Solar Power or Bust

Solar Panels (Mike Baker)

“When it’s completed in a few months, Solyndra expects to hire 1,000 workers to manufacture solar panels and sell them across America and around the world,” President Obama declared at the Solyndra plant in Fremont, California. That was in May 2010, over a year after the Energy Department guaranteed a $535 million dollar loan to the company, promising a bright future and more jobs for Americans.

Today, Solyndra instead finds itself in bankruptcy court, as it was unable to effectively compete with the low manufacturing costs of existing solar firms. According to Tim Worstall on Forbes, it was possible to see this failure coming:

“Manufacturing costs for the major competitor to all solar PV manufacturers (not just the silicon ones) were well below, in 2009, what Solyndra’s costs were predicted to be.”

After the Solyndra scandal, the Obama administration has been noticeably quiet on the solar power issue, hesitant to draw criticism from Republicans. Until recently when SoloPower, a domestic solar panel manufacturing company, revealed that it is also counting on a $197 million government loan guarantee.

How will SoloPower be any different from the failed Solyndra? SoloPower CEO Tim Harris is optimistic, saying,

“[Solyndra] could never get their costs down to where we are starting… We’ve got so much demand for this product we have all the orders we could possibly fill.”

Supporters of SoloPower also cite the $219 million from private investors as proof of the company’s rising success, forgetting that Solyndra also secured $286 million in private financing. Solyndra was also ranked as one of the three “top clean-tech companies” by the Wall Street Journal. It didn’t stop them from falling apart.

Typically, solar power companies have trouble competing with Chinese firms, who are able to produce solar panels at an extremely low manufacturing cost. However, even today, Chinese firms are cutting costs by laying off workers, due to extremely low demand from Europe for solar panels. Great Britain has seen panel installations drop almost 90% since the government slashed solar panel subsidies.

The economic data indicates that SoloPower would be unable to succeed without government aid, a worrying prospect considering the politics behind operating Amtrak. Amtrak is another government-dependent company that has consumed almost $50 billion of taxpayer dollars and consistently runs at a loss.

When Solyndra failed, the President first tried to blame the Department of Energy’s loan guarantee program on his predecessor, President Bush. However, his words in May 2010 at the Solyndra plant told a different story:

“But through the Recovery Act, this company received a loan to expand its operations.  This new factory is the result of those loans.”

As President Obama said correctly in 2010, the fast-tracked loans for Solyndra came directly from the 2009 American Recovery and Reinvestment Act, known more commonly as the stimulus passed by President Obama.

Only time will tell what the fate of SoloPower will be; however, let’s hope that the administration considers the consequences of loaning out hundreds of millions of taxpayer dollars to a company that is unable to support itself in a market with plummeting demand. Nobody wants another Solyndra.

A variation of this article was originally published in the Lariat on 1o/2/12.

Advertisements

One response to “Solar Power or Bust

  1. I would say that the lesson to be learned from Solyndra, is that the government should not be investing in companies in the private sector. That is the job of the private sector. Free markets do a remarkably good job of winnowing out the good from the bad. Free markets also provide the incentive to improve, via economics and competition. Governments have different agendas – capturing votes, plowing taxpayer moneys into districts to accomplish such, and rewarding political groups friendly to the party in power (cronyism). None of that grows the economy, provides more jobs (over the long term) or makes our products better vis-a-vis each other or compared to products from overseas. But free markets do provide that! The risk in free markets to businesses and jobs is more than offset by the overall rewards this system has brought our country, and now others. There is always risk. But government’s increasing intrusion and control in the economy and especially the private sector does not actually lessen risk – it enhances it – by reducing competition, and by using a guaranteed failed economic model. If I have a 50% chance of success utilizing free enterprise, versus a 100% chance of failure long-term using a governmental intrusion model, then I would choose the former. I would hope that most people would. But governmental intrusion is never presented like that. It is presented as “an investment”. These “investments” turn out poorly and money losers (failures) precisely because of the different agendas and motivations of politicians compared to business men and women.

Comments are closed.