The Elephant in the Room
In past posts to this site (here, here, here, and here just to list a few), I haven’t been shy about touting the benefits to Arizona from developing a robust and vibrant solar energy sector. Given Arizona’s natural abundance of sunshine, investment in solar businesses throughout the solar supply chain makes imminent sense. Government policies and financial assistance to promote green energy have helped jump-start an industry that was burdened with higher production costs than energy produced from fossil fuels. You can count rooftop PV installations, PV manufacturing plants, central solar generation stations, and steel fabrication facilities among the Arizona supply chain beneficiaries of these policies.And, now the elephant in the room is threatening to trample progress.
With Solyndra’s Chapter 11 filing, U.S. taxpayers are on the hook for the $535 million loan. The fallout from the debacle will likely further erode Congressional support for government-backed investment in green energy projects and has embarrassed the Obama administration, which vigorously supported the loan guarantee program and specifically hailed Solyndra as an exemplary leader in the solar industry.
In case you haven’t seen it, here’s how Jon Stewart summed it up on last night’s Daily Show: Jon Stewart Daily Show
In a more serious vein, today’s Wall Street Journal had an interesting take on Solyndra’s crash. It reports that the federal loan actually contributed to Solyndra’s bankruptcy by providing the cash to build a new factory to produce its thin film panels, hoping to reap economies of scale. Absent the loan, the company would likely have retooled its existing factory to produce more efficiently. Unfortunately, the company’s ill-fated business plan to build a bigger plant based on soft purchase agreements, coupled with a strengthening market for low-cost, conventional panels led inexorably to bankruptcy.
I, for one, hope the Solyndra debacle doesn’t derail continuing progress in developing solar energy in Arizona. But, the Solyndra story is an obvious cautionary tale for the remainder of the solar industry and for government efforts to support it. Solar businesses must have sound plans to meet demand, produce efficiently, and endure competitors. Government agencies must exercise rigorous due diligence in granting financial support and avoid the temptation toward irrational exuberance in moving this exciting industry forward.


