http://www.kqed.org/a/forum/R201109020900
This is a terrible sign for US cleantech and manufacturing just as US jobs reports are quite bleak. Solyndra was the poster-child of green start-ups. They got over $1B in private VC funding, $535M of guaranteed loans from the DOE as part of the Stimulus Plan (the first private firm to get a DOE loan), and even a visit from President Obama as part of his campaign to push for a cleantech-fueled economic recovery. Obviously the GOP are jumping all over this, citing this example as proof that Obama is clueless about economics and jobs: http://www.sfgate.com/cgi-bin/blogs/nov05election/detail?entry_id=96638.
Solyndra was so confident about its business prospects that it rapidly grew to 1,100 workers and set up a huge $700M plant in Fremont (yes, expensive-as-hell Fremont) to manufacture thin-film cylindrical PV panels. The writing was on the wall, but it was still a big shock that the firm declared Ch. 11 recently and laid off its entire workforce. So why did it happen? Is solar just a flop? Well, Solyndra's competitive advantage was using cheaper but less efficient thin-film technology at a time when silicon PV panels (the industry standard) were fairly expensive and China's solar sector was tiny and unproven. But since the 2008 downturn, China launched huge in capital investment projects, including building up a solar manufacturing industry from stractch that quickly became the largest in the world. The global price of silicon plummetted (demand declined due to the recession and supply increased due to development in China), wiping out Solyndra's advantage. The 70% price drop is great for global clean energy, but not for US manufacturers.
http://www.greentechmedia.com/articles/read/contract-silicon-prices-fall-50-close-to-spot-price/
So China was already subsidizing its solar manufacturing sector (basically free land, credit, and labor) to undercut the market, and now it's priciest input just got cheaper. So Solyndra was pretty much screwed, even if it had the best technology (2 other Bay Area solar firms also recently folded). But maybe we should learn from this example that cleantech firms shouldn't try to win through cost leadership. China will own us there every time. Our businesses have to utilize sophisticated technologies, innovative product development, and strategies so that China can't easily copy and undercut us (think Apple). Sure let's outsource the cheap, easy stuff like manufacturing and logistics, but we can't beat China on their terms - especially when their gov't isn't paralyzed with debt and partisanship, and they are 100% behind rapid high-tech and economic growth.
So what do we do now? The libertarians say this validates their views that gov't shouldn't be in the VC business. Maybe Obama's people were so awestruck by "the green panacea," that they didn't perform due diligence on Solyndra's prospects in a recession and vs. Chinese competition. But plenty of savvy private sector investors (such as Richard Branson and the Waltons) also threw money at Solyndra and got hosed (and that was during a time when VC money was pretty tight, before the exuberance over Facebook and such). Some big-gov't folks would say to not change course because Washington funded the interstate highway program, Internet, and GPS, and all those radically changed history and exponentially increased economic growth. True, but how about all the projects Uncle Sam funded that were utter failures, that we don't know about? Like usual, I guess the prudent course is some sort of middle ground. Gov't involvement but vetted as well as possible to avoid pork and boondoggles. The problem is, China is bankrolling ventures big time, and they can afford to have a 5% success rate and still gain market share on us. We can't afford to be wrong as much, especially with so much political resistance to cleantech and gov't spending now.
Another challenge is the industry itself. Highways and the early Internet are fairly straightforward concepts to develop, just plan and do it. But no one knows which horse to pick in cleantech. I suppose it would be wisest to diversify and place many small bets, but then no single industry will get to economies of scale quickly. Imagine if the gov't had to pick a search engine to back in the dot-com days. So now we have geothermal, wind, solar, biofuels, and fuel cells, with several variants of each. The gov't doesn't have the expertise and resources to properly evaluate all these options. The private sector doesn't have all the answers either. For example, one of the big Mojave Desert solar farms just decided to retool its entire setup from mirrors (focusing solar energy to heat water and spin a turbine) to conventional Si PV panels, since the global price dropped. Conditions are changing so fast that firms need the flexibility and investor patience to be able to adapt, if possible. But with Washington dithering and private credit still tight, we are only falling further and further behind. Good times.
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