MIT spin-out aims to make silicon-based solar competitive with coal by 2012

A series of manufacturing process improvements could make the cost of electricity from silicon-based solar cells comparable to today’s prices for coal generation within about four years, according to a company emerging out of stealth today.

The new startup, called 1366 Technologies, was founded by professor Ely Sachs based off advancements made in the labs of the Massachusetts Institute of Technology. The company has picked up a $12.4 million financing co-led by North Bridge Venture Partners and Polaris Ventures, and plans to begin building a pilot plant immediately.

Unlike many new solar companies that get financing, 1366 will not be trying to build a new type of cell. The company’s processes can work with any type of multi-crystalline silicon solar cells — the common type that most people have seen adorning rooftops and water heaters.

For 1366, that means that once its pilot plant has proved that the technology can be used in large manufacturing volumes, it can also be licensed out to major manufacturers. The president, Frank van Mierlo, told me that 1366 already has a deal with one of the top ten cell manufacturers in the world. The company will scale up to a 25 megawatt per year plant after the pilot, then 100 megawatt plants afterward, but the greatest volume should come from established companies using the technology.

There are several reasons that bringing costs down will take a few years. One is that 1366 is developing multiple technologies, each of which lowers costs by a certain percentage; together, the three processes will cut costs by over 50 percent, according to Mierlo. However, the company is also factoring in falling silicon prices to its calculations.

And what will happen if 1366’s claims pan out, and silicon-based solar cells really drop below $1 per watt within the next few years? If the costs for those cells, solar PV, drop more rapidly than expected, thin-film solar based on other materials could face more challenges than expected. However, companies that make thin-film cells like First Solar (NASDAQ: FSLR) and Nanosolar (coverage here) are working on their own process improvements, and it’s difficult to tell when breakthroughs will come.

More importantly, though, all types of solar cells could proliferate much more rapidly than expected. Coal and uranium prices are already on their way up, and the higher the cost for coal- and nuclear-based generation, the easier it will be for financiers and government to stomach shelling out money for widespread deployment of solar cells.

1366’s timeline calls for completion of its pilot plant later this year, and the first cells being manufactured by winter. It will probably begin looking for another round of funding around the same time.