Solyndra’s failure is a wake-up call to policymakers who support renewable energy, but it is a call to do more, not less. The $535 million loan guarantee issued to the now-bankrupt California-based manufacturer of thin-film solar cells shows that, though money matters, it isn’t enough to build an internationally-competitive renewable energy industry. The U.S. needs to build an energy market that favors low-carbon energies and tolerates the failures attendant to the growth of any tech and innovation-based industry to improve the success of future investment in renewable technologies.

China invested $33 billion in its solar industry in 2010 alone. By comparison, the U.S. loan guarantee program established by the 2009 Recovery Act devotes $38.6 billion to any “green” energy project, including nearly $6 billion to Ford Motor Co. for energy-efficient vehicles, over the course of more than two years. In effect, China invested twenty times as much in their solar industry as did the United States. This disparity in government support is one reason U.S. solar companies keep folding under pressure from Chinese competitors.

However, China provides more than just money: it provides low-interest loans, cheap or free land, and protectionist incentives to its solar industry. The U.S. brought WTO actions against China for protectionist practices such as subsidizing manufacturers that agree to purchase only domestic components. However, by the time China agreed to stop, the industry had grown so drastically that it was competitive even without continued protectionism. Naturally, the U.S. cannot and should not engage in many of these industry-building practices. However, the U.S. renewable energy industry still has a chance.

The U.S. may become more competitive with China without simply throwing more money at the problem. In fact, government loan guarantees may stymie innovation by attracting private investment to the guarantee-backed company and away from other deserving upstarts. What the U.S. industry needs is national policy that encourages renewables by increasing the cost of greenhouse gas emissions (cap-and-trade, a carbon tax) or changing supply and demand (feed-in-tariffs, renewable portfolio standards).

In fact, the U.S. solar industry is on pretty solid footing already. The market doubled between 2009 and 2012 and anticipated 25% growth in 2011. U.S. solar is running a $1.9 billion trade surplus while traditional energies, such as petroleum, are running a $250 billion trade deficit. The cost of crystalline (traditional) PVs has fallen 75% in the past four years. Unfortunately for Solyndra, it did not manufacture traditional crystalline installations but instead manufactured a panel that did not use silicon, betting that the price of silicon would stay high instead of dropping 80%. If the silicon market had gone the other way, Solyndra might be praised as a visionary instead of criticized as a harbinger of the end of the clean energy economy.

The loan guarantee for Solyndra represents just 1.3% of the Department of Energy’s loan guarantee program. The program has yet to allocate over $9 billion, 24% of the program’s funds, and is fast approaching its statutory deadline of September 30th to allocate these funds. Though energy research and development is vastly underfunded, with utilities spending 1/35th of the amount on R&D that the average U.S. industry spends, policymakers must help develop a market for these products so that investments can flourish. Solyndra should serve as a reminder to policymakers that while some tech companies succeed and many fail, the goal should be to develop a market that rewards those who succeed.

- Amelia McKeithen

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One Response to Solyndra: A Call to Action in the Renewable Energy Industry

  1. spals says:

    While the Solyndra failure has been unfortunate, it is encouraging to read about the progress in the alternative energy sector in the last few years. Hopefully, policy makers will write policies that would encourage private sector investment, rather than suffering from the fallout that this has caused.