Letting the sunshine in

In the winter of 2002, two men who were about to become neighbors in Tel Mond met for the first time. It didn't take long to discover that they had a dream in common.

Electrical engineer Avinoam Levy had just returned, with his wife and 6-year-old twins, from a stay of several years in New York. Alon Tamari came from Petah Tikva. Both were in high-tech: Levy had worked in New York as technical director for PowerDsine, Tamari was regional sales and marketing director at RadCom. Now they were going to have something else in common: a fence.

Fences are designed to divide, but that wasn't the case for Tamari and Levy. While setting up the wooden boards and painting them, they talked about their ambitions.

Levy shared his dream of getting into clean-tech. America is starting to realize the joys of electricity generated from renewable energy sources. In Germany and Japan, this is the focus of an entire domestic market. That, Levy told his neighbor, is what I really want to do.

Tamari, who had studied geophysics and earth science as an undergraduate, revealed that it was his fantasy, too. A few days later, he threw down the gauntlet: "Let's go for it."

Thus was SolarPower born.

It was not an obvious move to make. Even in ordinary times, leaving a steady job to launch a new company is risky. Tamari and Levy made their leap at a spectacularly merciless time.

It was the winter of 2002. The dot-com crisis was raging. Programmers and engineers were being fired in droves. Also, the area they chose was terra incognita.

Today, clean technology is a buzzword. But then, it was unknown in Israel, and the idea of retailing its products was tantamount to science fiction. The market was small, generally unsubsidized and unrecognized by the establishment. It essentially involved importing solar panels and doing a great deal of legwork in search of clients.

But the two had no doubts. "I saw what was happening in the world, and it seemed so right to me," Levy said. "Israel isn't an island. I was sure we would join the revolution, even if rather late."

And so it happened that Tamari and Levy spearheaded a trailblazing project in Israel's solar energy market.

SolarPower began as a company installing photovoltaic solar energy systems. If Levy and Tamari developed anything during their first year, it was their marketing abilities. They flew abroad and forged relationships with foreign solar panel suppliers. In Israel, they bought a pickup truck and hit the road. From the environmental community of Klil in the Galilee through manufacturing plants and plant nurseries to Bedouin villages in the Negev, the two met people and tried to convince them to go photovoltaic.

"Managing cash flow isn't something you learn how to do as an engineer," Tamari said. "You figure it out by doing it. We made a huge investment in infrastructure. We created Israel's first web site on the subject."

The goal was to become profitable fast, and speed in this case was a necessity. Tamari and Levy didn't have deep pockets. They had no venture capital backing.

They installed their first power-generating system at the Sapir Center in the Arava region. Then they installed 30 or 40 residential systems at Klil, built a solar farm near Modi'in, did installments at nurseries and on lighting poles at army bases, collaborated with the Rafael Armament Development Authority and equipped the warning lights on top of the chimneys at the Electric Company's power stations with solar charging panels. They also provided solar panels for generator backups at heavy industrial plants.

The eureka moment was noticing the high-potential niche of wireless communication networks.

PowerDsine, where Levy had worked, makes systems to conduct electricity along phone lines. RadCom, Tamari's former employer, makes equipment to monitor cellular networks. Now they considered how to combine the two areas.

Setting up a communication network involves erecting isolated poles over miles and miles of territory. And each of these poles needs a power source. They can, of course, be hooked into the national power grid - but Tamari and Levy realized that they could also have their own solar generators.

"We could see this was an international niche, and for a small company like ours, $500,000 projects were simply a huge achievement," said Tamari.

By now, they have done projects in Ethiopia (for Leadcom), in Angola, in Kenya and in Burkina Faso. SolarPower will soon be completing its seventh project, for the national communication company of Cameroon.

"Half of our activity today is abroad, which allows us to visit exotic places," said Tamari. But he also recalled some less happy moments, such as the time in Ethiopia when they hit a stray camel with their car and their local clients had to pay ransom to the angry tribe members who congregated around them.

Back home, Israel finally started encouraging solar energy on July 1, 2008 by setting prices at which owners of small solar devices can sell power to the national power grid. People or companies are free to produce their own power, use what they need and sell the surplus to the Electric Company for an attractive price, almost four times what the company charges its customers for power.

A new market had been born. Within less than six months, SolarPower and its two competitors were joined by no fewer than 30 other companies - some foreign, others local infrastructure giants such as Paz (Paz Solar) and Housing and Construction's Solaria.

Levy and Tamari move with the times. In March 2008, SolarPower raised $1.1 million from Precede Technologies and RosenRam Business Development. Tamari and Levy believe that their investors are people with added value.

The Precede team includes Orni Petruschka, Rafi Gidron and Albert Olier, all formerly of Chromatis. RosenRam is owned by former First International Bank chairman Joshua Rosensweig and Revital Aviram. These are strategic investors, not financial ones, said Levy and Tamari.

The Precede team helped them to analyze the market. With its new capital, SolarPower invested in infrastructure, hired people and strengthened ties with leading suppliers. Today it has 24 employees, including a marketing team, engineers and installment crews. It offers comprehensive service for solar installments: planning, supply, execution and funding solutions.

"SolarPower works well," said an industry source. "It orders equipment at good prices and knows its way around the installment process. Today it is one of the three leading companies in rooftop installments. I'd estimate that it does around 30% of the installment projects in the market. Since the investors came on board, its management has become more focused, more like high-tech."

Its clients fall into two groups, Tamari said: "green" clients and those with an essentially financial motivation, who realize that solar systems generate solid returns. "Farmers, high-tech companies, real-estate companies and landowners: these are our clients. We get approached by about 20 a week."

Tamari said the return is a little over 10% in central Israel and 15% to 20% in large facilities in the south. "The annual income of a large system in the Negev is NIS 200,000, while the cost of the system is between NIS 950,000 and NIS 1.5 million."

So why isn't the whole country covered with solar panels?

Levy: "The market is still young. The solar message isn't fully out there yet. It's also hard to raise funding. A great market emerged here, but there was no one to talk to. The credit crisis, the war. In the last couple of months, things have been waking up."

The economic crisis is the main obstacle hindering the development of Israel's solar market. The banks don't see future power sales as collateral for loans.

Another obstacle is the permit procedure: SolarPower, like other companies in the field, prepares a request for a building permit on behalf of the client. The request is then submitted to the local planning committee via an expedited process. But as in other areas, the bureaucracy is cumbersome.

So far, Israel has set rates only for small solar energy systems. But in the future, rates will also set for medium and large facilities, solar mega-farms. That's where the big money lies. Farms of this kind can only be built on the agricultural lands of sunny southern Israel, and the race is on: Representatives of companies are scurrying among kibbutzim and moshavim in the Negev in search of land for conversion, one day, to "sun agriculture."

The question is how SolarPower will fit into the new picture. Will the "big boys" and their large facilities push it aside?

"They'll have a problem entering the medium-sized systems market. They'll need far more capital," said an industry source.

Tamari and Levy, however, actually consider this an opportunity. "The large players will be our clients, because none of them will provide planning, acquisition and implementation services. Our goal is to hook up with them and be their service providers. Besides, most of the noise made by the large players is just that. In practice, there are still no regulations for solar power stations: Everyone is hurrying to buy land, the landowners are walking around with crazy price tags, but the [Israel Lands] Administration may not even approve this usage of the land. There is a great risk in what the large companies are doing today. It's a process that will take at least two or three years. We are building our revenue for 2010, because we are a private commercial company that has to make a living, but at the same time we are taking a careful look at what's going on in preparation for the next market."

One of Tamari and Levy's business competitors confirms this. "SolarPower is a mature, focused company: It has solid logistical infrastructure and a professional staff," he said. "They are focused on their niche of activity. It's clear to them who they are and what they want to be. They plan and install ready-made systems for clients, and are not even looking at solar fields. They know that they are not part of that game. This recognition is part of their maturity - unlike others, who throw around promises."

So far, SolarPower has installed a total of about two megawatts worth of off-grid panels and 600 kilowatts of on-grid ones. Tamari said the economic crisis has caused a considerable slowdown.

"From November to January, there was a dramatic change in sales. The market ground to a complete halt, and what supported us were private residences," he said. "Still, most of our work is with the business sector. It enables us to make a living today."

How much of a living? At the end of the year, SolarPower's revenue turnover was several million dollars. But despite the crisis, Tamari and Levy both estimate that in 2009, the company will triple its sales.

Looking back, how much has the approach to this field in Israel changed in the last six years?

Tamari: "Until 2005, there was no awareness at all, either in government or among the public. It wasn't even on the agenda. From late 2005 on, we started to see a change, and clearly the one marketing man to whom we owe the most is Al Gore. He brought the subject into people's homes, influenced politicians and bankers in ways that are hard to quantify. Suddenly I hear my high-tech friends talking about his speech. Even [former infrastructure minister Benjamin] "Fuad" Ben-Eliezer was a fairly important locomotive in this matter. He decided that the breakthrough would happen during his time in office, and he made sure not only to say it but to show it. In 2008, when the regulations were about to be published, the major press exposure began as well - and clearly that has helped us a lot."

And still, things couldn't have changed that much if the state needs to subsidize this electricity to encourage the field, with the consumer paying the high price.

Tamari: "And there's a reason for it. This, after all, is the beginning, when industry needs incentives to develop, until it reaches a scope that allows it to sustain itself. And that day is coming. Some believe that in five years, the cost of making electricity using solar energy will equal that of burning fossil fuels. But without the incentives, we couldn't get there."

Levy: "You also need to remember that these calculations don't factor in indirect costs, such as the pollution caused by burning fuels. In Europe, there are precise calculations showing why this is already economically worthwhile on the macro level."

So what does the future hold for you personally? Will you try to make a fortune on the venture like your high-tech friends?

Tamari: "We ran away from high-tech so that we wouldn't be part of that anymore. We didn't want to see the world from the perspective of 'getting your big break and walking away.' It sounds a bit self-righteous, and of course we, too, want to make a profit, but we also want to enjoy what we are doing, to live it to the fullest, to develop the business and not think about how much money this business will ultimately leave in our bank accounts."

Levy: "We're simply still having fun."

Still, people invested in you, and investors want a return on their money. So are you on the shelf?

"Almost any privately owned commercial company is on the shelf. But we're not actively looking, because we are handling the market well and don't need capital today in order to sell. The goal is to bring the company to a high value - and then to find the right connection."