2 Sep 2011

China’s solar strength raising the stakes for U.S. companies backed by government loans, guarantees; Evergreen Solar, Solyndra are latest victims

Written by Jim Pierobon

The closures of two U.S. solar energy pioneers during the past month speak volumes about the high stakes when governments place bets on clean energy start-ups. Evergreen Solar and Solyndra are the latest examples. More are likely to come as the industry endures a shakeout and struggles to find a sustainable path vis a vis their Chinese competitors.

Meanwhile, the spotlight grows sharper on states and the U.S. government making grants or loan guarantees to create clean energy jobs.

Massachusetts-based Evergreen Solar, which shifted its manufacturing technology to China in a move to stay alive, nevertheless shut down in mid-August and is selling its assets and reorganizing under Chapter 11 of the U.S. bankruptcy code.  This past Tuesday, Solyndra filed to reorganize its debts in California under Chapter 11 of the bankruptcy code.

Along with the U.S. government and two large private investors, Solyndra bet that refined silicon, the most important feedstock for solar panels and used to be very expensive, would stay that way. Solyndra invented a solar panel that didn’t use expensive silicon. Unfortunately, silicon has gotten very cheap over the past few years.  The problem that Solyndra initially solved — expensive silicon — disappeared.

Evergreen Solar produced a proprietary “string ribbon” solar cells. It sold them to distributors, systems integrators and other value-added resellers, which incorporated modules with those cells with electronics, structures and wiring systems. Other applications for Evergreen Solar’s products included on- and off-grid power generation.

Recognizing the stakes and what they mean for U.S. incentives from the Obama Administration’s support for clean energy incentives, the  U.S. Solar Energy Industries Association (SEIA) acknowledged the setback and offered some perspective.

“It is important to look at an industry’s health more broadly rather than through the narrow lens of one company’s success or failure,” said SEIA President Rhone Resch in a statement. “Today, the solar industry is one of the fastest growing industries in the United States, employing nearly 100,000 Americans at more than 5,500 companies across the supply chain in every region of the country.

“What we are seeing in solar happens in every industry that is maturing and growing more competitive.  You’re going to see winners emerge who find innovative ways to offer consumers the most competitively priced products,” Resch said. SEIA noted how solar panel costs continue to decline. Through the first eight months of 2911, the cost of solar PV panels has come down by 30 percent.

The Solyndra story might be a tad more complicated that what might first appear. The stream of comments following this “epitaph” by former Solyndra CEO Barry Cinnamon raise questions about what he did before he left the company to become CEO of Westinghouse Solar.

Greg Bialecki, the economic development czar for Massachusetts Governor Deval Patrick, has defended the administration’s support for the once-promising Evergreen. The state is still trying to recoup about $4 million in cash from the Marlboro-based company. The investment in China, which has become a joint venture with Chinese investors, is to remain operating subject to financing talks.

“Not every company is going to be successful … but we still believe the approach of providing business incentives to create and maintain manufacturing jobs in Massachusetts is an important strategy,” Bialecki said.

According to this report in the Boston Herald, during a state Senate hearing in March that explored the value of tax incentives for Bay State businesses, Evergreen CEO Michael El-Hillow said the company had “earned” 85 percent of the taxpayer benefits it received because of the jobs it originally created.

ABC News is reporting today that investigators in the U.S. House of Representatives have uncovered evidence that White House officials became personally involved in an Energy Department review of a hot-button $535 million loan guarantee to Solyndra. The $1.1 billion invested by U.S. venture capitalists may be the largest such loss ever.

The allegation surfaced in a letter House Energy Committee Chairman Fred Upton (R-Mich.) sent to the White House Thursday night, Sept. 1, saying he planned to accelerate efforts to understand an investment deal that may have left taxpayers out half a billion dollars.

Massachusetts Gov. Deval Patrick has criticized Evergreen CEO Michael El-Hillow for asserting his company does not intend to return any of the more than $20 million in direct grants it received from the state.

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