Solar Manufacturers' Demise Raises Questions About Loans

Sept. 2, 2011
Republican House members call for investigation into DOE loan awarded to Solyndra.

Solyndra Inc.'s announcement Aug. 31 that it plans to file for bankruptcy protection has reignited criticism that government loans and incentives for the renewable-energy industry are bad investments.

Fremont, Calif.-based Solyndra joined a growing list of companies in the solar industry reporting financial struggles. In August Evergreen Solar Inc. and SpectraWatt Inc. filed for bankruptcy protection.

Solyndra's decline has prompted calls for an investigation by Republican House Energy and Commerce Committee members. Republican Reps. Fred Upton of Michigan and Cliff Sterns of Florida are leading an investigation into the administration's handling of the Solyndra loan.

The Energy and Commerce Committee leaders requested in a Sept. 1 letter to the White House all documents related to communications between the White House and Solyndra regarding the loan.

They claim the Obama administration ignored warning signs that Solyndra was struggling while touting the investment as a stimulus-plan success story. The committee leaders also say White House officials were personally involved in approval of Solyndra's loan.

"We have learned from our investigation that White House officials monitored Solyndra's application and communicated with DOE and Office of Management and Budget officials during the course of their review in 2009 and when those officials were restructuring the Solyndra deal this year," said Upton and Stearns in the letter.

The Energy Department defended the loan program in an Aug. 31 article entitled "A Competition Worth Winning."

In the article, the DOE says it has always recognized that not every company receiving the loan guarantees will succeed. But the program has helped fund more than 40 other companies that are on pace to create more than 60,000 jobs.

"Congress recognized the risks inherent in such an effort, and wisely set aside funding to offset any potential defaults or losses," the article states. "That funding made it possible to support such a broad, promising portfolio of investments, and is significantly greater than the amount that the government stands to lose on this transaction. While we are disappointed by this outcome, we continue to believe the clean energy jobs race is one that America can, must and will win."

Tempe, Ariz.-based First Solar Inc. is among the successful solar-power suppliers that has received federal loan guarantees. In March, First Solar said the loan guarantee program was a key contributor to its planned construction of its second U.S. solar module plant in Mesa, Ariz.

"First Solar definitely supports government incentives to help build demand for renewable energy and programs, such as the Department of Energy's loan guarantee program for solar projects that First Solar participates in, as well as state programs such as the California's Renewable Portfolio Standard," said First Solar spokesman Alan Bernheimer.

The program provides a "government backstop if any of these large projects were to default," Bernheimer says.

"There's little cost to taxpayers in this because projects aren't going to default," Bernheimer says. "They have very solid income streams that stretch 20 to 25 years selling power to the utility. So it's a very safe investment."

The DOE article contends that many struggling solar-panel manufacturers have faced pressure from Chinese manufacturers that are supported by interest-free government financing.

Gordon Johnson, an alternative-energy analyst with Axiom Capital Management Inc., told IndustryWeek last month the Evergreen bankruptcy filing is the "tip of the iceberg for the solar market.

He noted that companies are struggling with a supply glut created over the past two to three years when subsidies in key European markets, namely Germany and Italy, drove demand. The European countries have begun rolling back these subsidies, known as feed-in tariffs, significantly reducing demand and creating excess supplies.

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