Solyndra Fights Back Against China

With electoral politics in the air these days, and much at stake for those working towards a sustainable future, it’s hard to miss the fact that Republicans love to belittle the Obama administration’s failed investment in Solyndra. They have used the company's bankrupcy, with some success, as a weapon in their efforts to keep the environment and the green economy out of the debate, suggesting that somehow the failure of this one company entitles them to dismiss the entire green economy as little more than “tilting at windmills.” In doing so, they are simply showing their ignorance of this company’s story, of the solar industry in general, and of the very nature of technology venture capitalism (not to mention the tremendous success of the green economy in creating jobs).

The fact that Solyndra has now filed a lawsuit against three Chinese solar manufacturers, an industry trade association, and the Chinese government shows that there is far more to the story than a quick sound bite can convey.

Let’s start with the last one, and work our way back. Research and development of new technology is a high risk, high reward business. This is a well known fact.  No one should be judged based on a single case. In fact, the generally accepted rule of thumb for R&D programs is one winner for every ten projects, or about a ten percent rate of return. Indeed, Solyndra was one of thirty-six DOE loan guarantee recipients, representing less than two percent of the total amount of money in play. In fact the other nine companies in the DOE’s top ten loan guarantee recipients (Solyndra was #7) are doing fine. The reason the DOE stepped in to help Solyndra was because the global solar PV industry was, and continues to be, so fiercely competitive. We’ll have more on that in a minute.

Looking at the industry, Paula Mints writes at Renewable Energy World that the promise of grid parity has practically destroyed the Solar PV industry. “The term ‘grid parity’ has been used as almost a promissory note towards the end of achieving continued incentives.  That is, a promise was made by the solar industry and all of its participants that the cost/price of installing a PV system would decrease at an aggressive rate to the point that the electricity generated would be at parity with other electricity generating technologies.” Going back to the earliest days of the solar industry, the idea of grid parity was thrown down like a gauntlet. Taking on this challenge has cost the industry dearly. Why? Well, for one thing, it is difficult to compare a system that you buy which provides free electricity thereafter with one that bills you monthly with no capital outlay. Of course, the investment can be amortized, but there are costs associated with solar leases, costs that sometimes have been excessive possibly to the point of being illegal. But there are other reasons too. For one thing, grid parity is a moving target. Right now with the current glut of natural gas, prices have gone down, making parity more difficult to achieve (though you can be sure that won’t last as long as a solar PV system).

An even more prominent factor is the question of incentives. Grid parity implies price parity without incentives, despite the fact that energy sources without some kind of government incentives are clearly the exception rather than the rule. In fact, incentives for conventional energy sources are considerably higher that those for renewables. The period from 2002-2007, for example, fossil fuel incentives of $13.7 billion dwarfed the $2.8 billion given to renewables. This does not include the multi-billion dollar outlays for nuclear power, which are likely to be the demise of that industry. Then, of course, there is the fact that prices don’t necessarily move in concert with costs. Providers always have the option of reducing their margins in order to gain market share, which brings us to the story of Solyndra.

When Solyndra entered the market in October 2008, their business plan was based on the premise that the cost of their thin-film collectors, at $2 per watt, which was less than half the industry average of $4.20, was competitive. The company raised money from both government and private sources and hired as many as 1100 workers to produce the panels. Then, less than three years later, the price of solar panels coming in from China had somehow plummeted from $4.20 to $1.50, dropping a total of 75 percent over a four year period. This made Solyndra’s product uncompetitive and pretty soon the wheels came off.

Now, Solyndra is coming back from the dead, fighting back with an anti-trust lawsuit against three Chinese solar manufacturers: Suntech Power Holdings, Trina Solar and Yingli Green Energy. According to the court filing,  “Solyndra’s better solar panel system, with its lower cost of installation, created a barrier to defendants’ complete domination of the market – so long as Solyndra, and its technology, was available in the market, defendants would not have been able to dominate the commercial and industrial rooftop market.”

The suit alleges that the three companies engaged in price fixing and conspired to flood the U.S. market with cheap panels. They also say that Yingli interfered with a beta test in Germany, pulling their panels off a rooftop and replacing them with their own. The suit further alleges that the companies received loans from Chinese banks below market rates.

The lawsuit comes on the heels of a decision by the Department of Commerce to impose substantial anti-dumping tariffs on Chinese solar panels.

Meanwhile, though the three Chinese companies were among the top 5 in 2011, they, too, appear to be struggling now.

Time will tell how all this turns out, but, for now, it does show that there is more to this story than simple bad judgment by the DOE.

[Image credit: Powerhouse_Museum: Flickr Creative Commons]

RP Siegel, PE, is an inventor, consultant and author. He co-wrote the eco-thriller Vapor Trails, the first in a series covering the human side of various sustainability issues including energy, food, and water in an exciting and entertaining format. Now available on Kindle.

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