Going green has lost quite a bit if traction in the U.S. because of some really outrageous spin and it would appear the oil/gas industry and their lackey’s in congress to be the culprits. Despite the fact we can see climate change with our own eyes, and that some of the giants in the oil industry admitted greenhouse gas contributes to climate change, we’re heading toward more fossil fuel production with gas fracking and tar sands oil at the top of the list. Friends of fossil fuel have jumped on the Solyndra bandwagon of failure as some sort of omen that green start-ups are too risky, and therefore, unworthy business models in the U.S. during a time of renewed “drill and frack” mentality. But Solyndra is a model of a much more ominous nature. Solyndra’s failure is not due to an innovation that had no place in the market, or mishandling of funds, or was too costly compared to the competition, or because it was a vehicle of some underhanded exchange of money for political gain. While conspiracies abound around the name “Solyndra” the biggest problem Solyndra had to overcome was CHINA, one of the four new and fastest growing world economies. No the U.S. is not on that short list. We’ll never make it at all if we continue on the path of fossil fuel for energy and stall moving forward quickly with green innovation.
Don’t get me wrong. China is indeed destined to get most of that tar sand oil from Canada, and so it is in the big fossil fuel burning category of nations. But China also continues to be a mixed bag for its energy sources and moving more and more quickly into the green foray. China recently emerged as KING of solar panel producers exporting its solar panel wares worldwide in numbers far greater than its competitors. But how did this happen you say and so quickly? And how come a company like Solyndra that barely came out of the ground went under so quickly? Surely there was a market for solar just look at China.
Just about all the reporting relative to Solyndra from ABC, to Fox, to numerous websites has been false and totally out of context, the main one being that it is Obama’s baby. Truth is Solyndra began in 2005 with a sound standing in the field of solar panels. Solyndra was the leader in innovation for solar. While standard solar panels look like flat screen monitors and utilize costly silicon in their photovoltaics (sun’s energy converted to direct current), Solyndra’s solar panels sported a tubular design that didn’t utilize silicon chips at all.
Solyndra’s solar panels are made up of 40 individual modules, wired in parallel for high current, which capture sunlight across a 360-degree photovoltaic surface capable of converting direct, diffuse and reflected sunlight into electricity. Using innovative cylindrical copper indium gallium diselenide (CIGS modules) and thin-film technology, Solyndra systems are designed to be able to provide the lowest system installation costs on a per watt basis for the commercial rooftop market. More than 1000 Solyndra systems are installed around the world, representing nearly 100 Megawatts.
Lightweight: Low Distributed Load of 2.8 lbs. per Square Foot
Designed to Last for More than 25 Years
Easier and Cheaper Installation
Superior Wind Performance: Ideal for Windy Locations
Greater and More Effective Rooftop Coverage
Design Keeps Panels and Roofs Cooler
From 2005 to late 2009, Solyndra panels were in the ballpark cost wise with standard solar panel manufacturers. Solyndra’s founder Dr. Christian Gronet earned a Ph.D. in semiconductor processing and a bachelor of science degree in Materials Science from Stanford University and was Vice President and General Manager of the Transistor, Capacitor and Gate product group at Applied Materials for 11 years. http://investing.businessweek.com/research/stocks/private/person.asp?personId=54334387&privcapId=33681528. According to their website, “Applied Materials is the global leader in providing innovative equipment, services, and software to the semiconductor, flat panel display, and solar photovoltaic industries. http://www.appliedmaterials.com/.
Solyndra had no problem raising over $78 million in venture capital quickly. From Climate Progress and verified by the DOE: “Solyndra raises its first round of venture financing worth $10.6 million from CMEA Capital, Redpoint Ventures, and U.S. Venture Partners. In October, Argonaut Venture Capital, an investment arm of George Kaiser, invests $17 million into Solyndra. Madrone Capital Partners, an investment arm of the Walton family, invests $7 million. Those investments are part of a $78.2 million fund.”
Funding came from the Right, the Left, and everywhere in between.
At about the same time Solyndra began, the Bush Administration’s Energy Policy Act of 2005 was initiated. Section 1703 seemed an ideal match for a company like Solyndra as follows: “Section 1703 of Title XVII of the Energy Policy Act of 2005 authorizes the U.S. Department of Energy to support innovative clean energy technologies that are typically unable to obtain conventional private financing due to high technology risks.” https://lpo.energy.gov/?page_id=39. The emphasis here is on the word “risk.”
In 2006, Solyndra applied for a DOE loan under Section 1703. Late 2007 the loan program was funded and Solyndra was on the list for a loan. According to Energy Sec’y Sam Bodman at that time: “The Energy Department had received 143 pre-applications for the guarantees and narrowed the list down to 16 finalists — including Solyndra.” Why was Solyndra mentioned that way, as if singled out? According to WashingtonMonthly.com, “Bush’s Energy Department apparently adjusted its regulations to make sure that Solyndra would be eligible for the guarantees. It hadn’t originally contemplated including the photovoltaic-panel manufacturing that Solyndra did but changed the regulation before it was finalized. The only project that benefited was Solyndra’s.” Hmmm—heavy Republican investors or what? The Bush Administration, as I often blogged about back then, was not exactly green by any stretch of the word. However, it was late 2007 and 2008 meant a new presidential race. Being able to tout investment in alternative energy might appeal to some independent voters. Whatever the case, this loan program and its admittance of Solyndra on the list was a decision made during the Bush Administration.
By 2008, Solyndra planned on building 2 new facilities in the U.S., and private investment in Solyndra reached an accumulated $450 million. It still looked like a great venture. Prices for silicon remained high and Solyndra’s costs were still competitive. But by late 2008, the loan still hadn’t been approved. According to themoderatevoice.com:
January 2009: In an effort to show it has done something to support renewable energy, the Bush Administration tries to take Solyndra before a DOE credit review committee before President Obama is inaugurated. The committee, consisting of career civil servants with financial expertise, remands the loan back to DOE “without prejudice” because it wasn’t ready for conditional commitment.
March 2009: The same credit committee approves the strengthened loan application. The deal passes on to DOE’s credit review board. Career staff (not political appointees) within the DOE issue a conditional commitment setting out terms for a guarantee.
Once taxpayer money was involved, the Obama administration was reluctant to let Solyndra fail.
June 2009: As more silicon production facilities come online while demand for PV (photovoltaics) wavers due to the economic slowdown, silicon prices start to drop. Meanwhile, the Chinese begin rapidly scaling domestic manufacturing and set a path toward dramatic, unforeseen cost reductions in PV. Between June of 2009 and August of 2011, PV (photovoltaic) prices drop more than 50%.
Some reports suggested that President Obama was warned several times via email that the deal was risky. On the contrary, Media Matters stated:
There was no email to Obama that the deal wasn’t ready for prime time relative to financial risk. Instead Email Concerned Timing Of Announcement, Not The Merit Of The Loan Guarantee. The email argued that ‘This deal is NOT ready for prime time’ because there were more steps to be completed before the loan guarantee could be finalized — namely, OMB had to review the credit rating and Solyndra needed to raise an additional $200 million in private capital. [House Energy and Commerce Republicans,9/14/11]
The merit of the loan guarantee lies with the OMB or Office of Management and Budget.
- OMB reviews and must approve credit subsidy cost estimates for all loan and loan guarantee programs, including the credit subsidy cost estimates generated by DOE for the Title XVII program, to ensure that costs are accounted for appropriately.
- OMB assesses cost estimates on a loan-by-loan basis because the Title XVII program provides relatively large-dollar guarantees and because their characteristics, terms, and risks vary greatly from project to project.
- OMB delegates the modeling of credit subsidy costs to agencies, and issues implementing guidance to ensure consistent and accurate estimates of cost.
- OMB works closely with agencies to create or revise credit subsidy models for new programs or programs issuing their first loans or loan guarantees, such as the Title XVII program in 2009,
- Based on these models, OMB reviews and exercises final approval authority over credit subsidy costs to ensure that the costs of direct loans and loan guarantees are presented, and reflect estimated risks, consistently across Federal agencies so that taxpayer funds are invested in a prudent and effective fashion.
- The final decision on whether to issue the loan or guarantee rests with the agency implementing the applicable program – DOE in the case of Title XVII.
By September 2009 Solyndra raised the money, an additional $219 million dollars and the $535 million loan from the DOE went through. Around one billion dollars had been invested in Solyndra, the bigger portion coming from the private investment sector. The Walton’s (the Wal-Mart family) Madrone Capital Partners and the Kaiser Foundation’s Argonaut Venture Capital, the Right and Left money respectively, being the biggest investors.
At this point, early 2010, China trumped everyone in the solar game “dump[ing] $30 billion into its solar industry. That is a lot of money for infrastructure as well as research and development. There is little doubt that the companies making solar panels in China benefited from the money.” http://www.solarcompanies.com/news/china-and-united-states-to-enter-trade-war-on-solar-panels
However, China did so in violation of the World Trade Organization (WTO), which prohibits government subsidies for corporations/businesses that plan to export. To do so allows that country to possibly corner the worldwide market in any segment, which China has done with solar panels. The thinking goes this way. A corporation is limited in growth if all its goods and services remain in the country. In the U.S., a corporation is limited by the fact that we only have 300 million people and consumers are only going to buy so many goods/services over a period of time. But if that same corporation decides to export—the sky is the limit. So for any government to heavily subsidize a corporation that also plans to export, tips the playing field badly on competition that can’t possibly keep up. Since China has over 3 times our population the playing field is already tipped to say the least. The $30 billion dollar Chinese “illegal” dump into the solar industry was a death knell for Solyndra. http://www.nytimes.com/2010/09/09/business/global/09trade.html?pagewanted=all
It’s not unforeseen or unusual that from December 2010 through February 2011, the two largest private investors, DOE, and Solyndra “negotiated the terms and conditions of an agreement to restructure the Solyndra loan guarantee. Throughout this process, DOE consulted with OMB about the proposed terms and conditions of this arrangement.” NY Times: Experts Said DOE’s Decision To Restructure “Is Routine In The Commercial World.” From a September 16, New York Times article
By the end of February 2011,
- Both Argonaut and Madrone added a combined $69 million in emergency funds to Solyndra.
- DOE agreed to extend the term of Solyndra’s loan guarantee from seven to 10 years, and to postpone the first repayment installment by one year, from 2012 to 2013.
- In addition, the agreement provided that, in the event of the company’s liquidation before 2013, the investors have the senior secured position with respect to the first $75 million recovered. In this case, it is not the full $75 million but rather the $69 million in emergency funds as stated, “The two firms gave the company a total of $69 million in emergency loans. The loans are the only portion of their investments that have repayment priority above the U.S. government. [Associated Press,9/16/11].
- DOE has the second senior secured position with respect to the next $150 million recovered in liquidation. This is taxpayer money
- If Solyndra had not liquidated or declared bankruptcy by 2013, the investors would have lost their senior secured position to DOE. [House Energy and Commerce Committee, 9/12/11]
Media Matters further stated that the decision to fund Solyndra, which in turn built brand new state of the art facilities, is in much better shape to garner more when they liquidate. “DOE determined, as part of the restructuring, that the facility would be more valuable, even in the event of a future liquidation, once complete.” He went on to say that “DOE determined that restructuring the loan guarantee gave the U.S. taxpayer the best chance of being repaid”
So there you have it. Advanced solar technology like Solyndra had a foothold in the industry when it began 7 years ago, but failed during the slow, slow process of funding during which time a giant like China decided to dump an “unforeseen” 30 billion into the solar panel industry in a very short time. Did they know about Solyndra? China’s panels are ho hum standard cheap, nowhere near the innovation of Solyndra. It’s a shame we have segments of our population that scream about government helping new industry get a start when our competition does it all the time. It’s not socialism by any stretch, especially when it’s about energy and infrastructure. It’s investment in the U.S. future if we’re going to compete with the likes of China, India, Russia, or Brazil—the top 4 economic powers now. Government certainly needs to rethink trade agreements too now that we know how China plans to play the game.