Solar-energy services provider Tioga Energy launched Tuesday with more than $10 million in venture funding and a business model aimed at making sun-generated electricity more affordable to small and medium-size commercial, nonprofit, and government customers.
By incorporating the costly business of financing, building, owning, and operating solar systems into long-term service contracts, the Sunnyvale, California-based startup plans to obviate the need for customers to lay out large sums of money up front.
The approach addresses a major issue dogging the solar power industry. Though solar is one of the fastest growing segments in the cleantech realm, widespread adoption of solar technology has been slowed by the high up-front expense of installing and operating solar systems.
“There’s a huge momentum in the market to install photovoltaics, but capital is still a huge constraint,” said Steve Parry, managing member of NGEN Partners, which is backing Tioga. Tioga CEO Paul Detering’s model “essentially takes that constraint away from the customer,” Mr. Parry said. Draper Fisher Jurvetson, RockPort Capital Partners, DFJ Frontier, and Kirlan Ventures have also joined in the deal.
Another problem affecting the industry is the relatively high cost of sun-generated power compared with that of conventionally generated electricity. Tioga’s services will take the form of 20-year power-purchas agreements, which will lock customers into set prices. With electricity costs expected to rise, Tioga hopes those set rates will become a more attractive option for customers. Mr. Parry said Tioga’s rates will be lower than those of traditional utilities. The company didn’t give details on how much it plans to charge.
Traditionally, the industry has treated the manufacture of photovoltaic cells and panels as a separate business from that of system installation and operation. Unlike many venture-backed solar startups, which tend to focus on developing cutting-edge equipment, Tioga is targeting services, and concentrating specifically on the still untested market for systems in the 50 to 500 kilowatt range—those suitable for a school, shopping mall, or office building, for instance.
“It’s the equivalent of becoming a utility in some respects,” said Mr. Parry. Indeed, Tioga’s plan will put it on the edges of the playing field dominated by the likes of SunEdison, a big solar power provider that takes on much larger contracts.
“This is a very new market. It’s emerging rapidly,” said Mr. Detering, formerly CEO of CerOx, a wastewater treatment startup that raised $17 million in funding. That company closed down last year.
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