What to Learn from the Solyndra Collapse?

On August 31st, solar cell maker Solyndra unexpectedly closed its doors, laying off 1,100 employees and filing for bankruptcy. The Fremont, CA company had been considered one of the most promising solar companies in the U.S.

The fact that Solyndra received $535 million in federally-backed loan guarantees has many questioning whether this collapse could have been foreseen as well as the wisdom of funding start-up companies with federal funds. But Jonathan Silver, Executive Director DOE’s Loan Programs Office, testifying before the House Committee on Energy and Commerce’s Oversight and Investigations SubCommittee, defended the program saying,

“While we are all disappointed in the outcome, securing America’s leadership in this vital new industry requires that we support innovation and deployment. Solyndra’s situation should not overshadow the great work that the Department’s loan programs have done.”

According to the San Francisco Chronicle’s report (September 1), solar module prices have plunged more than 40 percent in recent years, squeezing profit margins even as sales of solar systems grow. The U.S. once dominated solar manufacturing but now has less than a 10 percent share of the global market as other countries—particularly China—entered the market with heavily subsidized products. Two other U.S. solar companies, Evergreen Solar and SpectraWatt, filed for bankruptcy protection in August.

“We have always recognized that not every one of the innovative companies supported by our loans and loan guarantees would succeed, but we can’t stop investing in game-changing technologies that are key to America’s leadership in the global economy,” Public Affairs Director Dan Leistikow wrote in a blog post on the Energy Department website.

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Joe Flood

Should the government really be trying to pick winners and losers in a chaotic marketplace? Government has plenty of programs that work and need more money, so investing in startups is a really bad idea. It also feeds into the notion that the stimulus was a politically-inspired boondoggle. In this environment, government needs to demonstrate that it’s a good steward of taxpayer money.