Solyndra: The Myth, the Legend

April 16, 2020

Twitter Thread by Michael Carr:

The myth of Solyndra drives me a little nuts. I was the Senate Energy staffer in charge of financing programs – worked on the original program in the 2005 law, wrote the modifications creating “1705” in ARRA, and created the ATVM program for vehicle manufacturing.

So, I’ve lived quite a bit of this program. A few points about Solyndra. First, Republicans wanted it to be a story about corruption – that Obama political actors channeled money friends and made a bad deal for the taxpayers in the process. This is unadulterated bullshit. 

Solyndra was one of the first applications in the door during the Bush Admin. It had been in process for a long time and was simply the application that was farthest along. The head of the loan office at the time was a career guy (former OPIC). 

Neither he, nor any of the politicals had any interests in Solyndra and the private sector investors were donors, like most rich people, to both parties. And the pressure to move loans from Congress was certainly bipartisan. I watched Domenici yell in many hearings about it. 

Those private sector investors, BTW, lost about $1 billion on Solyndra, far more than the US loan. Was Solyndra a bad bet? Not when they started. Here is what polysilicon prices looked like at the time.

It was the key price driver for solar and looked like it would rise forever. Look at that run up in 2008 as solar began to take off in Germany and the US! The theory behind Solyndra was maximize to production of this expensive substance. 

By rolling it in a tube, and encasing it in glass, you could not only use the direct rays, but the ones that reflected back off the white painted roof. Plus, since it didn’t catch wind like traditional panels, you could put it on old, big, flat roofs like warehouses. 

All in, particularly with easier installation, Solyndra racks were very competitive with traditional solar, and they could be used in some applications that traditional panels couldn’t. With technology improvements, Solyndra had a path to beating the big players.

 So, what happened? In a word, China. China went all in on solar manufacturing and not only started flooding the market with cheap panels, they brought a huge amount of polysilicon smelting on line and flooded the market. 

Bringing back this chart, you can see that between the global economic crisis driving down demand and an explosion in supply, the price of polysilicon dropped from almost $500 per kg to under $100 per kg, in about a year! 

A fundamental premise of Solyndra’s value proposition, that polysilicon was precious and should be used sparingly to maximum efficiency, was turned on its head. Suddenly solar panels were a cheap commodity. Great for the world, not great for engineering-intensive Solyndra. 

Was this predictable? Maybe, but lots of people bet big money against this outcome and lost. It happens all the time in technology. Did the taxpayers lose out? Hard to say. Solyndra built manufacturing in the US that wouldn’t otherwise have been here. 

Millions of dollars were spent on US suppliers and thousands of workers over several years worked and paid taxes and spent money in the US that might not have otherwise been spent. We also minted a bunch of engineers that have gone on to do good things in clean energy. 

The biggest loss is how much it scared us from trying to good things anymore. If it had happened a year earlier, we might not have loaned to Tesla and Nissan. We wouldn’t have returned auto manufacturing to the CA NUMMI plant, wouldn’t have battery manufacturing in TN.

 Probably wouldn’t be a global leader in EV manufacturing. Or maybe it would have been fine, since then Solyndra would have been under Bush and Republicans would have shrugged and said that “it’s just the way innovation works.” 

Anyway, one good thing is, we have a new heuristic. As soon as someone starts ranting about Solyndra as a boondoggle or an example of how government can’t do good things, you know they are an ignorant ideologue. You can safely ignore the rest of the words from their mouth. 

UPDATE: This is probably worth adding.

Bloomberg:

The U.S. government expects to earn $5 billion to $6 billionfrom the renewable-energy loan program that funded flops including Solyndra LLC, supporting President Barack Obama’s decision to back low-carbon technologies.

The Department of Energy has disbursed about half of $32.4 billion allocated to spur innovation, and the expected return will be detailed in a report due to be released as soon as tomorrow, according to an official who helped put together the data.

The results contradict the widely held view that the U.S. has wasted taxpayer money funding failures including Solyndra, which closed its doors in 2011 after receiving $528 million in government backing. That adds to Obama’s credibility as he seeks to make climate change a bigger priority after announcing a historic emissions deal with China.

A $5 billion return to taxpayers exceeds the returns from many venture capital and private equity investments in clean energy, said Michael Morosi, an analyst at Jetstream Capital LLC, which invests in renewable energy.

“People make a big deal about Solyndra and everything, but there’s a lot of VC capital that got torched right alongside the DOE capital,” Morosi said. “A positive return over 20 years in cleantech? That’s not a bad outcome.”

19 Responses to “Solyndra: The Myth, the Legend”

  1. Engineer Ron Says:

    OK, all that said; address the fact that Solyndra filed for bankruptcy protection less that 2 months after securing the federal money. It’s impossible that Solyndra didn’t anticipate that action.

    Next, explain why the new Federal money was last minute changed so as to be subordinate to the existing investor funding. No one brings in (smart) new money subordinate to existing investment. Unless it’s OPM (other people’s money).

    Both issues strongly suggest fraud by Solyndra and at least utter ignorance by the Federal funders if not fraud.

  2. pendantry Says:

    As soon as someone starts ranting about Solyndra as a boondoggle or an example of how government can’t do good things, you know they are an ignorant ideologue. You can safely ignore the rest of the words from their mouth.

    Same story with the Dvorak keyboard, which economic ideologues love to hate because it disproves the concept that ‘there ain’t no such thing as product inertia’.

    • Canman Says:

      You can still buy a dvorak keyboard. You can probably reprogram your existing computer as dvorak. Dvorak is better, but is it that much better?

      • pendantry Says:

        I have a Dvorak keyboard layout; I’ve been using it happily for years. You’re right: it is possible to reprogram current PCs to use it. The point is that although Dvorak is indeed better, it has failed to make inroads into the existing market share that was locked in long ago by the Sholes (‘QWERTY’) keyboard layout, and yet economists have perversely pointed to this example as proof that product inertia doesn’t exist. I’ve written quite a lot about this (as have others: check out ‘The Fable of the Fable’ by Marcus Brooks).

        • John Kane Says:

          I have been using Dvorak for years. I remember reading the original “Fable” paper and concluded that we had two economists “knew” that the market always made the right decision and had to prove the QUERTY keyboard superior. It’s nice to be able to write the conclusion before starting the study.

        • Canman Says:

          The market “HAS” provided access to dvorak for those, like you, who want it. I’d call that a victory for consumer choice and the much derided concept of consumerism.

          • Canman Says:

            Argh! Forgot to close the bold tag. Hope I didn’t blind anyone.

          • pendantry Says:

            Ah, I see where you’re coming from now. I might be tempted to subscribe to your interpretation of reality if I could walk into a computer shop, ask for a Dvorak keyboard, and not be met with a blank look. But, I can’t can I?

          • Canman Says:

            I suspect that “blank look”, will be brief, followed by a few steps to the cash register/computer, and a “How do you spell that — is it dvorak?”

            … And Amazon or ebay won’t give you that blank look.

          • rhymeswithgoalie Says:

            My eyes! My eyes!

  3. Engineer Ron Says:

    pendantry,

    You seem to be more dense than average.
    So let me be a bit more clear.

    Several high profile investors put a ton of money into Solyndra. Money at high risk but sold on the promise of extraordinarily high rewards.

    But then the things you discuss above happen.

    They applied for federal funding knowing that they were soon to be out-of-business. But by some miracle (utter corruption) of funding, at the last minute the federal funding was agreed to be subordinate to existing funding.

    This meant that as they filed for bankruptcy relief, the original investors would be paid off 1st and now the risk of investment would be carried by the US taxpayer, rather than the ones betting on a huge reward.

    This is the definition of corruption.

    Had Solyndra actually paid off, the US taxpayer was never to be a beneficiary.

    • pendantry Says:

      Engineer Ron,

      You begin with an insult and expect me to read your words. You have a lot to learn.

    • rhymeswithgoalie Says:

      They applied for federal funding knowing that they were soon to be out-of-business. But by some miracle (utter corruption) of funding, at the last minute the federal funding was agreed to be subordinate to existing funding.

      Rather than utter corruption, I would call is mundane corruption: Many in government are easily swayed by lobbyists. I used to think it was only about the money, but I’ve come to see how a professional lobbyist can clean up using practiced psychological manipulation on a group which tends toward high egotism and low intelligence.

      I think it is plausibly unlikely that the person on the government side negotiating the loan even realized what a bad deal it was.

  4. Henry Hieslmair Says:

    Yeah… but no. I was working in solar cell manufacturing since 1993. The Solyndra concept was simply a bad idea with good salesmen. The tube was a bad solar device concept, period. Furthermore, I wish you had expanded your graph of polysilicon prices. You would have seen polysilicon prices rise and fall several times over the years. There is *nothing* inherently expensive about silicon. The peaks are just a temporary inability of refiners to expand fast enough to meet the rising market demand. So yes, it was easy to see that polysilicon prices would eventually fall. The worst lie though, is that Solyndra never even got close to their own cost goals. They were still way off their own targets while executives made super high salaries. The fall in solar prices allowed them to blame things on China and gave cover to their fraud. I don’t blame the government, but I don’t know that the government should be that directly involved with funding tech companies.

  5. Engineer Ron Says:

    In the end, the federal infusion of money was almost identically equal the the original investment. How the hell do you like that coincidence.

    So the original investors all got their money back and now the failed risk was all to be carried by the US taxpayer. How the hell do you like that. What a fantastic coincidence.

  6. J4Zonian Says:

    How many Solyndra-equivalents did we waste on various CONG projects?

    dailyclimate[DOT]org but the (differently titled) article seems to be gone, unfortunately.

    SUMMARY: 

    Georgia’s nuclear revival: 28 Solyndras:
    Yucca Mountain Nuclear Waste Repository: 180 Solyndras
    Hanford Nuclear Reservation cleanup: 224 Solyndras
    Department of Energy’s non-energy work: 35 Solyndras a year
    FutureGen and FutureGen 2.0: 5.6 Solyndras
    Uncle Sam’s two clean-coal research efforts never locked away so much as a ton of carbon dioxide.
    Kingston, Tenn. coal ash spill: 2.1 Solyndras
    LUST and clean air (Leaking Underground Storage Tanks): 58 Solyndras
    Federal oil and gas subsidies: 8 Solyndras/yr
    BP’s Deepwater Horizon penalty [and way, way too small—didn’t come close to paying the costs, let alone the punishment that should have been levied]: 9 Solyndras
    Ethanol subsidies—neither renewable nor sane, this yields an EROEI of about 1:1 and is essentially a money and energy laundering scheme for oil: 40 Solyndras
    America’s spending on salty snacks: 44 Solyndras
    Food wasted in the US: 300 Solyndras/yr

    If this argument were about waste it would find thousands of other expenditures to focus on. But of course it’s not. It’s just another lie from the fossil-fueled right wing.

    “the price of polysilicon dropped from almost $500 per kg to under $100 per kg, in about a year! ”

    “the price of polysilicon dropped from almost $500 per kg to under $100 per kg, in about 2 years!” 
    FIFY

    • Henry Hieslmair Says:

      But the price of polysilicon also rose from under $100 to $500 in the 2 years before the peak. Anyone could have seen the peak was a temporary situation. I’m not anti-government, but I do think Solyndra was fraudulent. I don’t think it is wise for the government to have such direct involvement in a particular company. Rather, we should have had a carbon tax and subsidies for renewables in general.


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