Another U.S. Solar Firm Goes Bust

(iStockphoto)

Two weeks ago, Steve Sexton wrote about the bankruptcy of Evergreen Solar in Massachusetts. Today it’s California’s Solyndra that’s shutting down.

From the Washington Post:

The unexpected announcement raised questions about whether taxpayers would be responsible for the entire $535 million in loans that the company used to build a Silicon Valley factory. The wisdom of loan guarantees granted to the company by the Obama administration had already been questioned by government auditors and been the target of a subpoena from House Republicans.

The start-up venture has long been an administration favorite, and its Fremont, Calif., factory received visits from both the president and Energy Secretary Steve Chu. Both used their visits to praise the company for creating jobs and leading the way into a new economy fueled by green energy businesses.

The company was backed by venture capital from Tulsa billionaire and Democratic fundraiser George Kaiser. Its political connections had been been criticized by Republicans, who questioned the administration’s focus on the company.

Is it a stretch to assume that Solyndra has a similar problem as Evergreen? As Sexton points out:

Evergreen’s spokesman conceded that the source of the company’s problems is price competition from China, not demand at home: “Make a couple of phone calls and see in the solar projects around the state, where the panels are coming from. They’re not coming from a U.S. supplier.’’

If not, then have we already lost the solar industry to China?

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  1. Allen says:

    Is this yet another case of government intervention distorting the market? Where would these companies be today if the money had been grants for research and development not us as discounts on the real price?

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  2. Joshua Northey says:

    “If not, then have we already lost the solar industry to China?”

    We may get it back in a few decades when the rising standard of living in China reduces the wage differential to a point that it doesn’t dwarf transportation and other costs. Manufacturing has become so commoditized it is hard to “lose” and industry if the fundamentals are there, and hard to keep them if they are not.

    Focus on fixing the fundamentals and the industry will come back.

    Some good starting points would be:

    1) Tariffs on good not produced to meet US standards (worker rights, carbon emissions, whatever)
    2) A focus on technical/life skills training for the lower class so that they can be productive laborers instead of dead weight
    3) A reduction in benefits to the lower classes to increase the desirability of working

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  3. Erik says:

    For an economics blog that loves micro I remain distressed over a relatively simple issue missed here and elsewhere about “green jobs”. Energy is perhaps the penultimate commodity good (and an intermediate one at that). THE MAIN thing that providers of charged electrons are going to compete on is price. So it is highly unsurprising that Schumpter’s process of creative destruction would work is “magic” on domestic on-shore solar manufacturers.

    Now we could complicate the miodel a bit. In addition to price there are issues of reliability. You are not really buying an electron but an entire system and, indeed, one is usually buying the services of a contractor who then is the agent that buys the panels. One COULD argue that in addition to price there are issues of reliability and that domestic manufactures could posit that foreign manufactured panels are likely to give out faster. However, this is an industry where information (about future reliability) is uncertain and costly to obtain. High discount rates are going to be applied by purchasers who are likely to also impose a high discount rate because of their beliefs about continued ownership of the property where it is installed. Thus while the model is a BIT more complicated than one where marginal differences in price are the Sole detainment it is pretty darn close.

    I hate to be cute but Dead Dinosaurs Don’t have Health Benefits. Price is going to be king…and if I can drive down labor costs to a minimum I am going to have a great advantage.

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  4. John B says:

    A major Presidential fundraiser gets paid over $1/2 billion of “green” money and it basically disappears.

    And the US Justice Department prosecutes American businessmen who paid sums to foreign officials to gain influence and business in those countries?

    It sounds like the prosecutions were intended to spread the message—if you are going to pay officials, give it to this administration’s fundraisers, not to foreigners. And not only will you not get prosecuted, we will deliver taxpayer $ directly to your company.

    Not only do taxpayers get taken, but legitimate competitors of the favored companies get put out of business. Oh well, let’s blame the Chinese.

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