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Case Study: Can Solar Power Pay?

A CEO has to weigh his ideals against financial reality

Christopher Churchill

Plan B Promethean co-founders Sam White, left, and Sorin Grama, CEO, with their reconfigured milk chiller on a farm in Massachusetts.

The room was cool, but emotions were not. It was the last day in February, and Sorin Grama and Sam White, co-founders of Promethean Power, were in a critical meeting with their team at a dairy in the village of Karumapuram, in the Indian state of Tamil Nadu. The entrepreneurs had launched their company, based in Boston, to build the world's first solar-powered milk chilling system, which they hoped would transform the archaic Indian dairy industry. Grama and White, along with Rajat Gupta, their point man in India, and three of the company's engineers had gathered at the dairy where they were installing their first unit. R.G. Chandramogan, founder and chairman of the company that owns the dairy, was Promethean's first and as yet only customer and had just finished examining the system. He wasn't pleased. Chandramogan informed the Promethean team, assembled in a tiny, cramped office, that the system was entirely too large, too complex, and too expensive.

The rejection was a devastating blow. Grama, Promethean's CEO, was forced to take a hard look at his dream of harnessing solar energy to modernize India's dairy industry. He realized the company faced urgent questions if it was to survive. Grama would have to either somehow dramatically reduce the cost of building the hybrid solar-electric chilling unit—a long shot, at best—or change direction entirely by offering a simple, cheap chiller that would run only on electricity. The second option carried a stiff emotional price. "We had developed very good solar technology, and I did not want to give up without a fight," says Grama. "I had to ask myself: Am I going to be as passionate about this business if it is not about renewable energy?"

The finger pointing began. "We were asking, How did we miss this market signal?" Grama says. "The engineers were looking at me as if I misled them, asking if we should have made adjustments earlier." Meanwhile, the team's cohesion seemed to be crumbling. "You didn't take into account the feedback I gave you—you didn't listen to me," Gupta complained. White agreed that the company was on the wrong path. "We shouldn't be trying to shove something down the customer's throat," he said.

As the gripe session progressed, one of the engineers voiced the obvious, which Grama wasn't ready to hear. If cost was such a critical issue, why didn't Promethean, which had six employees at the time, simply strip out the solar piece of the system? After all, although that component provided a key feature for users who operated in areas with outage-prone electrical grids, it greatly added to the complexity and cost of the system. Removing it and making other modifications could bring the cost down from $12,000 a unit to about $3,000. And those in areas where electricity was not available or unreliable could simply use generators.

At midnight, with the town's restaurants and bars all shuttered, a dejected White, Grama, and Gupta sat on the curb outside their hotel debating what to do next. Gupta, a Harvard M.B.A., argued the low-tech route was the only solution. He had already heard from a number of other dairy producers in India who had told him the unit's price was too steep and that the system's capacity was not large enough. Promethean simply needed to dump the solar technology, and the sooner the better. Only then could it come up with a new product that would give dairies what they needed: cheap, reliable chillers with lots of capacity.

But Grama still wasn't convinced. Coming up with the new system, he argued, wouldn't be as simple as just pulling off the solar-energy components. The chiller would need to be radically redesigned. And the company didn't have a lot of cash to burn.

Grama also worried that both customers and investors would be less interested in the stripped-down version. Building the company around solar products, he argued, was the entire premise of Promethean. It was also his passion. Raised in Romania, Grama came to the U.S. when he was 18 and earned a master's degree in engineering and management from the Massachusetts Institute of Technology. At MIT, Grama, along with White, who was working for a Cambridge start-up, became interested in clean technology. They took second place in an MIT business-plan competition for a solar-powered turbine project. That led to their launching Promethean in 2007.

India's milk industry depends on a constant round of pickups by truck from rural collection stations that have no refrigeration. Promethean's chillers would allow for storage at those stations, preserving the quality of the milk for several days. The company's killer app was its solar-energy system, which would allow operators at the collection stations to chill milk without having to rely on India's notoriously unreliable electrical grid. Grama and White recruited Gupta in 2010 to oversee operations in the country.

By early 2010, the team, thanks to $500,000 in venture capital, had a prototype ready for installation. Chandramogan had agreed to buy the system and install it in his company's factory in Karumapuram, outside the city of Salem. And he said the company would buy 10 of the units if the prototype worked out. Grama and White knew the unit was still a bit expensive, but they figured as they ramped up production, they would find ways to lower the price.

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