As markets change, clean tech industry reduces ambitions

In Bedford, technician Becky Allen works on a metallization process at 1366 Technologies, which uses a more efficient method to produce silicon wafers for solar panels.
In Bedford, technician Becky Allen works on a metallization process at 1366 Technologies, which uses a more efficient method to produce silicon wafers for solar panels.

In its heyday less than a decade ago, advanced battery maker A123 Systems attracted hundreds of millions of dollars in government support and hundreds of millions more from investors on the promise of technology that would usher in a new era of electric cars.

In 2012, the Massachusetts company went bankrupt, its assets acquired for less than 20 percent of peak value by the Chinese-owned Wanxiang America, which moved A123’s headquarters to Michigan. Today, A123’s presence in Massachusetts is limited to research centers in Waltham and Hopkinton, where engineers who once focused on systems to power electric vehicles are now developing small batteries that turn standard cars into “micro­hybrids” by shutting off engines when idling to save gasoline.

The saga of A123, founded on technology spun out of the Massachusetts Institute of Technology, represents the ups, downs, and scaled-back ambitions of the Massachusetts clean technology industry over the past decade as global energy markets changed dramatically. When oil prices raced toward $150 a barrel before the recession, investors, industry leaders, and state officials envisioned game-changing breakthroughs that would mean new factories building solar panels, wind farms producing power offshore, and refineries making alternative fuels from sawgrass, algae, and even garbage.

Today, with oil trading around $50 a barrel and natural gas prices at three-year lows, these dreams remain far from reality.

The state’s leading solar panel maker, Evergreen Solar, went bankrupt in 2011, overwhelmed by cheaper panels made in China. Cape Wind, the proposed wind farm in Nantucket Sound, has stalled after missing a financing deadline at the end of last year. Venture investment in New England clean energy companies has plunged by almost half, to $198 million last year from $362 million in 2011, according to PricewaterhouseCoopers, the New York accounting and consulting firm.

As with A123, the clean energy sector here is undergoing an evolution, refocusing from breakthroughs that might take years and millions of dollars to incremental advances that can be achieved faster and for less money. The industry in Massachusetts is growing and adding jobs, but it is increasingly led by firms that, rather than changing the game, are helping companies and households play it better.

Digital Lumens of Boston is an example. With the prices falling for wireless sensors and LED lights, which require less electricity than conventional bulbs, Digital Lumens has created lighting systems for businesses that use motion detectors to determine when work spaces need to be illuminated and software that automatically turns lights on and off accordingly. Chief executive Tom Pincince said the systems can cut lighting costs by 90 percent.

Digital Lumens’ workforce has swelled to 125 employees from five in 2009, Pincince said. He said he expects his company to increase revenues 60 percent to 70 percent this year and add at least 40 jobs a year over the next three years.

John Quealy, an analyst who focuses on clean technology at Canaccord Genuity Group in Boston, said Massachusetts’ industry is led by publicly traded companies such as Ameresco of Framingham, which installs energy efficient equipment and solar panels. Although there was a time for technology-centric manufacturing companies, he said, today’s companies have to sell customers reliable savings instead of visions of the future.

“There have been less innovative, silver bullet-type companies on the public side,” Quealy said.

The Massachusetts Clean Energy Center, a quasi-public agency that supports the industry, estimates that nearly 90,000 people worked for clean tech companies last year, up from 64,000 in 2011. More than half those jobs were in sales and low-tech service roles, such as installing insulation and solar panels.

Inexpensive solar panels, heat pumps, and other equipment produced by Asian manufacturers have helped create these jobs by making the technology affordable. About 17,000 Massachusetts workers install energy efficiency equipment and 7,500 install renewable systems, mainly solar.

About 500 of the state’s 6,000 clean-tech businesses are startups developing new products and they employ about 10,000 people, according to the Clean Energy Center. But these days, instead of building fuel cells, wind turbines, and solar panels, many startups are doing things like writing code that can help consumers analyze where heat is escaping from their homes and businesses, and conduct energy audits of their buildings without hiring specialists.

Early stage investors are more likely to show interest in a firm that needs a few hundred thousand dollars to develop software than one that needs tens of millions to commercialize equipment and hardware, said David Vieau, the former chief executive of A123 who is now an energy storage investor and adviser based in Newport, R.I.

“This idea of building a factory or a mechanical or electrical product is very much out of fashion,” Vieau said.

The state is taking a similar approach as it tries to support more startups with less money. In 2010, the Clean Energy Center invested $8.7 million in eight companies, for an average investment of $1.1 million per company. Last year, the center, which takes an equity stake in the firms, said it invested $2.4 million in seven companies, for an average investment of $340,000 per company.

One of them was Powerhouse Dynamics of Newton, which makes software that helps retailers and restaurant franchisees cut power bills by automatically shutting off lights, heating and cooling systems, and empty refrigerators when employees forget. The company, founded in 2008, is growing both here and overseas in markets like the Caribbean, where electricity is expensive. The company estimates the system cuts energy costs by 10 to 18 percent.

Powerhouse, which employs 25, last year received a $300,000 investment from the Clean Energy Center and investments from Ingersoll Rand, the industrial conglomerate headquartered in Davidson, N.C., and the power company Constellation, a subsidiary of Chicago-based Exelon, which promotes Powerhouse’s system to customers as a cost-cutting tool. “It’s a logical fit,” Powerhouse chief executive Martin Flusberg said.

Other Boston companies have also benefited from partnerships with large corporations. In Bedford, the solar wafer maker 1366 Technologies has raised a total of $64 million from investors, including General Electric, and the panel manufacturer Hanwha Q Cells, which has headquarters in South Korea and Germany.

1366 uses a super-efficient method to produce wafers for solar panels for less than 90 percent of the cost of established processes and makes it competitive with Chinese companies that dominate the wafer business, chief executive Frank van Mierlo said.

Frank van Mierlo, CEO of 1366 Technologies, put on a lab coat.Frank van Mierlo, CEO of 1366 Technologies. David L. Ryan/Globe Staff

The company, which has proven its technology in a demonstration plant in Bedford over the past two years, plans to break ground on a factory at a yet-to-be-determined US location before the end of this year. Hanwha, one of the world’s biggest solar panel makers, is set to be one of its biggest customers.

Government funding still plays an important role in clean energy, with at least $16.5 billion in federal support provided in 2013, the most recent data available. It is unclear when the industry will no longer need subsidies and other government incentives.

Judith Judson, commissioner of Massachusetts’ Department of Energy Resources, said the state will continue to support the industry, but added the focus could shift from maturing sectors, such as solar, to other technologies, pointing to a $10 million initiative to boost the energy storage sector, where analysts have predicted strong growth.

A123, which employs fewer people in Massachusetts than the 300 who worked here in 2012, is following the model of other industries, such as biotechnology, that concentrate researchers and knowledge workers in Massachusetts, but have manufacturing and other operations in lower-cost areas. (A123, which is now privately held, declined to disclose detailed information about its employment levels.)

A123’s Michigan factories are humming these days, producing the “microhybrid” batteries for automakers such as Mercedes-Benz, chief technology officer Patrick Hurley said. This year, the company expects its revenue to increase 50 percent to about $300 million, and that kind of growth could ultimately lead to more investment in Massachusetts as A123 looks to create new products and improve existing ones.

The research and development in Massachusetts, Hurley said, are “a very large part of where we’re going.”