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Published on September 1st, 2011 | by Aaron Fown

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Learning the Wrong Lessons from the Solyndra Bankruptcy

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September 1st, 2011 by
 

The Solyndra Headquarters, in San Mateo, California. Photo credit: Solyndra

Solyndra’s recent failure to thrive, despite half a billion dollars in federal loan guarantees and strong growth this year, could be taken as a lesson in the failure of government investment in clean energy technology. But it was, in fact, an example of a stunning success of this strategy. Unfortunately, it wasn’t our success. It was China’s.

An example of the Solyndra cylindrical photovoltaic technology. Photo credit: Solyndra

Solyndra began life with much fan-fare in 2005, with a new thin-film solar technology that used panels composed of printed photovoltaic tubes to capture incident light from any direction. Within two years, they were in production, and in 2009 they received a $535 million loan guarantee from the US Department of Energy. Solyndra built its business plan in a time, just a few years back, when it seemed like their cheaper production technology and more efficient panels would give them a huge advantage. But their business plan was undermined by a competitor that they never expected: China.

In 2005, it seemed like a good assumption that the West would have this technology unto themselves for a while. China had not ever been a leader in the production of semiconductors or energy production systems. However, within five years, China was a world leader in alternative energy production, producing cells cheaper and in greater volume than their western competitors. What happened?

Between 2002 and 2008, the US appropriated subsidies for energy production totaling around 100 billion dollars. Of this, nearly 3/4 went to fossil fuels, and of the 29 billion devoted to renewables, nearly half was in the form of subsidies for corn based ethanol. And this is all without counting the massive, multi-trillion dollar cost of  US foreign policy, which seems at times to be far more devoted to the interests of the oil companies than to the interests of the American people. Essentially, the US commitment to solar production has been half-hearted at best, and that has not changed much since 2008, despite the change of the guard in the White House. Meanwhile, China has been offering a nearly unlimited amount of low- to no-interest loans for solar manufacturing, while promising to take up excess production domestically by paying half the price for equipment in solar power projects, and subsidizing generating capacity at a rate of 60-90 US cents per watt! Is it any wonder that US solar manufacturers are falling left and right when they are having to fight against high subsidies and lower labor costs?

We Americans have a choice to make when it comes to alternative energy. Our global competitors have chosen to back these new energy sources with everything they have. Why not? As long as oil is denominated in US dollars, every watt of energy that they produce by other means is like money in their pocket. The WTO is toothless when it comes to major powers like China, so any complaints of anti-competitive behavior are unlikely to have much effect. And if they build up a big lead now, the US will be forced to buy their energy in the form of Yuan-denominated solar, once we start descending the back side of the peak oil curve. Perhaps this state of affairs is fine; I’m no macroeconomist. But as long as the US is providing massive subsidies for old, coal, and polluting energy technologies, it seems foolish to cede the lead to Asia, especially when building up new industry, and making sure that it flourishes, can help keep America working in a time of crushing unemployment.

Alternative energy technologies are the future; they can power the world, if we make an effort to help them do so. But I fear that this recent, spectacular failure may give credence to skeptical voices who advocate austerity over investment. Saving money is often a good choice, but failing to invest it aggressively enough can be just as bad as wasting it outright. The real lesson of this incident is that the US failed to invest aggressively enough, and were overwhelmed by a competitor that developed much more rapidly than was anticipated. It would have been better to invest more aggressively in these technologies years, even decades, ago, but in a perverse way, now wouldn’t be a bad time either. The nature of the competition for the market is now apparent, and this should make building business plans easier. With our lead in technology and automation, in time, the US can retake the lead in solar technology, but this is only likely to happen if an investment in the future is made now.

 

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About the Author

I am a plant biologist and documentarian who loves to write, photograph, explore, and discover.



  • Ed

    “A grasshopper with no legs is deaf” Your entire conclusion is wrong. Move the decimal place one place on wages at Solyndra and labor for the products used in the manufacturing and see who wins. It has nothing to do with investment. 500 mil is a good start for any business if the people loaning the money watched and understood how it was being spent. One can not compete price wise on a product when competition has a 10 times labor advantage.
    Ed K.

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  • Anonymous

    We need to stay the course with solar investments to the anticipated grid parity around 2016. Success is vital for energy security.

  • windsord

    I never could see how making sure half the photovoltaic material was always pointing AWAY from the sun would give Solyndra an advantage. Maybe if I had a billion dollars to invest I would be smarter.

    • MojoNixon

      You are all incorrect (including the author). The reason solyndra went belly-up is that their technology was unfounded and without sound science review.
      I know because I tried reviewing their technology and they refused to engage. Shortly thereafter they jumped out of the game.

  • Chris Kautz

    It isn’ the job of the US gov to invest in private industry. What a joke, it just proves that solar energy isn’t ready for the main stream, too expensive, it breaks. I would love be off of the grid and not rely upon the power company as I am still out of power from Irene

    • Question

      What would you call the massive subsidies that the fossil fuel industry receives except government investment in private industry?

      While residential solar is still expensive for an individual home (though if you can afford the upfront costs it has a return on investment better than the stock market over the past 10 years!), it is very reasonable for utility scale deployment.

      Furthermore, what makes you say that “it breaks”? What would make you say that? PV systems are pretty low maintenance compared to the heavy investment in upkeep that coal or nuclear require. Besides, as your example shows, distributed power generation is a lot more robust. If you had a solar system you’d have power now. Now what breaks?

      All this said, I agree, it would be wonderful if prices fell. Well, guess what? They are! and that is why Solyndra failed… prices dropped far faster than expected and are likely to keep doing so. In 5-10 years the only way the utilities will be able to keep people from having solar will be by legislating it.

    • Anonymous

      highly recommend checking out this piece: http://cleantechnica.com/2011/08/23/solar-power-intro-3-key-solar-power-points-top-solar-power-news/

      & re-read everything “Question” wrote. good points as well.

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