The solar world woke up this morning to news that Solyndra, a startup company pioneering a new kind of solar module, was preparing to file for bankruptcy. Many were surprised by the news because Solyndra was a recipient of a $535M DOE loan guarantee in 2009 and their facility was used by President Obama as a setting for a 2010 press event.
It would be a mistake to generalize from Solyndra’s failure to indict the solar industry and solar policy as a whole. This is about one company failing in a market that has exceeded all expectations on cost reduction. There are two important lessons to be gained that are worth stating very clearly.
First, Solyndra failed because conventional PV technology succeeded in dramatic cost reduction. Conventional solar panels cost 1/3 of what they cost 2 years ago. Solyndra’s technology just couldn’t get down the price curve fast enough to remain competitive in that kind of environment. We should be celebrating PV’s wild success rather than lamenting the failure of one company.
(As an aside, the announcement from Solyndra blamed an oversupply of cheap Chinese solar panels for the company’s demise. Yes, it’s clear that China has chosen to take a leading global position in manufacturing renewable energy technology. I don’t think that’s a bad thing. As I’ve argued elsewhere, lower cost solar equipment means lower cost solar electricity. Declining solar electricity prices mean expanding markets for all that help our planet get ever closer to cost-competitive clean energy.)
Second, not all solar policy faces the same kinds of risks as the DOE loan guarantee program (LGP). So let’s not paint all government policy with the same brush. The LGP was at the riskier end of the policy spectrum. It bet taxpayer money on individual technologies and companies. This kind of attempt to ‘pick winners and losers’ is typically the domain of venture capital and private equity–the type of investors who know that several companies in every portfolio will fail.
Other government policies like the Investment Tax Credit, 1603 treasury grant program, and state-level renewable standards are much less risky policies. They are ‘company agnostic’ and create competitive markets in which the best technologies win. Rather than betting on the success of one player, they align taxpayer interest with the success of the market overall. Those policies have resulted in resounding success and we need to recognize and reinforce their support.
Bottom line, I’m sad to see Solyndra fail and feel immense sympathy for the 1,100 employees who are now out of work. But in the bigger picture, Solyndra’s failure underscores just how successful the PV industry has been at cost reduction–and highlights the risks when governments try to pick winners and losers in highly competitive markets.