Surprised? So am I, actually, so please allow me to explain.
First, a new article from Quartz' energy and science expert Christopher Mims explores the root causes of Solyndra's demise and concludes that a collapse in polysilicon prices, not Chinese dumping, is to blame:
Solyndra made tube-shaped solar collectors because they were good at optimizing what was, at the company’s inception in 2005, a scarce and extremely expensive good: the pure, crystalline polysilicon needed to make a solar panel. Solyndra’s “big idea” was to change the shape of the solar panel so that it could get the same performance using significantly less silicon.Mims provides plenty of links to support his conclusions, but, hey, don't just take his word for it. Instead, take a gander at the recent congressional testimony of Jonathan Silver, Executive Director of the US Department of Energy's Loan Programs Office, explaining why Solyndra failed:
At first, this seemed like the right bet: In 2008, the cost of polysilicon reached $400 a kilogram. Today that same kilo will cost you $30.
Companies that continued to make conventional, flat solar panels were able to reap the benefits of this collapse in price. And what brought about this price collapse was an explosion of US and global polysilicon manufacturing.
“Over the last several years, US industry leaders made massive investments in silicon production capacity that rapidly pushed down the price of silicon and therefore crystalline silicon solar panels,” says Walker Frost, a spokesperson for Suntech, one of the Chinese manufacturers currently being sued by Solyndra.
Globally, there are now more than 170 startups and established companies making polysilicon. The solar industry used to be dependent on the cast-offs from the microchip manufacturing industry, but the profits reaped by polysilicon manufacturers through 2008 were so large that capacity has since exploded. There’s now so many companies making polysilicon that industry analysts at GTM Research now predict that price pressure and consolidation will leave behind only a dozen survivors by the end of the decade.
In 2009, Solyndra appeared to be well-positioned to compete and succeed in the global marketplace. Solyndra manufactured cylindrical, thin-film, solar cells, which avoided both the high cost of polysilicon—a crucial component used in conventional solar panels — and certain costs associated with installing flat panels. But polysilicon prices subsequently dropped significantly, taking Solyndra, and many industry analysts, by surprise. Among the principal beneficiaries of this pricing environment were four of Solyndra’s Chinese competitors, which sell polysilicon panels and received $20 billion in credit from the China Development Bank in the 2010.In short, polysilicon prices "surprisingly" collapsed, thus benefiting the Solyndra's Chinese competitors (yes, sure, they were subsidized competitors - you know, just like Solyndra). However, were it not for this "surprising" collapse, these competitors would never have realized such benefits. Thus, the key to Solyndra's bankruptcy wasn't China, but low polysilicon prices and the destruction of the company's business model.
These developments made Solyndra’s business model more challenging. The company attempted to cut costs and enhanced its sales and marketing efforts, which resulted in increased sales and revenues. In fact, its revenues increased 40% between 2009 and 2010, from $100m to $140m. But Solyndra’s efforts to gain market-share left it short of capital and, by the summer of 2010, the company faced the prospect of bankruptcy if it could not secure an influx of new cash.
What neither Mims nor Silver happen to mention, however, is why polysilicon prices collapsed. Yes, Mims notes new US investment and huge increases in domestic polysilicon production capacity, but he doesn't explore the drivers of that investment/expansion. A little digging, however, reveals that the huge increases in capacity - and resulting collapse in Solyndra-killing polysilicon prices - were caused, at least in part, by massive subsidization by the US government. You see, it turns out that US polysilicon producers were some of the biggest recipients of Obama administration "green" subsidies, primarily through DOE programs begun or dramatically expanded as part of the 2009 Stimulus bill.
Indeed, a very quick search of "polysilicon" on DOE's website reveals the following examples - each bragging about how federal subsidies helped bring new polysilicon capacity online:
- $44.85 million to Pennsylvania's AE Polysilicon via the Advanced Energy Manufacturing Tax Credit (aka "Section 48C");
- $154 million to Washington's REC Silicon via the same Advanced Energy Manufacturing Tax Credit — "the highest amount awarded to a recipient under the Recovery Act" (woo hoo!);
- $275 million loan guarantee to California's Calisolar Inc. (which also apparently benefited from millions of dollars worth of R&D subsidies through UC Berkeley);
The 2010 IRS factseet on the $2.3 billion in Section 48C tax credits also shows a $128 million subsidy to Wacker Polysilicon and another $51.6 million to Calisolar. (These are just the ones I could quickly pinpoint with "polysilicon" in their names; no doubt there are other producers who received 48C tax credits and/or one of the many other state and federal subsidies available to green energy producers.)
This cursory review makes clear that the Obama administration, and especially the 2009 Stimulus Bill, gave hundreds of millions of dollars in direct subsidies to domestic polysilicon producers. These subsidies inevitably - and totally unsurprisingly - helped cause polysilicon prices to drop (and led to a Chinese anti-subsidy investigation of US exports which targets the aforementioned tax subsidies and several other state-level programs). Moreover, all the state and federal subsidies to downstream solar manufacturers like Solyndra and to US solar energy consumers further stoked US polysilicon investment and production and further reduced prices.
And down goes Solyndra.
So to recap: the Obama administration gave a $500 million dollar loan guarantee to a company that was dependent on sky-high polysilicon prices, but simultaneously threw hundreds of millions of dollars at domestic polysilicon producers. The latter subsidies - when combined with billions in indirect subsidies to solar producers and consumers - inevitably helped stoke overcapacity in the domestic and global polysilicon markets and a resulting collapse in polysilicon prices that - wait for it - eviscerated Solyndra's business plan and ultimately killed the company. And when Solyndra declared bankruptcy, the Obama administration immediately blamed China.
You cannot make this stuff up.
There are certainly some important timeline questions here that I'm not willing or able to handle tonight (for example, did the administration subsidize Solyndra with any knowledge of the company's polysilicon-dependent business plan or that the 48C subsidies were helping bring tons of new polysilicon capacity online?), but answering those isn't necessary for tonight's purposes. Instead, what's sufficient is to just point out (i) the problematic, incoherent and anything-but-surprising effects of the United States' out-of-control green subsidy policies; and (ii) the fact that blaming Chinese solar subsidies, instead of failed US policy, appears to be a really misguided (and/or misleading) approach.
So I'll ask, once again: isn't it time for a change?