Ayear ago, Xunlight 26 Solar embarked on a two-year plan to develop aproduction-ready solar panel of cadmium-telluride encased by plastic. The startup, which is licensing technology from the nearbyUniversity of Toledo in Ohio, has been able to fabricate a cell thatcould convert 10.5 percent of the sunlight that strikes it intoelectricity, said Al Compaan, Xunlight 26 chief technology officer and an emeritus professor at the university.

That efficiency is lower than what the leader of cadmium-telluridethin films, First Solar (NSDQ: FSLR), could produce. Tempe, Ariz.-basedFirst Solar’s panels fetch 10.9 percent efficiency, which means thecells assembled into the panels should have even higher conversion rate.

 Of course, First Solar in its present incarnation has been aroundfor a decade, so it’s had time and resources to improve its technology.

But Xunlight 26 isn’t just chasing after First Solar.

In fact, Xunlight 26 is tackling a different set of challenges thanmany startups developing cadmium-telluride thin films. Its competitorsmostly work on sandwiching the semiconductor compound between twopieces of glass, much like what First Solar is doing.

The startup wants to replace glass with polyimide, and use what’scalled a roll-to-roll process to produce the thin films, Compaan said.The roll-to-roll process is akin to the process used by United Solar Ovonic and Nanosolar.

United Solar Ovonic makes thin films with layers of amorphous silicon while Nanosolar uses a mix of copper, indium, gallium and selenium.

"We take a material proven successful mainly by First Solar, and weare trying to eliminate glass so that it’s light weight and flexible,"Compaan said. "That will open up new markets for cadmium telluridepanels."

The more pliable thin films could be less obtrusive and fit in space that can’t accommodate glass panels.

Boosting the cell efficiency is a priority for Xunlight 26. Thecompany also needs to show that plastic is a suitable substitute thatcan withstand different weather conditions and other environmentalissues.

"Efficiencies on glass are higher than on polyimide now, but we seeno fundamental reason why they couldn’t be equivalent," Compaan said.

By the way, the numbers "2" and "6" in the company’s name refer to the II-VI semiconductor family in which cadmium and tellurium belong.

Xunlight 26 has received undisclosed seed money from Xunlight Corp. and about $1 million from the state of Ohio. The two companies share an office in Toledo.

Xunlight Corp., founded in 2006 as a spinoff of the University ofToledo, is developing thin films with layers of amorphous silicon,amorphous silicon germanium and nanocrystalline silicon.

Xunlight 26 plans to complete developing a prototype panel, whichwould measure 1 foot by 3 feet, in 12 months, Compaan said. The companywill then build a pilot production line.

Many companies in recent years have jumped into the business of developing cadmium-telluride solar panels.

The trend emerged partly because silicon, which is the keyingredient for most of the solar panels made today, became so expensiveand in short supply a few years back that entrepreneurs began to lookfor alternative materials or at least figure out ways to use lesssilicon.

The rise of First Solar coincided with this period of siliconshortage and high pricing. The company also succeeded in scaling up itsproduction and marketing its products. It’s now one of the top fivesolar panel producers in the world and claims a low manufacturing costof $0.87 per watt.

Cadmium-telluride startups hope to replicate First Solar’s success.The area around Toledo is home to not only Xunlight 26 but also a fewother new comers.

Willard & Kelsey Solar Group (WK Solar), founded in 2007, has set up a small factory in Perrysburg,which is near Toledo and is also home to First Solar’s factory. WKSolar’s management included former employees of First Solar andGlasstech. Harold McMaster started Glasstech in 1971 and then a solarcompany in the 1984 that would evolve to become First Solar (see When First Solar Wasn’t So Hot).

WK Solar recently received approval for a $10 million loan from Ohio to expand its factory. It appeared to have started trial production earlier this year.

Other cadmium-telluride players in the Toledo area include Calyxo USA, the American subsidiary for the Germany company largely owned by Q-Cells.

Solargystics, which doesn’t offer much on its website, also is part of the cadmium-telluride club.