Friday, September 2, 2011

Solyndra closure may signal welcome change to US clean energy policy


So long Solyndra, poster child for the Department of Energy grant loans programme. It has been a bad week for the solar industry for sure - made worse today by SolarWorld’s announcement that it’s closing its factory in California.

But how bad is this news and who might be next? MiaSole and SoloPower will be closely watched. Thin film solar companies are particularly vulnerable as silicon PV prices plunge and costs for the newer technology have yet to follow that downward trend.

Arno Harris, CEO of Recurrent Energy, points out on the Energy Collective website:
Solyndra failed because conventional PV technology succeeded in dramatic cost reduction. Conventional solar panels cost 1/3 of what they cost 2 years ago. Solyndra's technology just couldn't get down the price curve fast enough to remain competitive in that kind of environment. We should be celebrating PV's wild success rather than lamenting the failure of one company.
But it would be wrong to imagine that Steven Chu, Jonathan Silver and even barack Obama himself who have all visited the factory Fremont, California, are now in DC scratching their heads wondering where did it all go wrong for this heavy investment from the loan guarantee programme.

VCs might be lamenting their biggest loss ever, Katie Fehrenbacher at GigaOm estimates as much as $1.1bn. But the loss of Solyndra might also cost the Obama administration financially – not just the $545m in loans (the first the DoE made) to build its factory and politically. Fehrenbacher describes the pitfalls of close contact with high-risk businesses for politicians here.

But it also might cost the political argument over why government should be “intimately” involved as Chu said this week in developing new technologies. At a time when Republicans are putting pressure on Obama admin to cut costs, it will be a harder argument to win after Solyndra.

Earlier this week at the National Clean Energy Conference, Chu said that there was a place in government policy for high-risk high yield investments, accepting that some will fail. He compared the mission of the Advanced Research Projects Agency – Energy (ARPA-E) which only focuses on “high risk, high payoff concepts - technologies promising genuine transformation in the ways we generate, store & utilize energy” with baseball.

He said: “You have to take a more daring approach to fund innovative projects. Those projects could be gamechanging. To use a baseball analogy, we weren’t swinging from the heels enough, we were investing in incremental things… singles. But a home run could really change the whole landscape of energy technology.

“When you swing from the heels you expect a few strikeouts but what you don’t want to do is swing at bad balls.”

He admitted it was too early to tell whether we have home runs yet "but we see a number of people rounding second base".

But I wonder as he delivered his speech in Las Vegas this week whether he already knew that Solyndra was a bad ball.

As Neal Dikeman notes on his Cleantech blog:

This deal’s been close to a running joke among the cleantech cynics for a couple of years now.
We wrote about this before. The theory on the product was that rooftop install issues and low wind resistance were so important that they should be coating CIGS on a circle and encapsulating it in the most weird and costly way possible (or maybe because they liked the cattle-grate aesthetic), and then demanding a premium price for it. Keep in mind, it was roughly the same amount of CIGS material they would have used if they had done a similiar size flat plate module.

But the reasons for Solyndra’s failure are more nuanced and will no doubt get lost amid the ineffectual squabbling of Congressmen and women as they debate cuts to programs which have propped up the renewable industry since the global economic crisis. The sun is setting on the 1603 grant programme, as hopes are fading that anything will replace it. Others, like the investment tax credit will continue, but hinge on tax revenues, which are much weaker than when it was developed. 

But buried in the news is a golden nugget that the Obama administration could use to silence its critics: Solyndra blamed an oversupply of cheap Chinese solar panels for the company's demise.

The loss of manufacturing to China of many products, not just in clean energy, is a constant theme in the US. Although figures out this week from the Institute for Supply Management showed that manufacturing activity expanded in August at a slightly higher rate than expected. That was merely a glimmer of good news amid another dismal jobs summary from the Bureau of Labor Statistics showing no growth since April this year.

But the view from China on manufacturing was much sunnier by comparison. That’s no surprise.

Some Democrats such as Harry Reid are trying to stitch these two policy goals together with “green jobs” bills

President Obama has also pledged to “win the future” and encourage manufacturing in clean energy in the US. But lithium ion battery production is not enough on its own, although supply chain manufacturing for the auto-industry will almost certainly be boosted by the new fuel efficiency, CAFE, standards.

But Democrats will have to work harder to idiot-proof policies from attacks from unqualified opinionators on the “climate change hoax” such as Rush Limbaugh who as America’s unofficial comedian laureate said this week:
Every liberal program come down the pike... Social Security (I know this is gonna irritate some of you) is a Ponzi scheme that is given credibility simply because it's run by the government. But it's no different than what Bernard Madoff was doing. There's not a shred's bit of difference in what Madoff was doing and what Social Security is -- pure and simple -- and we have reached the point where Madoff went to jail in Social Security. There's no longer money to pay late-arriving investors.
I haven’t looked into the Fox News story he cites which claimed that federal programme weatherizing in Seattle burned through $20m, while employing only 14 people and upgrading three homes.

But I would argue that journalists could be and should be looking into where federal ‘clean energy’ funding ends up. Excellent reporters such as Russ Choma have already investigated some cases, and I intend to follow.

Republican knives have long been out for Solyndra with an investigation launched by Fred Upton this year into misuse of stimulus funds.

But Tea Party Republicans and their sympathizers jump should hesitate to jump on the band wagon and hold up Solyndra as an example of why government should stay out of business. As Greentechmedia noted this week, “let the market” decide approaches leave us with products no one wants such as “lead paint, DDT pesticide, and the 80-hour work week”.

The first chart on the Greentech media post shows Solyndra’s loan guarantee dwarfed by Chinese Development Bank loans to Chinese solar company but asks whether US funding would have been better spent on developing the manufacturing of proven technologies rather than trying to get new technologies to commercial scale.

After Solyndra has failed to find a way out of a terminal valley of death is the Obama administration considering refinements to policy approaches to investments in clean energy?

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