US solar industry rolls along despite Solyndra's collapse

September 19 - America's solar energy industry continues to advance, with new federal loans for solar projects planned and the country's most ambitious photovoltaics program in the works, despite the high-profile bankruptcy of solar panel-manufacturer Solyndra.

The collapse of Solyndra has not diminished congressional support for the Department of Energy's loan-guarantee program -- at least not yet. The Senate Appropriations Committee approved a fiscal 2012 spending bill on September 7 that would give DOE another $200 million beginning next month to support loan guarantees for wind farms, solar facilities and other renewable-energy projects.

The Democratic-led panel fully met DOE's budget request for the loan-guarantee program, despite the recent collapse of Solyndra, which was the first company to receive a federal loan guarantee since the Carter administration. (Listen to a related podcast: Loan guarantee program could change in wake of Solyndra bankruptcy)

Committee Democrats said DOE's loan-guarantee program is vital to increasing America's energy security and lowering carbon emissions. Senator Dianne Feinstein, a California Democrat who chairs the Appropriations Subcommittee on Energy and Water Development, said at the full committee hearing on September 7 that DOE loan guarantees "promote innovation and leverage private-sector investment in clean-energy projects to create jobs."

The $200 million that the panel's bill would provide would be used to pay the so-called credit subsidies of loan-guarantee recipients, which, like points on a mortgage, are fees that are collected to protect against potential defaults. The committee approved the loan-guarantee funding as part of a larger appropriations bill for energy and water projects.

The Republican-led House Appropriations Committee this summer approved its version of the energy and water funding bill, providing $160 million for the DOE loan-guarantee program to pay for credit subsidy fees.

At her subcommittee's hearing September 6 on the appropriations bill, Feinstein said she would have preferred to provide even more than DOE requested for renewable energy loan guarantee credit subsidies, but given the political and economic realities of constrained budgets, $200 million was as much as she could have hoped for.

"It's de minimis," she said of the $200 million in the bill

DOE continues to provide loan guarantees for renewable energy projects. The department finalized a $150 million loan guarantee on September 8 for 1366 Technologies to scale up a new process for manufacturing solar-cell wafers that the company said cuts costs in half.

"This type of pioneering technology is needed to compete and thrive in the global race for solar manufacturing, a market worth billions of dollars and tens of thousands of jobs in the years ahead," Energy Secretary Steven Chu said in a statement. DOE first reported in June it intended to award the loan guarantee to 1366 Technologies.

The company estimates it will be able to produce 700-1,000 MW of silicon solar wafers annually. The project will be based in Lexington in the state of Massachusetts, and DOE estimates it will create 70 permanent jobs and 50 construction jobs.

It uses a process that reduces the number of steps involved in manufacturing silicon wafers, and cuts the amount of silicon waste. The company originally developed the technology at the heart of its novel manufacturing process with a $4 million grant from DOE's Advanced Research Projects Agency-Energy, which funds high-risk, high-reward research, and $3 million from the department's Solar Energy Development Program.

In addition, DOE said September 12 that it had reached a final agreement on a loan guarantee to support Abengoa's Mojave Solar Project, a proposed 250-MW concentrating solar power plant in California.

Construction of the facility will support more than 900 construction and permanent operations jobs, DOE said, and when it is complete, it will increase the US' currently installed CSP capacity by about 50%. The project will generate enough electricity to power more than 54,000 homes, with PG&E agreeing to a 25-year power-purchase contract.

DOE said the Mojave Solar Project will use technology from Abengoa that is significantly better than the previous generation of CSP installed in the US during the 1980s and 1990s. Agengoa's solar collector assembly was developed with the help of a DOE grant.

The assembly includes a lighter, stronger frame than used in previous systems that is designed to hold parabolic mirrors that are easier and less expensive to build and install, DOE said. The advances make the technology 30% more efficient than the first generation of CSP plans, department officials said.

DOE has now either closed on or issued conditional commitments for more than 30 loan guarantees under its 1705 loan guarantee program that was set up and funded under the American Recovery and Reinvestment Act of 2009. The closed guarantees account for more than $8 billion in loans for renewable-energy projects, while the yet-to-be-closed conditional commitments amount to $10.7 billion in loans. Under program rules, construction on the projects must begin by September 30.

The department is also helping to finance the largest US program to date for installing solar PV. Chu said September 8 that DOE had offered a conditional commitment for a partial guarantee of a $344 million loan to help secure financing for US company SolarCity's SolarStrong project, which is designed to double the number of residential solar PV installations in the United States.

As part of the project, SolarCity plans to work in partnership with military housing-privatization developers to install, own and operate up to 160,000 rooftop solar installations on as many as 124 military housing developments across 33 US states. The company cited estimates that there are currently 166,000 PV installations in the United States.

The project is expected to create more than $1 billion in solar projects and 371 MW of new solar generation capacity. USRG Renewable Finance, a subsidiary of U.S. Renewables Group, will serve as the lead lender for the project in partnership with BofA Merrill Lynch.

"Now the solar industry has a debt model that can make distributed generation affordable on a massive scale," SolarCity CEO Lyndon Rive said.

The SolarStrong projects will likely include installing solar PV on other privatized buildings on military bases, such as community centers, administrative offices, maintenance buildings and storage warehouses. The first SolarStrong-eligible project -- a coordinated effort between real estate developer Lend Lease and SolarCity -- is already underway at Hickam Communities at Joint Base Pearl Harbor-Hickam in Hawaii. When completed, that project alone will provide renewable power to more than 2,000 military family homes.

The SolarStrong project will help the Department of Defense, America's single-largest energy consumer, secure its energy needs from renewable sources operated in parallel with the electric grid. DOD has set a goal to obtain 25% of its energy from renewables by 2025.

Casting a shadow over expansion of the US solar industry is the uproar over the recent Chapter 11 bankruptcy filing of Solyndra, a California solar panel maker that received a $535 million DOE loan guarantee in 2009. House Republicans have launched an investigation into the Solyndra loan guarantee, charging that the Obama administration failed to vet the company closely enough before offering it the taxpayer-backed financing.

Republicans have said the Obama administration put taxpayer dollars at risk to prop up a financially shaky business, and the House Energy and Commerce Committee has scheduled a hearing to discuss the Solyndra loan guarantee.

"Now-bankrupt Solyndra was the flagship loan and a hallmark of the Obama administration's ill-fated jobs program, repeatedly trumpeted as a stimulus success story," Representative Cliff Stearns of Florida, the top Republican on the committee's investigations subcommittee, said September 8.

Democrats on the committee have asked Republican leaders to compel Solyndra CEO Brian Harrison to testify. "Less than two months ago, Mr. Harrison met with us and other committee members to assure us that Solyndra was in a strong financial position and in no danger of failing," Representatives Henry Waxman, of California, and Diane DeGette, of Colorado, said in a September 8 letter to Republican committee leaders.

The Washington Postreported September 13 that emails it had obtained showed that the Obama administration attempted to hurry federal reviewers for a decision on the loan to Solyndra so Vice President Joseph Biden could unveil the approval at a September 2009 groundbreaking for the company's new factory.

FBI agents on September 8 executed search warrants at Solyndra's headquarters in Fremont, California, though officials would not give a reason for the search. Solyndra spokesman David Miller confirmed local news reports that FBI agents executed warrants at the company but did not provide further details.

DOE spokesman Damien LaVera confirmed that the agency's IG office was involved in the search warrant, but also declined to provide additional information. Justice Department representatives declined to issue any statements as well.

Solyndra has been highly touted by the administration as a clean-tech leader, with President Barack Obama last year visiting its new manufacturing plant, which it built with the help of its DOE-backed loan.

Feinstein, who in February spearheaded a successful effort to overturn House Republicans' attempt to eliminate all loan-guarantee funding in the fiscal 2011 continuing resolution, acknowledged that she has questions about the Solyndra financing and the loan-guarantee program.

"I was led to believe and had no reason not to believe that the review process for these loan guarantees was as good as it's ever been, if not ever," Feinstein said. "A company that everybody thought was doing well suddenly goes bankrupt. Why didn't they know this before? That's my question. Why isn't this figured out before you go through the loan process, before you get the president of the United States out there?"

According to its bankruptcy filings, Solyndra has drawn down about $528 million in loans from the Treasury Department's Federal Financing Bank, which DOE has guaranteed. The federal government stands second in line to recoup its loan from the revenue raised by a sale of Solyndra's assets in bankruptcy, behind a group of investors that lent the company $75 million.

Several solar industry analysts said they doubt the company's assets will generate much interest from would-be buyers, given the specialized nature of the company's manufacturing equipment and the already oversupplied market for photovoltaic panels.

Thomas Maslin, a Washington-based solar industry analyst with consulting firm IHS-Emerging Energy Research, said he does not foresee other solar manufacturers being too eager to bid on Solyndra's assets, since its manufacturing equipment was custom designed to make Solyndra's unique cylindrical, modular rooftop solar panels. And the patents for those panels may not be highly coveted by other solar manufacturers, since Solyndra has already shown the technology cannot stay cost-competitive with cheaper traditional photovoltaic panels.

"It's a very unique technology, so maybe the number of suitors are smaller than if it were nanosolar or something more of a traditional flat panel thin-film," he said. Still, Maslin said, Solyndra's panels, designed for rooftop installations, have received generally good reviews from installers and clients. The modules are lightweight and easy to install, and, unlike most conventional solar panels, Solyndra's do not require any major supportive structures to be built onto a building.

"There may be some value to be gleaned from any inventory yet to be sold," Maslin said.

Theo O'Neill, a New York-based analyst with brokerage firm Wunderlich Securities, said that with several other solar firms going bankrupt or announcing asset sales in recent weeks -- including Q-cells, Schott Solar, Spectrawatt and Evergreen -- Solyndra's assets are going on the market at a bad time.

"The Solyndra [intellectual property] may be worth something, but the plant and equipment, probably not," he said. "As with Evergreen, the equipment is designed for a non-standard wafer size and will go on the market when there is already equipment from other bankrupt solar makers up at auction. I assume it will bring some value as parts or scrap or both."

Kerina Cusick, solar developer SunEdison's Mid-Atlantic director of government affairs, said Solyndra made a bad bet with its technology by seeking to reduce the amount of polysilicon in its panels, just before several new polysilicon plants were built, lowering prices for the material.

"They built the company on some great patents, they had a very unique and very refreshing approach that made them very revolutionary at one period of time," Cusick said in a panel discussion at the 2011 Georgetown Clean Energy and Cleantech Conference in Washington. "Unfortunately, at the same period of time, a number of polysilicon plants were being built. They lost their competitive advantage. They were at a higher cost differential instead of a lower cost differential."

Despite the recent rash of solar companies going belly up, analysts and industry advocates said that does not necessarily signal troubled times for the US solar industry. Solar manufacturers have been facing fierce competitive headwinds, as cheaper Chinese-made panels flood the market, drastically lowering PV prices.

DOE has noted that PV prices have fallen 42% in this year alone, with the Chinese government heavily subsidizing its manufacturers, contributing to Solyndra's inability to stay afloat. Maslin said those price drops, while painful for panel makers, will actually help encourage the adoption of solar power generation, and in the long run, the solar industry may be stronger for that.

"Solar technology is cheaper, but it's still more expensive than wind or gas or coal. But the cheaper it becomes, the closer it gets to being competitive on its own without incentives," Maslin said. "Different parts of the value chain are feeling this different ways, but in some regions, solar is looking almost competitive with wind in the southwest US or geothermal in other parts, and it's coming in line with retail power prices in northeast US. It's moving in the right direction, but there are going to be some casualties."

He said there is still great venture capital appetite for solar, citing Google's recent establishment of a $280 million fund to finance rooftop installations and Total's acquisition of SunPower. But the companies that will survive are the ones that can achieve mass scale to keep costs competitive, such as First Solar, he said.

Chirag Rathi, a senior consultant with research firm Frost & Sullivan, said US solar firms will have to keep innovating, not just in panel efficiency but also in the cost of production, in order to compete against cheaper Chinese firms. Solyndra had a very innovative product, but was unable to get the economics to work, he said.

"It's essentially Darwinism at play," he said. "The prices are regulated by global dynamics, and you have competitors from China and some of the other eastern countries offering them with such low prices. You can get greater efficiencies [in panel design], but technology is very easy to reverse engineer, so the biggest factor is cost of production. You have to produce as efficiently as possible, because of the market realities."

US trade group the Solar Energy Industries Association said the industry is healthy in the United States, employing almost 100,000 Americans. It chalked up Solyndra's bankruptcy to the natural, if unfortunate, realities of a maturing industry in a competitive marketplace.

"You're going to see winners emerge who find innovative ways to offer consumers the most competitively priced products," SEIA President and CEO Rhone Resch said in a statement. "Competition in the solar industry is good for American consumers. It means that costs are coming down and solar is increasingly affordable for more and more Americans every day."

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