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Solyndra's burnout burdens other solar upstarts

The political uproar over failed solar company Solyndra risks eroding support for valuable clean-energy technology programs and could starve promising solar companies of financing.

Solyndra's tube-shaped solar collectors are designed for flat commercial rooftops.
news analysis The media frenzy and political circus caused by bankrupt solar company Solyndra makes it tougher for other fledgling solar companies to secure financing and risks derailing government policies to promote green technologies.

In the latest twists in the weeks-long story, government-backed Solyndra said yesterday that CEO Brian Harrison and CFO Bill Stover will exercise their Fifth Amendment rights and not provide substantive answers to questions during a scheduled Congressional hearing on Friday.

Also yesterday, the House Subcommittee on Oversight and Investigations, which held hearings last week with Department of Energy officials, said that it intends to investigate proposed loan guarantees to other energy companies over concern that decisions may be rushed.

While Solyndra's failure clearly looks bad for the Obama administration, the damage of bad publicity could spread to Silicon Valley and the headquarters of other green-technology companies.

"If anyone else is trying to raise money, really for any new technology in solar, you are going to be playing defense now with Solyndra," said Shayle Kann, an analyst at GTM Research. "It's probably going to create a more difficult landscape in general."

Young solar companies need money to build their first factories. Another hurdle for new solar technologies is making them "bankable," or deemed worthy of receiving loans for building large-scale solar projects. Now with the very public failure of Solyndra, solar companies seeking financing from venture capitalists or banks face steeper challenges, said Kann.

After receiving a $535 million loan guarantee to build a factory in Fremont, Calif., Solyndra abruptly shut down its operations and then declared bankruptcy, blaming rapidly falling solar prices led by Chinese manufacturers. In the aftermath, there have been accusations of political cronyism and that the Obama administration rushed the loan guarantee decision.

For people who closely follow the solar industry, Solyndra's demise was not all that surprising as it had significantly higher costs than other producers. Now the worry for other solar companies is that all manner of policies to encourage green-technology innovation will be painted with the same brush.

Cutting support for renewable energy in the U.S. is a "definite risk," said Craig Lund, the vice president of business development at solar manufacturing startup 1366 Technologies, which also received a loan guarantee from the Energy Department for a demonstration solar plant.

More significantly, Solyndra's demise is a very public signal of the consolidation that's going on in the global solar industry where prices for photovoltaic panels have dropped more than 50 percent since 2010.

"This is the beginning of what's going to be a necessary and productive shakeout over the next couple of years. You are going to see some major bankruptcies and a lot of corrections, including companies you've never heard of in China," said Lund.

Loan guarantee program scrutiny
While some politicians will use Solyndra as a political tool, there are some questions over what constitutes effective U.S. policy even among supporters of clean-energy technologies. Federally funded research tends to draw universal support among politicians but loan guarantees to scale up new technologies are relatively new in the U.S.

Solyndra was the first company to receive a DOE loan guarantee, a program was created in 2007 to help fledgling companies bridge the so-called valley of death of bringing new technologies to market at large scale.

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''I believe that it addresses a key capital gap in the 'valley of death' for cleantech innovations, but wasn't designed well," wrote investor Rob Day. "So there's a sober conversation to be had about whether government should be seeking to address that capital gap, and if so, how it should do so."

Loan guarantees have gone to solar, wind, nuclear, and advanced auto battery companies, with the bulk of solar loans going toward large-scale energy projects rather than solar manufacturing. The jury is still out on whether the four solar-manufacturing loan guarantees will work out but the utility-scale solar projects are safer financial bets, said GTM Research's Kann.

"When you look at the scale of these (solar energy) projects, it would've been hard to finance them otherwise and they're not terribly risky. It scales up the market much more quickly than it would have otherwise," he said.

Soldiering on
For solar industry watchers, the question now becomes whether a spate of U.S. solar companies created about five years ago, as Solyndra was, can survive the shakeout and whether policies will change to make it more difficult.

Most new U.S. solar companies are commercializing thin-film solar technologies, which promise to be less expensive than traditional silicon. And despite Solyndra's demise, these companies are plowing ahead, assuming they can successfully raise expansion funding.

Silicon Valley-based Miasole, for example, expects to be able to manufacture solar panels at less than $1 per watt at its Sunnyvale, Calif., headquarters this year and projects going below 80 cents per watt by the end of 2012, said Rob DeLine, the vice president of marketing.

The company began the process of applying for an Energy Department loan guarantee, but withdrew because it was able to find corporate and venture funds, DeLine said. Its operations are still tiny, but its manufacturing process promises to approach the efficiency of traditional silicon solar cells with lower manufacturing costs.

"We think we have the material set that gives us a cost structure that's lower than China and provides performance that is similar to their product," he said. "If we deliver on that, we'll be just fine."

Yesterday, thin-film solar producer Heliovolt received a $50 million investment from Korean conglomerate SK Innovations to expand Heliovolt's Austin, Texas-based manufacturing. In another example, thin-film solar company Stion opened a solar factory last week in Mississippi, lured in part by state incentives, including a loan and job training incentives.

Solyndra's failure is a harsh reminder of the perils of putting public money at risk. But there's an upside to the solar industry shakeout--lower prices for a renewable energy source. Rather than scoring political points, though, the episode should remind U.S. businesses and policymakers on the need to devise more effective industrial policies.