Nearly $1 billion in venture capital funding, a massive U.S. Department of Energy (DOE) loan guarantee, and a disruptive technology tabbed to translate United States clean technology innovation into economic growth have kept mentions of Solyndra alive in the business press and solar industry circles well past its demise. A number of interconnected conclusions have been drawn. Some are true, some are false, others lie in the middle. Among them:
Claim: Unexpected drops in polysilicon prices destroyed Solyndra’s business case.
Reality: Indeed, polysilicon prices falling from the order of hundreds of dollars per kilogram to roughly $50/kg today – and destined to fall further – rippled downstream, allowing module prices to fall from $3.80/W in 2008 to $1.50/W today. However, the drop was hardly unexpected. In February 2009, the Lux Research State of the Market Report “Finding the Solar Market’s Nadir” (client registration required) stated: “…in 2009, securing polysilicon will cease to be a major concern for an industry plagued by module oversupply, and polysilicon prices look ready to fall, even before the material goes into oversupply relative to x-Si manufacturing capacity in late 2009.”
Claim: Chinese manufacturing will always win thanks to significant governmental support.
Reality: While Chinese government support allows for ease in scaling production, it wasn’t a problem for Solyndra. Solyndra set up two fabs – extremely advanced facilities, at that. Fab 2 was constructed with former manufacturing mistakes in mind, featuring highly-automated processes and set to maximize yields and throughput. However, the company’s low yields and high production costs are design constraints – and certainly not borne of a lack of governmental support or competition from industry elsewhere. We warned of Solyndra’s high manufacturing costs over a year ago: “manufacturability proving difficult with low yields, and costs remain very high…positive gross margins a moving target” (see the June 10, 2010 LRSJ – client registration required). The company’s investors believed it would win, and the loan guarantee program did its job in enabling the company to scale operations, and providing the opportunity for the company to prove its technology a competitive option; failure to do so was the fault of Solyndra alone. States will continue to offer support of the industry domestically, and companies will continue to manufacture in the U.S. – Stion and Calisolar are scaling in Mississippi, while Solopower plans to ramp operations in Oregon.
Claim: The solar industry in the United States is now doomed.
Reality: Just because high-cost players like Solyndra, Evergreen, and Spectrawatt couldn’t survive in the face of falling prices – a necessary step towards achieving grid parity – doesn’t mean the industry will turns its back on U.S. demand. In addition to Stion, Calisolar, and Solopower, downstream participants like SolarCity, SunRun, and Verengo are expanding operations in the U.S. Installers, developers, and integrators are poised to capitalize on U.S. market growth, and in doing so, will succeed where Solyndra failed (see the September 15, 2011 LRSSJ – client registration required).
Separate from each argument about Solyndra’s product or implications for the industry after its fall, is the political matter at hand – with regards to the due diligence performed prior to being granted the loan guarantee in 2009. While this debate is sure to continue well into the 2012 presidential election cycle, keep in mind that Solyndra was a unique, highly-publicized case that suffered from the same market conditions as its peers – but its own inability to compete should not discount the prospects of other U.S. solar players, nor should it be seen as an indicator of the broader demand market in the U.S.
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