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Can Solar survive Solyndra aftermath?

By Lou CoveyEditorial Director, Footwasher Media

The recent collapse of a few high-profile solar energy companies, like Solyndra and Beacon Power, has caused even the most ardent fans of alternative energy to ask, "Can this industry survive?"  The answer is a resounding, yes and no.  It all depends on what government on all levels does.

Current public impressions of the health of any industry are colored by recent history.  The financial failings of companies and industries considered "to big to fail" are what most people think of when hearing news about solar.  But unlike the auto industry, with a population of three major players, the solar industry is filled with hundreds of start-ups struggling to establish themselves.  Even if one, two or two dozen go down, it is still well populated.

"Although panel manufacturing is in trouble, the solar industry is doing relatively okay." said Chirag Rathi, a senior consultant on the energy industry for Frost and Sullivan. "This is largely due to the advent of solar leasing companies in the U.S. One such company, SolarCity, was even give a contract to install solar power on up to 160,000 military homes. The program was supposed to be supported by the Department of Energy (DoE), which had extended a conditional commitment for a partial guarantee of a $344 million loan to support the project."

Government subsidy and purchase are the key to whether the industry thrives. The DoE recently announced a new initiative to fund solar collection technology development and the Department of Defense (DoD) is under congressional mandate to reduce fossil-fuel consumption by 50 percent.

The reality is that all forms of energy production are heavily subsidized by government throughout the world.  China has invested hundreds of billions of dollars in their solar panel industry.  Spain's financial difficulties are directly tied to the 100 percent subsidy it gave to the industry there, that it can no longer support.  Even Germany, relatively healthy in the world economy, is struggling to maintain its levels of support to the industry.  In the US, most of the government support – Federal, state and local – is actually tied to the installation industry.

"The purpose of government subsidies for renewables is to reduce costs and make them economically viable alternatives to fossil fueled electricity generation." said Jay Holman, research manager for solar energy strategies at IDC. "As the cost of electricity from renewables drops, it is natural that the subsidies drop as well: this is an indication of progress. The trick with subsidies is to encourage industry growth without placing too heavy a burden on electricity ratepayers or taxpayers. A flat, constant subsidy won't do the trick: it needs to drop in line with falling costs."

Holman said Germany and Italy automatically reduce subsidies based on the amount of solar installed in the previous year, which provides transparency and predictability for the market.

"In the US, however, we send the issue back to congress every few years and let them duke it out. That is an incredibly inefficient approach that makes the subsidy situation extremely difficult to predict."

Holman concluded that what the US industry needs is a long term subsidy plan that makes automatic subsidy adjustments based on the rate of installations and/or the cost of electricity from renewables.

Solyndra collapses.  Why are the generals smiling?

The fall of Solyndra was expected, and the DoD is happy

By Lou CoveyEditorial Director, Footwasher Media

The collapse of Solyndra has been the subject of both major news coverage and a foundational bit of political discourse recently.  A closer look at the facts reveals that the reality of Solyndra and the solar industry is far from the speculation, especially when viewed from a military perspective.

In the wider scope, industry analysts and observers wonder what all the kerfuffle is  about because everyone who knew the industry knew that Solyndra was not going to make it, especially in the current market.

"Solyndra's CIGS solar panels were expensive," according the Chirag Rathi of Frost and Sullivan. "The technology was innovative when it started out 6 years ago, but the global market place changed so fast in this time period that it became incredibly difficult for them to compete on price.  Their per watt production cost was widely believed to be above the $6 mark, much higher than the poly-crystalline technology of $1.75 per watt and falling."

According to the industry rule of thumb, for alternative energy to be competitive with fossil fuels, the cost per watt needs to fall below $1.

Rathi pointed out that the solar panel industry is in oversupply with the massive capacity coming out of China and Taiwan. "The Chinese government has provided more than $30 billion in soft loans to the domestic panel manufacturers."

With all this common knowledge, the persistent question has been: Why did the Obama administration push forward with the loan program?  The first answer is, well, that's been the way things have been done for some time.

Contrary to conventional thought, alternative energy gets the lion's share -- by far -- of any government investment in energy, including fossil fuels.  According to the Institute for Energy Research, direct federal subsidy (that's cash, not tax incentives) for renewable energy topped $14 Billion in 2010, while total subsidy of fossil fuel (gas, oil and coal) was just under $3.4 Billion... and 90 percent of the latter was in tax incentives, not actual cash payments.  And since the Solyndra investment was only in the form of loan guarantees, it won't come out of the federal budget until the bankruptcy is complete.  In other words, the fall of Solyndra has not yet cost the government anything.

So what, specifically, did the government get out of the Solyndra deal?  That's where no one is looking, and where you need to look to find the more interesting story.

Find out why the generals are smiling at Element14.com