Another Government-Backed Solar Player Dies (INTC, FSLR, TSL, STP, JASO, YGE, LDK)
The month of August was hard on US solar makers. Evergreen Solar closed its doors a few weeks ago, followed by privately held and Intel Corp.-supported (NASDAQ: INTC) SpectraWatt, Inc. a few days later. Yesterday Solyndra LLC sent 1,100 people home for good, unless and until the company can emerge from a Chapter 11 bankruptcy filing.
Solyndra had been a favorite of the Obama administration, and the President himself visited the factory last year. One of the company’s largest backers was George Kaiser, a Tulsa oil baron who was a big campaign fund raiser for Obama’s run for the presidency in 2008. A committee of the US House of Representatives had been investigating a $535 million federal loan to Solyndra, but having little success in getting information from the administration. This part of the situation should fire up a lot of pixels in the next few weeks.
In the real world, Solyndra simply couldn’t drive its costs down fast enough to compete, and the $535 million loan notwithstanding, the company couldn’t raise enough capital fast enough to ramp up its manufacturing. Solyndra, like Evergreen Solar, did not build the same kind of solar PV cells as the major players. The company’s cells were cylindrical rather than flat and the technology was neither the mainstream crystalline silicon nor the thin-film cadmium telluride cells made by First Solar Inc. (NASDAQ: FSLR).
Solyndra’s technology was the newer copper indium gallium selenide (CIGS) technology, and the company could not get its module prices down below $2/watt, nearly double today’s going rate for crystalline cells and nearly triple the thin-film technology used by First Solar. The company withdrew a $300 million IPO in June 2010, although at the same time it did raise another $175 million from its private investors. The terms of the private investment were described by one observer at the time as “onerous.”
While $535 million isn’t chump change, Solyndra’s overall financing could not be described as overly generous. The federal loan aside, Solyndra raised about $1 billion in private funding. Chinese banks provided government-backed loans to several of the country’s key solar PV companies last year to the tune of more than $25 billion. Trina Solar Ltd. (NYSE: TSL) received $4.4 billion, Suntech Power Holdings Co. Ltd. (NYSE: STP) received $7.3 billion, JA Solar Holdings Co. Ltd. (NASDAQ: JASO) received $4.4 billion, Yingli Green Energy Holding Co. Ltd. (NYSE: YGE) received %5.3 billion, and LDK Solar Co. Ltd. (NYSE: LDK) received $8.9 billion. Most of these funds were directed at expanding manufacturing capacity as a way to drive down costs.
What happened to taxpayers’ $535 million is certainly a valid question, and deserves to be answered. But for the solar industry, Solyndra’s failure underscores the difficulty of breaking new ground while competitors are tilling proven fields. Solyndra couldn’t keep pace with the price cuts and couldn’t convince customers that their modules were worth nearly double the many alternatives. That’s a recipe for failure.