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To get to the future of Detroit, you have to park at the guard shack outside a dusty bus depot next to the freeway in San Jose Calif., the heart of Silicon Valley. On the road in on a recent weekday, I pass buildings bearing the logos of technology titans such as Applied Materials (AMAT), Juniper Networks (JNPR), Cisco Systems (CSCO) and others. When I arrive at the shack, I meet Skyline Solar CEO Bob MacDonald, another potential Silicon Valley savior of the beleaguered U.S. auto industry.

We drive up to a chain link fence, unlock a gate, and walk onto an empty parking at the Santa Clara Valley Transit Authority. On the blacktop lot reside 24 shiny, solar-energy collectors built by Skyline. The collectors run 18-feet in length and are six-feet tall, configured in a gently sloping "W" and set on rotating arms that follow the sun. The panels use curved aluminum mirrors that, when Skyline ramps up for production in late 2009, will be stamped out by workers at a retooled auto parts factory in the Midwest (the company won't disclose which one exactly).
What I do know is the factory is part of a large company with 14 facilities -- a company that is hurting due to the turmoil in the U.S. auto industry and the bankruptcies of General Motors and Chrysler. If Skyline Solar's order pipeline grows as MacDonald hopes, then the small Silicon Valley startup could become part of a wave of companies in the technology heartland throwing a lifeline to staggering giants in the U.S. industrial heartland.

"They are taking existing machinery used to make auto chassis and body parts and retooling them for our solar dishes," MacDonald tells me. "We hope we can help keep autoworkers employed while at the same time moving the country towards energy self-sufficiency."

The theme of retooling the Rust Belt to become the industrial engine for the greening of America has been much -- perhaps overly - repeated. President Barack Obama has made retooling industrial states to participate in the green economy a key priority in his green economic platform.

To date, little progress has been made. China and other parts of the U.S. remain the primary locations for photovoltaic solar panel production. Wind-energy equipment producers have excess capacity, meaning Detroit's capabilities were not needed.

Rather, the hope for redeploying industrial America likely lies in with technologies more similar to that of Skyline Solar. The array in Santa Clara puts out 27 kilowatts, enough to power a small- or medium-sized office building. That is the market Skyline is targeting, a space that includes office parks, churches, schools and state and local governments. These types of solar arrays do not require large permitting processes, or even environmental impact statements. "No one cares if you build in a parking lot," says MacDonald.

Skyline or, more likely, local installing companies, will build out small- to medium-sized solar arrays, ranging from several dozen kilowatts up into multi-megawatt projects that could power hundreds or thousands of homes. The installers will pay the upfront costs of buying the solar equipment and then sell power back to the end-customer, an arrangement called a Power Purchase Agreement (PPA). These agreements allow customers to lock in fixed costs for power and allow investors to lock in fixed rates of return.

What Skyline has done differently is design panels with minimal use of photovoltaic cells, the most expensive part of solar arrays. Skyline also uses lightweight aluminum panels that can be easily packed in shipping crates and moved efficiently. Skyline has also designed the whole array installation process to be very simple and modular, allowing for install times that are one-tenth that of standard photovoltaic arrays.

Another differentiator: Skyline uses crenolated metal radiator panels behind the photovoltaic surfaces to reduce the temperatures of the PV. This adds an additional 10 percent to 15 percent to power generation.

The vision in enticing. Skyline is one of small handful of startups in the solar space to get U.S. Department of Energy funding. Powerful venture capital firm New Enterprise Associates is the lead investor in Skyline, which has raised $24 million in venture funding to date. Of course, nothing is a slam dunk in the world of solar. In order to remain competitive with traditional power sources, Skyline, like other alternative energy equipment makers, is heavily reliant on federal and state tax breaks for buyers of alternative power systems.

With China heavily subsidizing production of solar energy equipment, the costs are falling so quickly that U.S. makers of solar gear are scrambling to keep up. (Others, such as Bill Gross over eSolar, are taking other evasive measures to drop costs).

The lack of a national feed-in tariff (a mandated power price paid by utilities) for solar power in the U.S. has made it harder for alternative-energy power system installers to plot out viable business plans due to the wide fluctuations of energy pricing with the current system. In other words, retooling Detroit with green power remains a tenuous proposition dependent on all sorts of hard to predict external factors.

Tim Keating, Skyline's vice president of Marketing, says that the company already has a real pipeline of projects ranging from a 500-kilowatt, size up into multi-megawatt projects that are closer to small utility scale. Early results from the Santa Clara Authority project, which Skyline put up for free in order to test its technology, have been positive, exceeding expectations.

"We received a development grant from the Department of Energy's Solar America Initiative, with goals of getting our power costs down to 9 to 15 cents per kilowatt hour(kWh) by 2010 and 7 to 10 cents per kWh by 2015. We expect to achieve these goals," says Keating. Those costs are very low by California standards.

Should Skyline hit those numbers and the pipeline of projects turn into reality, then the heartland would get a small but meaningful boost from the Valley.

Alex Salkever is Senior Writer at AOL Daily Finance covering technology and greentech. Follow him on twitter @alexsalkever, read his articles, or email him at alex@dailyfinance.com.

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