Intelligent Energy

Why Solyndra failed and the DOE loan program is next

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Solyndra's bankruptcy has ignited a debate over what caused the startup to collapse. A look at the company's business model and the global solar market and it's hard to imagine a different outcome.

Solyndra's bankruptcy announcement this week has ignited a debate over what caused the solar panel startup to collapse. Take a look at the company's business model and the changing dynamics of the global solar market and it's hard to imagine a different outcome for Solyndra.

Solyndra's technology, it's use of unconventional materials, and its tubular design stood out in a sea of flat, solar panels made with silicon. Solyndra's was an innovator, for sure. Instead of flat panels, Solyndra sold round tubes with a rolled solar cell that were spaced out to capture more sunlight.

Unfortunately, the company's novel technology only made sense when costs of materials were high.  And they didn't stay that way for long. Costs dropped precipitously after China's state-run banks handed out billions of dollars in loans to homegrown solar companies including Suntech and Trina Solar. This chart, put together by Ryan Cunningham using compiled news reports from Reuters and Bloomberg, illustrates the inequity between Chinese and U.S. government support.

A flood of cheap solar panels compounded Solyndra's own cost control problems caused by a need to buy specially-designed manufacturing equipment, not to mention criticism that it used more material than other companies.

Down goes the loan guarantee program

Solyndra's failure now puts the Department of Energy's support programs at risk. And that means cleantech start-ups that have struggled to secure financing might lose out too.

Two years ago, the DOE pinned its clean economy job creation hopes on Solyndra and awarded it a flagship $535 million loan guarantee.  After Solyndra closed one of its factories, laid off workers and cancelled its planned public offering, Republicans pounced on the DOE's loan program and its use of stimulus funds.

Last February, the House Energy and Commerce Committee launched an investigation. Now that olyndra has bit the dust, the DOE loan guarantee program will be Republican's crosshairs. This joint statement issued Wednesday from committee chairman Fred Upton and the panel's oversight subcommittee chairman Cliff Stearns is a good indicator of how intense this investigation is about to become.

We smelled a rat from the onset. As the highly celebrated first stimulus loan guarantee awarded by the DOE, the $535 million loan for Solyndra was suspect from day one.

It is clear that Solyndra was a dubious investment, but the DOE doubled down in March of this year and restructured the loan, possibly further increasing taxpayers' liability. That is a question we want answered. In this time of record debt such disregard for taxpayer dollars cannot be tolerated.

Here's the problem. Public investment in the U.S. clean energy industry is necessary. Without it, U.S. companies would be even further behind its Chinese competitors. So what is the role of the DOE's loan program? To offer support to companies with game-changing technologies, but a high risk of failure or big, established players that can probably secure its own financing?

It's worth noting that the DOE wasn't the only entity that picked Solyndra as a winner. The solar startup raised $1 billion in equity from high-profile and savvy venture capitalist investors including RedPoint Ventures, CMEA Capital and RockPort Capital.

Photo: Flickr user hans.gerwitz, CC 2.0; Solyndra

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Kirsten Korosec

Contributing Editor

Kirsten Korosec has written for Technology Review, Marketing News, The Hill, BNET and Bloomberg News. She holds a degree from Northwestern University's Medill School of Journalism. She is based in Tucson, Arizona. Follow her on Twitter. Disclosure