Friday, October 14, 2011

A little perspective about Solyndra

My summary of the Solyndra story:
  • Company launched in 2005 to create a unique thin-film (CIGS) solar module to avoid using expensive (at the time) silicon as most other solar companies use.  They took a calculated business risk to create an innovative product to address a gap in the marketplace.
Solyndra's technology & value proposition
  •  Prices of silicon collapse in 2009.
  • Almost overnight, the business case that Solyndra was trying to make completely reverses.  More efficient panels are now the same price as Solyndra's less efficient panels.
  • Solar panel manufacturing has been extremely turbulent from the beginning so Solyndra stays the course and attempts to weather the storm.
  • On May 26, 2010, President Obama gives a speech at Solyndra headquarters to tout his commitment to American job and clean energy development. This was a company that both the Bush and Obama administrations wanted to associate with for political purposes.
  • June 2010: Solyndra is producing 30MW of solar panels per year and is in a tie as the 10th largest thin film manufacturer. 
  • November 2010: Solyndra gets a $535 million loan guarantee from the 1703 loan guarantee passed in 2005 by the Bush administration.
  • Silicon prices continue to fall hitting a 6-year low in June 2011 (~$50/kg from ~$470/kg).
A solar cell nestled in raw polysilicon
  • Solyndra tries to restructure its loans again in August 2011 but is refused and subsequently loses a contract with the US Navy.
  • Bankruptcy--September 1, 2011
Solyndra was an innovative company in a dynamic market.  The founders took a big risk in a very risky business.  Like other companies in other industries, they lobbied the government for special consideration and like other companies in other industries, they got it.  Governments facilitate markets and companies participate in these markets.  My view is that clean energy companies should get special consideration because they promote technology and ideas that help society as a whole.  Special consideration doesn't mean direct investment however.

One lesson learned from this story is that governments are horrible venture capitalists.  This should be expected since unlike VCs, governmental decision makers are betting with someone else's money.  While market development is a solid roll for governments, picking specific winners like VCs try to do, should be left to private investors.
Solyndra couldn't keep up with John Boyd's OODA Loop

One lesson to not learn from this story is that solar energy can't compete with traditional energy and that solar is doomed to failure.  Solyndra failed in most part due to falling prices of solar components and a general inability to keep up with changing business assumptions.  While this was bad news for Solyndra, this is very good news to proponents of clean energy.  Solar energy is on pace to be the least expensive source of electricity for most of the world in a decade.  All this political theater over Solyndra will seem pretty silly when that happens.
"The trend is my friend."
-Old adage of market makers

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