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Solyndra Spells Disaster for DOE Loan Guarantee Program

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Back in May, I raised the question of whether or not Solyndra’s $535 million loan guarantee from the Department of Energy — the DOE’s first and flagship loan guarantee — was a mistake. Despite the fact that Solyndra had raised around a billion dollars of its own private equity, I pointed out the company has one of the highest manufacturing costs of its thin-film solar peers. The economics just didn’t seem to work.

Since I wrote that article, Solyndra ended up ditching its IPO plans, and its founding CEO stepped down. Now this morning, the company announced it will close its first factory and will lay off dozens of workers. Wow. Things could not have turned much worse for the company the DOE held up as an example of a stimulus package that could create green jobs and a good candidate for its long-delayed loan guarantee program.

To remember better days for Solyndra, just look back to my live coverage of Solyndra’s ground-breaking of its factory in September 2009. The event was attended by DOE Secretary Steven Chu, California Governor Arnold Schwarzenegger, then-CEO Chris Gronet, and featured a live video keynote from Vice President Joseph Biden. The entire crew did the obligatory shovel dirt shot in front of a tractor draped in the American flag (see photos).

Now the company is shelving its plans for its first factory to save money, despite raising funds of $175 million in June by selling convertible promissory notes to existing investors. Solyndra told us it has completed the construction of the second factory building, but as of a few weeks ago, it hadn’t started production. Company spokesman David Miller told our reporter Ucilia during Solar Power International in mid-October the company was putting in equipment on the second factory floor.

Solyndra might eventually pull through, but I think DOE made the mistake of thinking that since so many private investors had backed the company, it was a safe bet. There’s no guarantee the company will be able to get its manufacturing costs down. I also heard that Solyndra had been asking for a second loan guarantee to help boost production, which, if the DOE had agreed, would have been an even bigger mistake for the government.

As is the nature of high-profile political media events, there was no room for caution in last year’s ground-breaking ceremony. Biden couldn’t have given a speech about how Solyndra would hopefully boost production and lower costs, but that he wasn’t so sure yet.

Unfortunately the DOE loan guarantee program is one that has to pick winners. While the DOE can fund several companies in one sector, it still has to select one company for the guarantee, which essentially serves as a promise by the government to make good on a loan if the company can’t, and typically enables better interest rates and lower costs than would otherwise be available to a company for project financing.

I think everyone (minus competitors) in the greentech industry has wanted Solyndra to succeed, given it received such a flagship, high-profile award. It just isn’t happening.

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6 Responses to “Solyndra Spells Disaster for DOE Loan Guarantee Program”

  1. There was no unfair competition from the Chinese. The Chinese government did not guarantee $535 million for a Chinese solar panel factory the way our government did. If anything, our own DOE acted unfairly.

  2. Edward F. Dijeau

    If unfair competition from China did not exist, Solyndra would be able to come up to speed and get to the $2.00 per watt “instaled price” range as their quantity of output improved.
    China is the bigest manufaturer, in the world, for solar panels. They want to stay number one even when demand is down because of the bad economy and low Oil Prices. Putting the competition out of business, by unfair dumping, is the culprit. Our Government needs to take steps to stop this practice but they also want us to go “Solar” and the cheep prices of solar are a tempting bait to look the other way as people claim their 30% Federal Income Tax Credits on Solar.
    Solyndra makes panels for large wharhouses and buildings with Flat roofs. Our Government owns a lot of them and if they purchased Solyndra Panels for them, they would save money, energy and Solyndra. Instead, they keep getting their Solar panels from the lowest bidder, The Chinese. Even though Solyndra has a better product, longer warentee and does less structural damage to the property they are installed on, they are not in the specifications of the award contracts. Out Government needs to Buy AmericanFirst just like the rest of us if we hope to survive.

  3. There is nothing new about their technology, it is a mistake to invest or loan any money. The solar or green technology itself is buzz word, and a hype, phyics does not indicate that it is something really green or environmental friendly. It will be busted soon.

    We live in Fremont, the time of equipment auction will be coming soon, we will be there to get some good deals.

  4. Sam Jaffe

    One could make the opposite claim: that the loan guarantee allowed a company to build a new factory which will be much cheaper to operate and get much better efficiencies and use it to replace an older factory that wasn’t competitive. No bank would have extended un-guaranteed credit for that, but the loan guarantee allowed it to happen.