U.S. President Barack Obama heads inside to deliver a speech after meeting with construction workers building a new Solyndra solar panel factory May 26, 2010 in Fremont, California. President Obama toured Solyndra Inc., a once-growing solar power equipment facility that is adding jobs as they expand their operation.
Fremont based Solyndra declared Chapter 11 bankruptcy on August 31, leaving 1050 people without jobs and casting doubts on the future of America’s solar industry. NBC Bay Area technology reporter Scott McGrew takes a look at some of the most common questions raised.
The news media uses the phrase “federal loan guarantees” to describe the money used to fund Solyndra. What does that mean?
While “guarantee” sounds like the feds co-signed a loan the way your dad co-signed your first apartment, it is in fact a direct loan from the Department of Energy to Solyndra. It was a straight transfer of money from taxpayer funds to the now bankrupt company.
How much money was it?
The total loan promised was $535 million. Loans like Solyndra’s are handed out in tranches, which mean “slices of a loan”. The Government Accounting Office tells NBC Bay Area News “about 90%” of the tranches were issued. Back of the envelope math puts that at $481.5 million.
Where did the money go?
The money was used primarily to build Solyndra’s state of the art robotic production facility.
Can we get that money back?
Unlikely. When a company declares Chapter 11, a court decides which creditors will be paid back and how much they will be paid. The government will have to stand in line just like other creditors. The big question now will be who – if anyone – will buy the facility and how much they might pay for it. Solyndra’s patents are also worth some money.
I thought green technology was supposed to be an important factor in the economic recovery?
Certainly politicians have promised that. Remember, “green technology” has no specific definition. Green can mean trash pickup, for instance. In the case of solar, it can mean the installation of panels, or the manufacture of panels, or the manufacture of the machines that make the panels. A wind turbine engineer and a garbage man can be lumped into the same job class if a politician needs the numbers to work.
But solar is selling well…
It is. However, it’s become commoditized. That is, the solar cells themselves are just a product, like computer chips or textiles. The Chinese are able to produce solar cells more cheaply than American factories. You’ll hear news reports claiming that’s because the Chinese government is offering more funding, more loans and less regulation. This is generally true. Keep in mind the people claiming this are American manufacturers who would like more funding and less regulation.
There’s a more important factor: the Chinese are largely manufacturing photovoltaic cells made from crystalline silicon. American companies like Solyndra, which were born at a time when silicon prices were very high, were seduced by new technology called “thin film”. In the last few years, silicon prices have fallen enormously, leaving those who bet on thin film with overly expensive production lines. This is one of the reasons it may be hard for Solyndra’s creditors to sell the factory.
Further, a lot of growth in America is government mandated. Thus it’s unclear how much of green adoption in the States is actually market driven. For instance, laws in California obligate state government to cut greenhouse gas emissions to 1990 levels by 2020 and require power companies to get one third of their power from renewable energy.
So China is winning on price.
Yes, but don’t discount their technology, says Applied Materials’ Matt Gonzales. “Their engineering prowess is growing” he says. Applied Materials supplies the machines to factories to make solar cells. It recently reduced its exposure to thin film solar technology and threw its weight behind old school crystalline silicon. Applied recently opened a research and development laboratory in China.
What are the political ramifications of this?
President Obama visited the Solyndra plant back in May of 2010, shortly after the DOE pushed the loans through. At the time, it was seen as a great use of stimulus funds. The funds would help build the factories, creating construction jobs, and would then lead to more jobs within the factory itself. It was a perfect photo opportunity.
Some in Congress weren’t so sure. Florida Congressman Cliff Stearns, Chairman of the House Energy and Commerce Committee’s Subcommittee on Oversight and Investigations, warned Solyndra had not been properly vetted. “For months, we have been investigating how and why nearly half a billion dollars in taxpayer money was committed to this financially troubled company” he said.
There has been some talk that the loan was related to President Obama’s relationship with philanthropist George Kaiser, who is also a major investor in Solyndra. Kaiser raised money for Obama’s election.
However, the Department of Energy is quick to point out “This loan guarantee was pursued by both the Bush and Obama Administrations. Private sector investors – who put more than $1 billion of their own money on the line – also saw great potential in the company.”