Four-year-old start-up Transphorm is tackling a problem as old as the electricity distribution grid: the energy lost in converting between AC and DC.

The Goleta, Calif.-based company today disclosed its product plans and said that it has raised a $20 million round of funding led by Google Ventures. Other investors include Kleiner, Perkins, Caufield & Byers, Foundation Capital, and Lux Capital. It has raised $38 million in three rounds of venture funding and received a Department of Energy ARPA-E grant for an undisclosed amount.

Transphorm has designed electronics to more efficiently convert between the alternating current--the way that power is transported on the grid--and the direct current used in many devices, such as computers or electric vehicles.

At a press briefing today, company executives and investors said that as much as 10 percent of all energy used in the U.S. is lost in power conversion, more than enough to supply several cities. That inefficiency, which is measured in the hundreds of terawatt hours in the U.S., amounts to a "hidden tax" in the form of wasted energy, CEO Umesh Mishra said.

The company intends to demonstrate its first products--a power conversion module, or chip--in two weeks and have its products on the market this year, Mishra said. Its modules can be used in a wide variety of applications but the company intends to first target data server makers, then inverters for solar photovoltaic panels, and then motor drives for devices such as elevators, he said. Eventually, it hopes to be incorporated into hybrid or electric-vehicle designs, though that takes years.

To improve on current power electronics, Transphorm is using a nonconventional material: gallium nitride, the same semiconductor material often used in LED lighting. Gallium nitride (GaN) power conversion chips lose less energy than silicon-based devices and allow for smaller, lighter products.

The material's advantages are most compelling for electronics that run at high-voltage and high-frequency, executives said. It's also more expensive than silicon. But manufacturers of finished goods, such as makers of computer power packs, can save money by designing products with fewer components, Mishra said.

"Silicon is running out of steam and we are providing the answer," Mishra said. "We will be leading a market that others will be proceeding into. It will be good for the planet and good for business."

Efficiency play Power electronics are constantly at work but it's largely an invisible, unsung function on the grid.

Because computers, for example, operate using direct current, the alternating current from the outlet needs to be converted. When you touch a "brick" or power pack for a computer or cell phone and feel heat, that's energy being wasted in the AC to DC conversion.

Transphorm expects that its devices can be used for more efficient servers and squeeze more efficiency from solar panels. Solar panels generate direct current which needs to be converted to AC with a device called an inverter to feed power into the grid.

"When you look at what is happening in green investing, there's a lot on the (power) generation and fuel side. What we don't talk enough about is what's happening on the efficiency side," said Randy Komisar, from Kleiner, Perkins, Caufield & Byers.

The impact from making computers, motors, and solar panels more efficient is three times what can be done with digital lighting, such as LEDs, he said. If widely deployed, efficient power converters would be the equivalent of taking 300 coal plants off the grid, he said.

Over the past few decades, the U.S. has fallen behind in training people skilled in power electronics. Executives from General Electric, which has investments in wind and solar power, sought out companies and people working in power electronics during its last Ecomagination contest because it has had trouble hiring people in the U.S.

The DOE's ARPA-E agency, created to fund research in "high risk-high reward" energy technologies, has a program dedicated to power electronics, which includes mostly university-level work. Grant sizes, in general, are typically less than $10 million each.

Transphorm received a grant from the ARPA-E program to fund research on efficient high-frequency power conversion devices for very high-power applications, such as compact motor drives and grid-tied inverters. That work is for future needs, whereas Transphorm's venture funding is being used to commercialize products in the near term, said company president Primit Parikh.

Transphorm intends to touch all aspects of product design and fabrication, including growing gallium nitride material customized for power electronics and making actual semiconductor devices, said Mishra.

The company plans to make converters for different uses, not only converting AC power from the grid to DC power for computers. Also planned are DC-to-AC modules for solar panel inverters, DC-to-DC conversion for power grid equipment, and AC to AC for efficiently running electric motors, he said.