American Solar

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By: Wayne Brown


The hot topic in the news this week is the bankruptcy failures of those “green energy” companies so touted by the Obama Administration as revolutionary in the effort to obtain clean, renewable, energy sources for America. Conceptually, that is not a bad idea and bears consideration over time as technology opportunities present themselves or are discovered. On the practical side, as a commercial venture which is “profit oriented” the concept might bear some scrutiny.


Four of the five failing companies in the recent bankruptcy proceeding were in the same business…solar technology. Rather that attempt to track through the individual litany of each failure, let’s take a closer look at the one company which seems to have grabbed the majority focus in this situation. That company is Solyndra. Now this is a company which President Obama visited in 2010 and upheld as a shining example of what America needs to be doing in the hunt for renewable energy resources.


Solyndra was founded in 2005 and established on a new approach to solar energy capture. The traditional approach is that of flat solar panels which are made of a grid of small energy cells which are interrelated in a complex circuitry such that it functions as a single unit. The flat panel offers maximized surface area for the capture of energy from sunlight. The process of constructing traditional flat panel technology is labor intensive and tedious work somewhat akin to working with computer microchips. Thus, traditional flat panel technology has been rather expensive to afford and difficult to justify in terms of payback on investment at the commercial levels of industry.


Solyndra had a better idea for a “mouse trap”. Rather than employ the traditional methods, they would use a cylindrical approach creating long tubular photovoltaic cells which employed large continuous amounts of material rather than working in the small flat cells. This would make the process less expensive and more affordable in the marketplace. While Solyndra appeared to have a good idea, apparently they did not totally control the technology as other companies in the U.S. market followed suite with similar product designs.


By 2010, Solyndra could boast of having over 1000 commercial rooftops equipped with their tubular solar technology in over 20 countries worldwide. The company had built a large headquarters complex in Fremont, California and now employed approximately 1100 people. All eyes were on a new robotic manufacturing facility totaling over 800,000 sf to anchor the company in the market place. Funds for this investment were derived from private investment to the tune of one billion dollars and federal government loan guarantees of $535 million dollars. At the time, Solyndra had annual sales of approximately $140 million dollars. A rather small amount of sales versus investment but the market potential was estimated at upwards of $2 billion dollars so it was assumed that financial growth would continue.


Unfortunately, the economic downturn of 2008 had worldwide effects. This coupled with other financial woes of the global market left many companies who had stepped up for the Solyndra concept reexamining their commitments to investment in solar energy. This was one factor playing into the demise but there were other influences as well. Enter the Chinese. China has energy woes which are becoming more apparent every day. Starting with fossil fuel energy, much of their crude oil consumed is supplied by the world market. 80% of their electrical needs is furnished by coal-fired electric plants. China has less than a 50 year reserve in its domestic coal seams at present. Ultimately, China will be heavily on the world market looking for coal which will drive the price through the roof just as it has crude oil.


China sees solar energy as an alternative to some of their woes so the government invests in it heavily in the hope that its use will reduce the dependence on coal especially in the commercial sectors. In the process, the Chinese have found that they can produce the traditional flat panel solar cell technology at a cost saving of about 70% over previous prices in the commercial market. This is the straw which really broke the camel’s back in the marketplace for companies like Solyndra. The flat panel technology is more efficient in that it has more surface area to capture light. The tubular technology can or was cheaper to produce but lacked the efficiency of the flat panel due to the cylindrical shape of the tube which ultimately reduced the amount of surface available to directly trap the energy. When the Chinese drop their products into the market, customers flocked to the traditional and now more affordable technology. This was a windfall for China in that the primary focus was on solving some of their own internal issues and now they had products to sell which were commercially viable around the world.


Solyndra and the other companies taking bankruptcy all cited the same market conditions which ultimately undermined their technological approach. While there are lessons to be learned here as there are in any business failure, ultimately survival in the marketplace becomes a function of a company’s product, intelligence, flexibility, common-sense, and financial strength. When all those factors do not come to bear, the chances for survival are few.


In Solyndra’s case there are numerous considerations. The company was in business for only seven years. It had grown far too fast and had just taken on over $1.5 billion dollars in debt when it only grossed $140 million annually in sales. Yes, there were some very inviting government loans here but still those loans must be repaid from the cash flow of the company. The company employed over 1100 workers but the new factory was touted as “robotic”. The question then begs, were most of these workers used in production or was the company “administratively heavy”.


Solyndra’s process was expensive upfront to the end customer and had to be looked at for long term value to justify the upfront costs. This was a bitter pill to swallow in an industry in which the costs of “going solar” has dropped in the past year by 30% in the U.S. market alone…more in others. Solyndra’s patented technology had potential long life benefits in an industry where technology is changing greatly on the short-term. Many companies were just not willing to gamble on the payoff of long term dependency on a single technology.


The solar technology business is alive and well today with over 5500 companies in America currently engaged in this market segment in one way or the other. This makes for some competitive conditions and calls for companies to be lean and mean in their daily operations if they are to survive in the pack or become a dominant leader. While some may not agree, the marketplace is the ultimate litmus test for the viability and the need of a given product. Those which cannot survive the marketplace fall by the wayside. In some cases this is because the product was a bad idea and in others it is because the company which attempted bring the product to market was a bad idea. Either way, survival in the market is dependent both on the company and the product…both must meet the muster.


On the environmental side, there are those who clamor that the government has not done enough in subsidizing and upholding these business ventures. They cite the involvement of the Chinese government in the success of the Chinese venture in solar products. There might be some credibility to this argument if conquering the concept provided some primacy over the end result. This is not the case, as solar technology is a free-range battlefield…anyone can jump in at any given time and take the risk. If subsidizing companies to gain their venture into a given area were all it took, then we should be domestically independent in the crude oil arena today as a country and we certainly are not.


At what point does the American taxpayer stop subsidizing an industry which cannot make a profit? That is the question which comes to bear. If there is a true market for the product out there, there will be people, investors, and methods which will come to bear in the marketplace economy to bring it to life without any involvement of the government. Taxpayer subsidies are nothing more than a crutch which props up an entity which cannot stand on its own. There may be some argument for that in the early startup stages but somewhere beyond that point, the business either has to stand on its own or disappear from the market.


Capitalism is about free market competition. At least that is the case in its truest form. When one mixes government intervention into the recipe, then we no longer have a pure market but one that is skewed by the use of taxpayer dollars to keep entities alive which would otherwise perish. In that process, if one stirs in a bit of greed, there is ample opportunity for some rip-off of the taxpayer in the process and little or no accountability in either the company or our government which propped it up. America can no longer afford such behavior without explanation.



©Copyright WBrown2011. All Rights Reserved.


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Comments 19 comments

leroy64 profile image

leroy64 5 years ago from Dallas, Texas (Oak Cliff)

Before the current administration, solar panel design had progressed along the lines of film technology, that is the panels were made lighter and easier to install without structural modifications. Two things I saw being sold on the market were solar shingles that can be used as apart of a residential roof and a solar film that could be applies to vertical surfaces. This was an effort to control installation costs. The cost of installation is as much a barrier to sales as the initial cost, especially in retrofits. Just judging from the speeches coming from our government, I would say that the actual potential of solar panels are not understood.

This is another thing to support the viewpoint of Libertarians ( I hope that is the right word.) that the government has little justifiable place in the market place.


Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

@leroy64...I tend to agree. The marketplace is what it is...much like the arena of the gladiators...a bloody place but for those who can survive it there is much reward. WB


Ruchira profile image

Ruchira 5 years ago from United States

The lay off at Solyndra was a shocker. The ex-employees say that a lot of money was also spent on working out the interiors of the building which was not needed and the other extravagant expenses which could have been curbed...

A solar company declaring bankruptcy says volumes about where we are heading...A sad but true fact :(


P. A. Kenney profile image

P. A. Kenney 5 years ago from Cape cod, Massachusetts

Why do we insist on allowing foreign contries who provide massive subsidies to their exporting industries to cripple us as we attempt to grow in the same technologies, such as solar, as those very countries? The Section 1603 30% rebate and the accelerated tax depreciation allowance that make solar work for us in the U.S. as solar owners are applied equally to domestic and foreign manufacturers of solar equipment. While Solyndra was producing for $2.00/kw China was at $1.25 +/-. But, Chinese panels received the same "incentives" as those made here, or at least made by a U. S. company. Evergreen failed becasue failure was deserved. Solyndra failed because of many factors. Unfair foreign competition was certainly one of these factors.

If the s.1603 rebates were weighted to favor U. S. solar manufacturers foreign makers would see their retail prices lose the advantage they now have. The advantage flowing to foreign solar manufacturers is not necessarily either quality or long-term efficiency, it is primarily and some say only cost. Had we, the United States, not taken on what many at the time believed to be a foolish risk we would not now be wasting time talking about failure but would have more time and energy to devote to figuring out how to succeed.

Something interesting to ponder: if the s1603 rebates expire as planned on December 31 of this year there will be failures of solar producers in China that will make Solyndra seem like a minor accounting error.


Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

@Ruchira...I rather suspected such as this company seem to need to have all the "visuals" in place before they had achieved that level of business...big headquarters, etc. Nice but not practical for a startup company in a competitive strucuture. WB

@P.A. Kenney...I get the impression from my reading on the bankruptcy for Solyndra and some of the others that the real fallout was in the European markets where solar had been progressing well. The problem with some of these assitance bills in the USA is that they are product specific thus a U.S. supplier may be installing solar panels made in China. Solyndra was also a union shop so you know labor rates had to be rather high. In watching the video you will note there is lots of automation and you see very few people in the production process. This tells me that the bulk of the 1100 employees were more likely overhead than productive...i.e. administration support, IT types, engineers. While those folks are necessary, the number of them is the trick. Solyndra's average wage below the execuitve level was about $97 ranging from $69K to $164K. This did not include the wages of hourly or executive positions. As stated above, the company took seven years to put solar roofs on 1000 commercial businesses in 20 countries. I suspect these were rather high dollar projects and not happening every day. This was likely one of the problems with their cash flow is that they did not have enough market span to draw a broad business base. They were also selling long life cycle pay out versus a price sensitive market which is a tough sale on most days. I am not sure that American business can take very many risks today without considering Chinese products in the market and Washington is not about to offer any protectionism as a result of the poltics with China and the heavy lobby of foreign producers. WB


WillStarr profile image

WillStarr 5 years ago from Phoenix, Arizona

Another example of government meddling in the free market that failed.

When will they ever learn?


Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

@WillStarr...I just saw where the Federal Govt planned to file lawsuits against some of the larger banks citing that they packaged their mortgage securities improperly causing the horrendous losses at Fannie Mae and Freddie Mac. Why does something smell rotten here? WB


CHRIS57 profile image

CHRIS57 5 years ago from Northern Germany

In your hub your write about the future of world energy consumption, namely the problems of China. China tackles the energy problems by strategically investing into green energy production, mostly wind and solar.

While basic technology for wind turbines is huge, is xxl-sized and most likely to be manufactured locally, photvoltaic solar panels are modular, light weight, easy to transport and thus easy to ship and export. That is the reason why solar industry has to weather strong, competitive storms from all over the world.

The other reason for the failures in this discussion is a political one. It is about subsidies. The major mistake was to subsidize the production of solar energy products and not the production of green energy.

Currently even the most advanced industrial economy in terms of green energy only gets 20% of its energy consumption from green sources. So the base cost for energy, for electricity, is linked to conventional fossile and nuclear production, some 0,10 USD/kWh on a world market level. This cost will rise because BRIC economies, especially China consume more and more energy. The days of gasoline in 4 USD/gallon range will soon be over. We don´t even have to discuss peak oil.

The cost for solar energy is still well above 1 USD/kWh, more than 10 times of market cost. The cost for windpower is still above but already closing in at 0,20 USD/kWh, only twice of fossile energy.

I have difficulties understanding why America is looking at solar power and concentrate on wind power, which is much more competitive.

If have difficulties understanding, why the gap between fossile energy cost and green energy cost is not closed by subsidies. That would be a policy that deserves the name.

I expect the gap (between conventional and green energy cost) to close within the next 10 years. So all we have to do is a little math, estimate yearly subsidies to close the gap and sum up for the next 10 years.

A little scenario:

In the first years, green energy will be relative low portion, requiring only some 30 to 50 billion USD/year. Then industry will find out that there is money to earn and green will be pushed. Subsidies will go up above 100 Billion USD/year. At the end of the 10 year period the cost gap will have closed, so subsidies per kWh will be low. Summing up the 10 years i would expect some 600 to 1000 Billion USD of subsidies to be payed.

That is a lot of money. But you get real windturbines, real solar panels, real industry, real jobs for the money.

What did average American get from 1000 Billion of quantitive easing?

This scenario depends on the farsightedness and the will of the people and their government. Everyone should not complain about high gas prices but about what should be done to shoulder energy costs in the future.


Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

@CHRIS57...Thank you for you informative comments on this subject. Certainly subsidies in the early stages of development makes sense. Given that the oil and gas industry has been subsidized by the federal government since 1916 and continues makes no sense especially in light of the fact that we are not self-reliant in that arena. There must be a point at which sudsidies stop and the industry stands on its own if the intent is to survive in the commercial marketplace. If that is not the intent then maybe it should be a "government domain" as in NASA. In this case, I do not blame the industry per se but I do blame our government for risking so much money without a significant involvement in how it is to be used. By the looks of things, this company had an external face which appeared to be rather high in maintenance cost. Add that to executive salaries and returns to investors and the sales of $140 million annually do not go very far. We still have too many cases in which those who want to put the "green energy" button on their chest are there simply to line their pockets with taxpayer money then bail. I am not sure that was the case across the board here but all of those involved in the same industry dropped out at about the same time. The headway the Chinese made in reducing the cost of flat-panel technology apparently shifted the economy of scales in the global solar market significantly. The question then becomes, "how deeply and how long would the government have to subsidize a company like Solyndra in these market conditions in order for it to survive economically?" WB


50 Caliber profile image

50 Caliber 5 years ago from Arizona

Wayne, great hub. If I had not obtained my flat panels when and how I did, like the average American, no way could I buy them at todays prices so I think it's like he eco-cars, UN-affordable by every day folks, so the market is going to get saturated pretty quick.dust


Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

@50 Caliber...It does run contrary to the grain of the marketplace. But the marketplace has a way of changing when we are not looking...just ask the guy who use to make buggy whips. Like water, it seeks its own level but it is also driven by people who are wanting to succeed and find ways to do so. If we kill that spirit with too much government influence then the marketplace will surely lose its magic. WB


SilentReed profile image

SilentReed 5 years ago from Philippines

The comment of Chris57 give some insight on the failure of the US govt. on it's policies and support for green energy.Obama's backdown on the EPA ozone standard due perhaps to lobbies of oil companies also show a lack of political will. Although still more expensive compare with fossil fuel,new discoveries in technology will eventually bring down it's production cost and green energy will become an important alternative source. After the Fukushima meltdown,Japan and other European nations are looking for other options like wind turbines.As people become more aware of pollution,stricter regulations will make green cars more attractive as they become cheaper.Should government intervene or let market movement decide the fate of "green energy"companies? Consider former Chinese premier Deng Xioping's remark almost 20 years ago "There is Oil in the Middle East; there is Rare Earths in China".China now controls more than 95% of the world's need and dictate the market. “America has a new dependency and it’s not middle east oil. It is instead several arcane elements known as Rare Earth Elements (REE).” ~ Forbes. REE is a major ingredient in green technology as well as high tech devices from smart phones to cruise missiles. Leaders should have the foresight and come up with farsighted policies and planning.Unfortunately what we see are politicians who are more concern at looking good instead of looking out for the good of the nation.


CHRIS57 profile image

CHRIS57 5 years ago from Northern Germany

Wayne, as i commented, i don´t understand why America is so hot on photovoltaic. Solar energy is at least 5 times more expensive than wind power.

This whole business is not about people putting a couple of solar panels on their roof to get off grid. It should be that people invest in their own little power plants,solar or wind. They would have to get independent in terms of electric energy supply, but stay on the grid, feed electricity into the grid and earn money.

At this point government should step in with regulations to force electricity grid companies to buy the excess energy. And government should subsidize the energy price. Grid companies get market price but seller gets the subsidized price to form a viable business case. That is what i call subsidizing energy and not subsidizing producing solar panels or wind turbines.

Again, thanks for your hub, it was a pleasure reading and commenting.


Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

@SilentReed & CHRIS57...I believe we definitely need to question how we hand out subsidies in the government. Does the oil and gas industry really still need subsidies? They have been getting them since 1916. I agree that we need to be doing things to encourage the consuming public to become not only energy efficient but also sufficient. Subsidies which are given to the homeowner to employ solar or wind power generation could be a great relief on our power grid in future years when we endure summers like the one we are coming through now. The Obama administration plans to begin forcing closure of coal-fired electric plants in January 2012. These plants do not meet current standarts but they are all we have at present and it will take time to erect replacements. I am not sure that is a wise choice in terms of the load on the power grid. One day, all of us may wake up in darkness and find that we are on our own...much like the caveman. It will be back to the basics of sheer survival if this house of cards we have built does come tumbling down in financial collapse. Thanks muchs for your points, great insight, and commentary on this issue. WB


breakfastpop profile image

breakfastpop 5 years ago

This is the end result of government interference through regulation. Eventually, every thing they touch fails. Up interesting and awesome.


suziecat7 profile image

suziecat7 5 years ago from Asheville, NC

I tend to agree with P.A. Kenney. Unfair foreign competition especially from China is a good part of the problem. We need to stop kissing their butts. Great Hub - rated up, tweeted and shared on Face book.


Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

@breakfastpop...It is one thing to offer a market subsidy to get things going but there has to be some potential for a business to stand on its own at some point...the government has difficulty recognizing that requirement. WB

@suziecat7...The problem as I understand it with all of those who have bankrupted lately seems to hinge more on the European market than that of the USA so it would be difficult to control that competition. The other aspect is that these business were created around solar tube technology which was suppose to be cheaper create than the tedious flat panel cell linking. The Chinese managed to reduced that costs with labor and process making them more competitive on the flat panels. From what I read, the flat panel is the preferred of the two for the efficiencies of the surfaces. At the same time, Solyndra was pricing itself at the upper echelon of the market with a long depreciation/capital recovery cycle in an environmental where technology is changing every few years. I think they may have been partially responsible for their demise in not being able to seel that perspective. With wind and solar energy available for the picking, the competition comes down to who can produce the most efficient device for the most affordable price. Labor costs will likely keep the USA out of that dominance unless it is a company producing their actualy products offshore and bring them in for sale. Foreign suppliers have lobbied their way into the free market and Congress defends it by saying that it is good for business and ultimately good for the consumer. That is true as long as the consumer has a "job" but eventually foreign products erode the job base of the country they are flooding so people have to get new skills to remain employed. I think this is one of the dilemmas we currently face along with unionized labor demands for high wage rates which also burdens the competitive aspect. Thanks much! WB


road2hell profile image

road2hell 5 years ago from Linden, AB

Did you ever thought that the corporations and lobbyists have their hand in the backpockets of the government? That is why they want the government to stay out of big business' affairs.

Banks and financial insitution got away with unregulated subrime mortgage lending and hedge funds spectulation. If the government had the power to "meddle" in these "going ons", and say "no" to lobbyists who are interested in their own extravagents instead of the society's interests, would the United States would be in the crisis they are in?

Something to think about.


Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

@road2hell...There's no doubt that corporations, PAC's, etc. have their hand and their money in the pockets of our elected officials in Washington...otherwise the likes of Harry Reid and Nancy Pelosi would care little for such a position. There is much corruption in government which requires fixing but we cannot expect the fox to purposely keep himself out of the henhouse...we must clean house and start over. WB

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