Crystal Clear Lessons from Solyndra

The solar world woke up this morning to news that Solyndra, a startup company pioneering a new kind of solar module, was preparing to file for bankruptcy. Many were surprised by the news because Solyndra was a recipient of a $535M DOE loan guarantee in 2009 and their facility was used by President Obama as a setting for a 2010 press event.

It would be a mistake to generalize from Solyndra's failure to indict the solar industry and solar policy as a whole. This is about one company failing in a market that has exceeded all expectations on cost reduction. There are two important lessons to be gained that are worth stating very clearly.

First, Solyndra failed because conventional PV technology succeeded in dramatic cost reduction. Conventional solar panels cost 1/3 of what they cost 2 years ago. Solyndra's technology just couldn't get down the price curve fast enough to remain competitive in that kind of environment. We should be celebrating PV's wild success rather than lamenting the failure of one company.

(As an aside, the announcement from Solyndra blamed an oversupply of cheap Chinese solar panels for the company's demise. Yes, it's clear that China has chosen to take a leading global position in manufacturing renewable energy technology. I don't think that's a bad thing. As I've argued elsewhere, lower cost solar equipment means lower cost solar electricity. Declining solar electricity prices mean expanding markets for all that help our planet get ever closer to cost-competitive clean energy.)

Second, not all solar policy faces the same kinds of risks as the DOE loan guarantee program (LGP). So let's not paint all government policy with the same brush. The LGP was at the riskier end of the policy spectrum. It bet taxpayer money on individual technologies and companies. This kind of attempt to 'pick winners and losers' is typically the domain of venture capital and private equity--the type of investors who know that several companies in every portfolio will fail.

Other government policies like the Investment Tax Credit, 1603 treasury grant program, and state-level renewable standards are much less risky policies. They are 'company agnostic' and create competitive markets in which the best technologies win. Rather than betting on the success of one player, they align taxpayer interest with the success of the market overall. Those policies have resulted in resounding success and we need to recognize and reinforce their support.

Bottom line, I'm sad to see Solyndra fail and feel immense sympathy for the 1,100 employees who are now out of work. But in the bigger picture, Solyndra's failure underscores just how successful the PV industry has been at cost reduction--and highlights the risks when governments try to pick winners and losers in highly competitive markets.

Comments

[Ray Marshall]

Declining prices are only part of the solution for getting solar energy into the mainstream. We also need government policies that remove barriers for those that do not have a location to install their own solar panels. Solar hosting farms on government owned lands could open up vast opportunities for residents and businesses that want to go solar, but, do not have a location to install their solar panels. Imagine the amount of capital that could be tapped around the world if governments implemented policies to open up territories to allow solar hosting farms for residents and businesses. I've already written an article on this subject titled "A Framework For Energy Independence Via Solar Hosting Farms" which was published by U.C. Berkeley on August 12, 2009. I also sent a copy of this article to the Solar PEIS and received a response from one of its project managers which included the following statement, "While the solar hosting farms concept presented in your paper is very interesting and would be a nice option for people wanting to utilize solar power, it is outside of the scope for the Solar PEIS." Unless we address the barriers to entry in solar energy, only a small percentage of residents and businesses will ever be able to participate in solar energy, even if the price is way below $1/watt. The only way we can address such barriers is to have governments implement policies granting residents and businesses access to government owned land in order to install their solar panels via solar hosting farms.

[Barry Fitzgerald]

It was clear to me years ago that it was unlikely Solyndra would ever be competitive and thus the loans should never have been granted. Why was it not obvious to everyone making these monetary decisions? I just hope this does not tar the entire DOE support for alternative energy. China seems to have won by supporting its solar industry.
Isn't it strange that larger amounts of cash USD were lost in Iraq with no accountability and no House hearings or outrage?

[Solar panels maryland]

When it comes to pollution free future solar energy can be considered the best power source that neither pollute the envelopment like thermal power plants and nor needs to have huge infrastructure like hydro energy plants.

[לימודי שוק ההון]

This is about one organization declining in a industry that has overtaken all objectives on price decrease. There are essential training to be obtained that are value saying very clearly.

[church financing]

The gov't needs to keep its hands out of private industry.

[Affordable Solar]

From the research I've done, it seems like solar power is the way to go. Even a family in my neighborhood has solar panels. they might look funny because they cover their whole roof, but in the end I'm sure they will pay for themselves. Solar power for businesses seems like a good idea too.