Solyndra Failed. The Solar Industry is Strong.
When Solyndra filed for bankruptcy in September 2011, critics quickly treated the collapse as evidence that America’s solar industry was failing: yet it’s strong!
That conclusion missed the bigger story.
Solyndra failed as a company. However, solar power is strong and also has continued expanding. In fact, one of the forces that hurt Solyndra ultimately helped transform solar energy into a strong and mainstream source of electricity: rapidly falling costs.
The solar market was becoming more competitive, not less.
Solyndra Became the Story
Solyndra attracted enormous attention because the company had received a $535 million federal loan guarantee to build a photovoltaic manufacturing facility in Fremont, California.
Then everything unraveled.
In September 2011, Solyndra stopped manufacturing, laid off roughly 1,100 employees and filed for bankruptcy protection.
The collapse immediately became a political controversy surrounding federal clean-energy investments.
However, one troubled manufacturer did not represent the entire solar market.
That distinction mattered then. It matters even more looking back today.
Solar Panel Prices Were Collapsing Making the Industry Strong
Ironically, Solyndra faced trouble partly because conventional solar technology became dramatically cheaper.
Solar module prices fell rapidly during the years leading up to the bankruptcy.
Back in October 2008, average solar module prices were reportedly around $4.20 per watt. By 2011, prices had fallen to roughly $1.20 to $1.50 per watt.
That was an extraordinary shift.
Moreover, the decline changed the economics of solar energy strong almost overnight.
Manufacturers could produce conventional crystalline-silicon panels at increasingly competitive prices. Developers could build projects for less money. Utilities could sign larger solar contracts. Meanwhile, homeowners and businesses gained access to increasingly affordable systems.
Solyndra suddenly found itself competing in a strong solar energy market that moved much faster than its business model anticipated.
Silicon Went From Shortage to Abundance
The solar market had previously faced another problem.
Silicon prices soared as global photovoltaic production expanded.
At one point, solar-grade silicon reportedly climbed from around $25 per kilogram to roughly $450 per kilogram. That price spike encouraged companies to develop technologies that relied less heavily on conventional silicon.
Solyndra followed that path.
Its cylindrical thin-film solar modules represented an alternative to traditional flat crystalline-silicon panels.
Initially, the concept made sense.
Then the market changed.
Silicon production expanded. Prices declined. Manufacturing improved. Traditional solar panels became significantly cheaper.
Consequently, Solyndra lost one of its biggest potential advantages.
Competition Was Making Solar Industry Stronger
That is the part of the Solyndra story that often gets overlooked.
A clean-energy company failing does not automatically mean clean energy itself is failing.
Sometimes the opposite is true.
Technology markets are intensely competitive. Companies rise. Companies disappear. Manufacturing techniques improve. Supply chains expand. Prices fall.
The automobile industry experienced the same process.
So did personal computers.
So did smartphones.
Solar energy followed a similar path.
Solyndra reportedly faced production costs around $2 per watt. Once competing technologies moved substantially below that level, maintaining the company’s competitive position became extremely difficult.
However, cheaper competing panels were excellent news for customers.
Solar Installation Costs Were Already Falling: Making the Industry Strong
By 2011, the price of going solar in the United States was also declining rapidly.
Installation prices reportedly dropped about 17% during 2010 and another 11% during the first half of 2011.
Therefore, homeowners, businesses and utilities could increasingly justify solar projects based on economics rather than environmental benefits alone.
Meanwhile, government programs, state renewable-energy policies, tax incentives and private investment helped the industry reach greater scale.
Greater scale lowered costs.
Lower costs increased demand.
Higher demand encouraged even more manufacturing and investment.
That cycle helped accelerate solar deployment across the country.
California Was Already Showing What Came Next
California offered an early glimpse of where the market was heading.
By mid-2011, California utilities had signed contracts representing more than 8 gigawatts of solar generation, according to figures cited at the time by Vote Solar.
Even more significant, some of those projects were reportedly competing economically with new natural-gas generation.
That represented a major transition.
Solar industry was immediately strong and power production was no longer simply an experimental idea. Or a technology supported only by environmental advocates. That’s because it’s becoming energy infrastructure.
The Federal Loan Program Was Bigger Than Solyndra
Solyndra also became the most famous participant in the Department of Energy’s Section 1705 loan-guarantee program.
However, it was only one project.
The program supported renewable-energy systems, transmission projects and other advanced-energy developments across the United States.
During September 2011 alone, the Department of Energy listed loan guarantees or partial loan guarantees for projects including Desert Sunlight, Antelope Valley Solar Ranch, California Valley Solar Ranch, Mesquite 1 and several other renewable-energy developments.
Therefore, evaluating the entire clean-energy investment strategy through one bankruptcy offered an incomplete picture.
Solyndra deserved scrutiny.
Yet the performance of the broader portfolio and the evolution of the technologies also mattered.
Investigations Later Found Serious Problems
The Solyndra story should not be romanticized either.
Years later, a Department of Energy Office of Inspector General investigation found significant shortcomings surrounding information Solyndra provided during the loan-guarantee process.
The Inspector General reported that company officials provided statements and financial information that were inaccurate or misleading and sometimes omitted information relevant to government decisions.
Taxpayers ultimately suffered losses exceeding $500 million.
Those findings were serious.
They reinforced the importance of strong due diligence, transparency and oversight whenever taxpayer money supports emerging technologies.
However, those failures still did not demonstrate that solar power itself was economically doomed.
Solar Ultimately Proved the Bigger Point
Looking back, the broader direction of the market became clear.
Solar technology continued strong and continually improving.
Manufacturing expanded dramatically.
Competition intensified.
Costs continued falling.
Solar installations multiplied across residential rooftops, commercial properties, utility-scale projects and community-energy systems.
Therefore, Solyndra became less a symbol of solar’s failure and more a reminder of how brutal technological disruption can become.
Not every clean-energy company will survive.
Nor should anyone expect them to.
Innovation involves risk. Markets eliminate companies that cannot remain competitive. Better technologies replace expensive ones.
However, the underlying technology can still succeed spectacularly.
Conclusion:
Solyndra Was a Corporate Failure, Not Solar’s Funeral
Solyndra collapsed.
That deserves to remain part of the history of American clean-energy policy.
Taxpayer losses were real. Management decisions deserved investigation. Government oversight deserved scrutiny.
However, declaring the solar industry dead because one manufacturer failed never made much sense.
The market was doing exactly what rapidly evolving technology markets often do.
Costs were falling.
Competition was increasing.
Manufacturing was improving.
Deployment was expanding.
Ultimately, the dramatic decline in solar prices that contributed to Solyndra’s problems helped make solar power more accessible to millions of Americans.
One company died.
Solar kept growing.
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http://www.forbes.com/sites/toddwoody/2011/08/31/what-solyndras-bankruptcy-means-for-silicon-valley-solar-startups/
http://www.forbes.com/sites/energysource/2011/09/02/solyndras-failure-is-no-reason-to-abandon-federal-energy-innovation-policy/
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http://www.theatlantic.com/politics/archive/2011/09/why-we-cant-let-the-solyndra-failure-kill-support-for-solar-energy/245127/
http://www.washingtonpost.com/blogs/ezra-klein/post/five-myths-about-the-solyndra-collapse/2011/09/14/gIQAfkyvRK_blog.html
