ansaris hold a reunion there each summer. “I actually get disappointed when I come to Toronto in the winter and there’s no snow. I’ll take Toronto snow over this California rain any day.””