By Lou Covey
Editorial 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 all 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 to 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.
Everyone knows that the US is a large consumer of oil, now second only to China. And many people might assume that the US military takes a big chunk of that. In fact, the Department of Defense is the largest single consumer of oil not only in the United States, but the largest in the world. In fact, at 360,000 barrels a day, it consumes more than 35 other countries. That makes any interruption in the flow of oil not just a domestic and economic issue in the US, but a significant military issue as well.
As Congress has mandated the military cut oil consumption by 50 percent, the Pentagon sees alternative energy production to be a crucial strategic effort. That makes Solyndra an equally crucial component in the DoD's green push.
The primary selling point for Solyndra's technology was not that it was cutting edge nor inexpensive; it was easier to deploy and maintain than the commercially available PV panels. That makes them portable, which is a big plus for military applications. It doesn't matter that the cost of energy produced by Solyndra's technology is pushing $7 a watt, because the technology could be adapted to the field.
More importantly, though, no foreign government can mess with the technology or supply. Solyndra represents a manufacturer of a proprietary technology that is solely based in the United States. It doesn't depend on foreign sources of raw materials, the manufacturing capacity is based only in the US, and the patents are all owned in the US. And the US government is now the largest creditor. Once the company completes the Chapter 11 reorganization and the government honors the loans it backed, Solyndra will be owned by the government.
Jay Holman, Research Manager on Solar Energy Strategies for IDC Energy Insights, doubts that is what the government had in mind when it approved the deal, but he admitted it was not out of the realm of possibility. "It wouldn't surprise me if that's the way it works out," he said. "But the investment in Solyndra never made sense and it might be better to just write off the entire deal. It would be a better long term investment to heavily subsidize manufacturing here in the U.S., just as China has done ($300 billion in soft loans)." Holman theorized that as demand for PV panels increase in China it could restrict the supply in the US, raising prices and increasing the viability of US production.