On August 31, Solyndra, Inc. suspended operations, leaving 1,100 employees out of a job, and announced plans to file for bankruptcy reorganization.
In 2009, the thin-film PV panel manufacturer received a $535 million loan guarantee from the Department of Energy (DOE) as part of a government backed investment strategy.
The DOE Energy Loan Program guaranteed loans to over 40 innovative green energy companies. Solyndra’s loan guarantee was to aid construction of a manufacturing plant for cylindrical thin-film photovoltaic panels for commercial applications.
But while Solyndra sold over 1000 installations in 20 countries, increasing sales revenue by 2000 percent over three years, the firm is likely to file for Chapter 11 bankruptcy this month.
As the number of manufacturers has increased over the past five years, the price of solar panels has fallen. While American and European firms still have a technological advantage, the Chinese cost advantage has proven to be a powerful one.
Further, U.S. state and federal government subsidies to the consumer have not boosted demand for solar panels as intended. The United States has an export surplus in PV components, but it’s main solar import is Chinese-assembled solar panels. So some of these government subsidies are used for purchasing Chinese PV panels rather than adding to demand for U.S.-made panels.
While Chinese firms are often associated with low labor costs, they also have advantages in capital-intensive sectors like photovoltaics. Chinese firms have access to heavily discounted, if not free, land, as well as interest free government financing. These government support mechanisms are much greater than those available to American firms.
But low-cost competition was not the only problem for Solyndra. According to the Department of Energy, solar panel prices have dropped 42 percent during 2011 as manufacturers have increased capacity. While many U.S. solar energy firms weathered these market conditions, part of the reason Solyndra couldn’t survive was the product itself.
Solyndra’s cylindrical solar panels used newer thin-film technology, whose marketability depended on using less polysilicon. But the price of polysilicon used in traditional solar panels has fallen 80 percent over the past three years, offering little incentive to switch to Solyndra’s now relatively expensive thin-film panel.
Peter Lynch, an industry analyst, adds that Solyndra was not competitive with other U.S. firms. Estimates for Solyndra’s cost price have been as much as $6 per watt. “Regardless of the Chinese cost, Solyndra had to get its costs down,” said Lynch. “The Chinese are cheap, but there are U.S. manufacturers who are selling excellent panels for under $1.75 per watt.”
The Road Ahead
Solyndra is the third U.S. solar energy company backed by the DOE Loan Program to file for bankruptcy in August 2011, along with SpectraWatt and Evergreen Solar. According to GTM Research, the closing of these three firms is a loss of almost 20 percent of the United States’ solar panel manufacturing capacity.
David B. Sandalow, the assistant secretary for policy and international affairs at the DOE, said there is “no question” that U.S. green energy firms are feeling the heat from China. But perhaps Solyndra’s closure is rather, as some experts claim, a consolidation of an industry with too many firms for the demand rather than a sign of a serious cost disadvantage for U.S. solar energy firms.