Posting in Design
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
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.
Related on SmartPlanet:
- Solyndra to file for bankruptcy; suspends operations
- CNET: Solyndra bankruptcy was disaster waiting to happen
Sep 1, 2011
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Solyndra bankruptcy must be analyzed carefully. Conventional accounting methods have led to wrong business decisions. A project like Solyndra may have to be approached differently if it is funded by the government. Just like trains and subways, many of these projects need subsidy if these are to continue operating because of their necessity. The question should be, is Solyndra a necessity that needs to be subsidized like MRT's and LRT's in cities which are considered solutions to congested highways and pollution from running vehicles? If the answer is NO it should not have been considered in the first place. If yes, then the accounting approach and the economic concept must be wrong. The determination of profit and loss may have to be considered on macro and subsidy rather than the usual profit and loss determination in common businesses.
It's interesting that everyone sees the Chinese government investing in solar as some massive threat to America. About 15 years ago the same kind of thing was happening in Japan and everyone seemed to be in panic that we would lose everything to the Japanese. Look where they are now after all their government's investment. Here's the failure in the thinking: If the Chinese government is subsidizing their companies or even the R&D in the industry, the cost of that is being borne by it's citizens. That makes them poorer and lowers their standard of living. Should they succeed, it only means that the rest of the world will end up with the technology, or the rest of the world will benefit from the cheap products at the Chinese citizen's expense. It's the same flawed argument as Tariffs. The logic in all of this is totally flawed. Some county is punishing it's citizens, therefore we must punish ours. Totally ridiculous. Get the government out of all of this. If this technology is worth pursuing, the private sector will do so. If not, then it definitely should not be pursued by politicians, or by further definition, taxpayers.
Will anything come of this? http://www.msnbc.msn.com/id/44440035/ns/business-us_business/
Solyndra failed becuase it was a fundementally flawed concept. The idea of minimizing the use of you solar material versus maximizing it (like concentrated solar) doesn't make a lot of sense. I am only surprised that it took this long. I knew this would happen years ago (http://gigaom.com/cleantech/solyndras-estimated-market-cap-up-to-2b-report/). This is one of the two worst ideas in solar (and I have seen a lot). The cost will be driven down by using the materials more effectively like concentrated photovoltaic (CPV). I especially like the Rainbow Concentrator by Sol Solution (www.Sol-Solution.net).
As we speak, the President is preparing his big Labor Day jobs speech. Will he dare drone on again about his "green jobs" approach with this dangling behind him? Heres the problem. Public investment in the U.S. clean energy industry is necessary. Is it really? And again, how has that been working out so far? All we have done is "stimulate" jobs for India, fed the feedback loop to politicians (Solyndra was the child of billionaire and Democratic fundraiser George Kaiser. How much of that half-billion made it back to Democrats and the Obama 2012 campaign?) and we're another billion or so in debt with nothing to show for it. Without it, U.S. companies would be even further behind its Chinese competitors. What? More behind than we are now? Who can tell the difference? Hell, we're even subsidizing the Chinese to drill for oil for the Brazilians! Where does the madness stop? The argument that China subsidizes this technology is a fair one. But then again, it's not the first time that this issue has occurred in high-tech manufacturing. For example, Airbus is a creature of government subsidy as well. And yet, through trade agreements Boeing has been able to compete both here and abroad. Allowing politicians to indiscriminately throw billions of dollars hoping something will stick has not worked, nor will it ever work. So what is the role of the DOEs 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? If there is any role for the Federal government in "clean energy", it should be pure R&D in the technologies. Beyond that, it has been repeatedly demonstrated that politicians and their appointees are in no way qualified to determine what is and is not commercially viable. All this "green investment" money has done is to fertilize corruption.
Well said, Hates Idiots. Massive deployment of solar PV -- before figuring out how to connect to the grid and store solar energy -- was hastened in the panic over global warming, with promises of "green jobs" for Americans. Sounded good back in 2009, when hope was fashionable. Somehow, solar PV would find a way to provide baseload power to substitute for the coal and nuclear plants that the EPA is going to shut down. Cap-and-trade and the "free market" were supposed to put America back to work after the 2008 crash. But then cap-and-trade turned out to be an offset derivatives scam, an attempted replay of the junk mortgage debacle using "carbon credits" -- which could be anything, including bogus forestry projects in remote jungles -- to underlie derivatives for wheeling and dealing on Wall Street. And then the "free market" turned out to be all about access to government subsidies and obscene executive compensation as a reward for putting private profit over public welfare. And the basic business model of "renewables" trying to do the job of baseload generation proved to be delusional. We do not, in fact, have "all the technologies we need" to keep the lights on while reducing CO2 accumulation in the atmosphere, and we'd better get busy on developing some new stuff with the scarce government assistance that is now available. To start, the money being wasted on CO2 sequestration projects should be put to better use. It's "profoundly non-feasible option for the management of CO2 emissions" (see http://twodoctors.org/manual/economides.pdf) and taxpayer funding of oil company enhanced oil recovery (EOR) projects looks like corporate welfare in green guise.
Solyndra, in the US, closed because they took much of the $535 million loan and dumped it into their India subsidiary, Photon Solar. They also turned over the work on two 16 MW projects in California to Photon Solar. They took the money, they got 2 big California solar projects only because the state thought the jobs would stay in state and now they declare bankrupcy so they do not have to pay the money back. I would call that a pretty good years work for the CEO. Give that man a raise. With this mess and GE paying no income taxes in 2010 because of eco tax credits, Obama has some nerve complaining about the GOP and corporate welfare. Obama is the poster child for corporate welfare. How is that green agenda working out Mr. Obama?
I agree. We should fund for R&D not for production. Production should be funded by VC because those people know how to get the job done right, not the politician.
Couldn't agree more with JohnMcGrew@ about gov't funding R&D over operations. In order for the "Green Economy" to take root, the administration should be investing dollars in basic research and training/education on all sorts of alternative energy technologies, rather than trying to find and fund companies directly. Following the DARPA model of technology transfer to the private sector would also be a solid course of action for the government. And then let market forces dictate the winners and losers. In terms of financial incentives, creating a corporate tax structure that better rewards invested R&D dollars with lower tax rates (or yes even credits) for programs deemed "in the national interest" might help sustain ongoing corporate investment rather than relying on direct, high profile stimulus loans. Though I think utilizing the current Small Business Administration loan process for funding start up capital could be fair game if it was supplemented with perhaps some "technology transfer" grants from the likes of DOE, EPA, DOT, etc. I also agree that throwing out the Chinese competition card is a potential red herring here. Nothing spurs innovation like competition... even unfair competition. This market is so young still that I believe all the "wild west" rules apply and until the U.S. can, through honest achievement, demonstrate leadership (both technical and consumption) here, it should be every country for themselves. After all, alternative energy sourcing and supply is not unique to the US... it is truly global in nature.
Where is there solar deployed without being sufficiently connected to the grid? Where is it deployed at a level that storage is even an issue? Southern California, one of the prime places to use solar, has around 6% of it's renewable power from solar, and peak use is in line with peak output from solar. Storing solar generated electricity for use at night makes no sense unless that 6% got to more like 70% of all power generation, not just renewables.
...for its intended beneficiaries; campaign contributors who got the tax breaks, get to pocket easy stimulus cash and enriched their interests elsewhere, and the politicians who got a percentage of the spoils back in re-election funds. We already know that the "green agenda" has complete contempt for actual taxpayers.
Have anybody looked at the fact why it's neighbor still hiring? According to ABC news, its neighbor (another solar company) is looking for the employee of Solyndra. They have no government funding but their business is great. Why? I think it has something to do how they spend the money not belong to them!
SBA assistance is available to companies having 499 employees, who can afford to have a full-time paid principal investigator on the payroll (an SBA requirement). Startups are not eligible for SBA assistance, and the assistance that should be going to startups gets channeled to corporate welfare. There should be a new category of "microbusiness," with dedicated assistance to startups.