Co-authored with Matt Hopkins
Cross-posted from New Deal 2.0
Solyndra, a venture-backed solar panel maker founded in 2005, was the poster child of the Obama administration's American Recovery and Reinvestment Act (ARRA). It was the first company to receive federal loan guarantees under the already existing Energy Policy Act of 2005. A hefty $535 million in government-backed loans was going to provide 73 percent of the funds to build Solyndra's second manufacturing plant in Fremont, California, with the rest of the financing coming from private equity. It was said that 3,000 workers would find employment in the plant's construction and 1,000 workers in its ongoing operation.
The factory was built, but, overburdened with capacity, Solyndra went bankrupt in August 2011. The company's 2010 sales of 65 megawatts of power were not even 60 percent of the capacity of its first factory, making the 500-megawatt capacity of the second factory totally redundant. As Yuliya Chernova has written in the Wall Street Journal, some investors with knowledge of Solyndra's operations see the government-backed loan as the source of the company's downfall.
There is little doubt that Obama's team could not resist the opportunity to score political points through a deal that promised to stimulate the economy while investing in our renewables future. As President Obama put it when he visited Solyndra in May 2010: "Before the Recovery Act, we could build just 5 percent of the world's solar panels. In the next few years, we're going to double our share to more than 10 percent. Here at this site, Solyndra expects to make enough solar panels each year to generate 500 megawatts of electricity."
But Solyndra was not the only U.S. solar company to go bankrupt last August. Seventeen-year-old Evergreen Solar Inc., a Massachusetts-based company that had received $58 million in state subsidies, closed its factory last March, and then in August entered Chapter 11 with almost $500 million in debt. Also in August -- in between the bankruptcies of Evergreen and Solyndra -- another solar manufacturer, SpectraWatt, called it quits. These three failures resulted in the loss of 2,000 U.S. jobs. As it was, Evergreen had already moved some of its manufacturing to China in an effort to remain competitive.
The global market for solar power was over $71 billion in 2010, double what it was in 2009. Yet there is no question that the future is bleak for solar manufacturing in the United States. According to the Poughkeepsie Journal, in late August SpectraWatt asked the bankruptcy court to permit it to auction off its plant and equipment quickly because "within six months, used solar cell manufacturing equipment and related assets could flood the market and lower its auction bids."
The manufacture of solar panels is a capital-intensive business that requires huge plant-level economies of scale for competitive success. The Chinese have become the leading producers of solar panels for both their home and global markets. Is it possible for a high-wage economy such as the United States to compete as a global manufacturer in the solar industry?
In the case of Solyndra, besides its government-backed loans the company raised over $1 billion in venture capital from 11 major sources. Beyond government subsidies, it is these financiers upon whom we rely for the committed finance required to sustain the operations of a solar manufacturing plant until it can achieve sufficient scale to be profitable. If a venture like Solyndra had not promised eventual success, why would this "smart" business money have flowed so abundantly into it?
The answer is the stock market. The holders of private equity were betting that they could recoup their investments and make a handsome profit for themselves when Solyndra did its initial public offering (IPO) on NASDAQ, even if at that point Solyndra itself might be a long way from attaining profitability. In 2005, when Solyndra was founded, the IPO market was heating up after a sharp slump with the Internet bust at the beginning of the decade, and 2007 was the strongest year for IPOs since 2000. Then the financial meltdown of 2008 killed the IPO market. In December 2009, with the economy in recovery and with its $535 in government-guaranteed loans in hand, Solyndra registered its IPO.
At the time, however, the company had accumulated $558 million in losses since its founding, and in a filing to the Securities and Exchange Commission in April 2010 Solyndra's accountant, PriceWaterhouseCoopers, wrote that its financial condition raised "substantial doubt about its ability to a continue as a going concern." That nixed the possibility of an IPO. Now, with Solyndra in bankruptcy, the investors have lost their money and U.S. taxpayers are on the hook as the company's largest creditor.
For solar manufacturing in the United States to be profitable, it will need committed finance that the U.S. venture capital community -- still by far the world's richest -- is unwilling to provide. They have learned that solar companies require more capital and a longer incubation period than they are willing to endure. If we want advanced solar research to go forward in the United States, we need to engage in advanced manufacturing here as well. In renewable energy, as in other high-tech fields, government and business both need to be involved in providing the "patient" capital required to develop and utilize productive resources. At present, however, notwithstanding its massive wealth, the United States lacks the financial institutions that can cope with the 21st century world of high-technology and global competition.
Matt Hopkins is a research fellow at the UMass Center for Industrial Competitiveness, focusing on issues of clean technology and economic development. He has written a soon-to-be-released report on the U.S. wind turbine industry.
William Lazonick is director of the UMass Center for Industrial Competitiveness and president of The Academic-Industry Research Network. His book, Sustainable Prosperity in the New Economy? Business Organization and High-Tech Employment in the United States was awarded the 2010 Schumpeter Prize.
If such success is so easy to do, then instead of throwing out a hatchet job article filled full of meaningless numbers and CRAP....give us the roadmap to how to go about doing it. The reason why you CANNOT write usch an article is the answers are not as simple as you'd have us believe and i nsuch cases ANYONE write such a PURELY POLITICALLY MOTIVATED ATTACK ARTICLE instead of writing something that leads us somewhere productive.
Solyndra had a new way of making solar and patents on the process that was cheaper when silicon base for solar panels was sellin at four times current prices--prices dropped for many reasons.......also China is selling at a loss right now to keep their production going (and corner the market?)....
you do know the price for solar panels fell about 50% in the last year?...how many business models can adjust to such a drop in price by the competition in that time frame?
also this was a new business--what are the failure rates across the board for such ventures?
Americans should just stop even trying to compete on the world market?
wind? as in windmills?==how much R&D has been happening in that area during that time?
I'm talking solar and wind power have been around for thousands of years and is still not viable. The question you should be asking isn't how much R&D has been happening, its "why" more R&D hasn't been happening?
Answer: Inefficient, ineffective, not economical.
It is as simple as that.
guess that is why oil companies are investing in solar
for the environment . They, LOL, state that fracking
will not harm it. Well light me faucet and poison the
land.
Solar and wind have been squelched by fossilized
rich corporations with the assistance of congress.
Forget nukes. Once she blows there's no getting
the rads back in the bottle.
Natg = thermogenic in origin.
Solar and wind where "squelched" by their own inefficiencies centuries ago, long before high tech of "fossil fuels".
Chinese goods are artificially cheap because of currency manipulation, illegal subsidies, and a complete lack of environmental laws/enforcement in China.
We need to impose large tarriffs on any imported goods from China to balance this out.
This means ...
... setting a vision
... creating a call
... organizing an Energy Department that is not about cronyism and celebrity science
... reinforcing the value of math and science
... provide funding for academic research
... creating a true fair-market incentive (and not tax credits as a thumb-in-the-eye to Big Oil)
... creating real jobs within this sector
... having the renewable community be better organized in its lobbying & messaging (see Big OIl)
Until then, solar will not be taken seriously.
the field is already out of R&D. See other countries are already making them efficiently and putting up in their solar farms.
why do you need govt help here? does apple need govt assistance or Google or Facebook.
Do we need government intervention (tax benefits) for corporations?
After you consider land preparation or rooftop installation, maintenance, weathering, storage, and other real costs, solar energy takes 5-10 years to pay back the energy "debt" you incur to build the system.
Most solar systems (contrary to the lies of companies like Solyndra) don't last more than 15 years on average. Some last 30, some last 10. The average is 15.
Do the math people. It is mathematically impossible for solar to grow fast enough to even keep up with growing demand, much less eliminate coal or other hydrocarbon.
what you are telling is the "absolute fact"
Solar energy is not "sustainable" for any form of higher organisms. Even shell fish int eh see does not depend on photosynthesis and has to rely on already captured concentrated energy by lower life form.
Solar energy is too "dilute" for human consumption.
it is a fact "inconvenient fact" liberals will not accept.,
The fact that you can buy residential PV packages (installed) at places like Home Depot, and that PV solar companies now offer deals where they install systems on peoples' roofs, but the companies own and operate the systems, tells you that PV is now economical in much of the US.
No, what that tells me is that the US consumer sees it as a lose that is also inefficient and unreliable. The only reason that companies see it as economical, is that they can make a buck of the subsidies from the government.
Why?
Chu's official DOE energy report used 1993 costs for green energy to make green look bad compared to the 2016 fossil and nukes costs he got from the pr department of those industries.
Based on Chu's 1993 costs for solar or 9$ installed, Solyandra looked like a good deal.
Proof: "and, for PV, from the Electric Power Research Institute, Technical Assessment Guide (TAG) 1993." http://www.eia.gov/oiaf/aeo/assumption/renewable.html
Problem is, solar panels costs are below 1$, installed system for less than 2$ about 3$ average.
Officials lies have tragic consequences.
First Solar should have gotten that money.
While the solar panels themselves continue to drop in cost, the non-panel systems cost and installation cost are not dropping.
Major components such inverters, voltage regulators, batteries, etc need to come down in price.
This requires more standard packaging and higher production volumes.
Better yet, if household appliances were able to run on DC (and AC), we could avoid the need for inverters.
Installation costs could be brought down by: standard packaging and streamlined building permit processes.
This will help make solar PV viable in the Sun Belt.
PV panel prices have been dropping faster than the other components - if 40 percent of a system's cost is that of the panels (which is what it roughly is right now), then even another 50 percent reduction in PV panel prices would only lower the overall system cost by 20 percent. There are certain to be more cost-reduction opportunities in inverters, other components, and simplified modular installation methods.
Lovins with tech from the 80s built a house (for the same money as conventional) in the mountains of Colorado where he grows bannanas--and he has no mechanized heating system!
He does however have all the modern gadgets and gizzmos (except a plug in clothes dryer--uses passive solar tube to dry clothes from the washing machine)
If we stop wasting most of the energy we produce --any system becomes cheap enough to use if savings are calc. along with the initial expense of the system.
Them the question is do we want to increase the trade deficiet or create jobs in the US--and the tech. improvements. And be dependent on new foreign "suppliers" of something as basic as energy production capability.
There are many industries in which we are competitive.