There have been two relatively recent, major newsmaking events in the solar industry. The most recent is that it looks like we are going to put Tariffs on China for dumping (selling below their cost) Photovoltaic (PV) cells on the market. The second is the collapse of Solyndra. But the collapse of Solyndra was not an isolated incident, it clustered with the bankruptcy of Evergreen Solar and 10 other US solar manufacturers. So really Solyndra was the poster child for the collapse of the US solar manufacturing industry and the real story is that the Chinese are in the process of a hostile takeover of yet another strategically important industry.
“The moral of the Solyndra story is not that the government spends too much on solar, it is that we do not spend enough!”
The Chinese execution has been flawless and our predictable political bickering has allowed them to do it with nothing more than the upcoming slap on the wrist of “manageable tariffs.” The news media has failed us by framing the Solyndra story as one of the government picking winners and losers. The real story was that the Chinese were outspending us on development of solar manufacturing 10 – 1 in order to take over that industry. Solyndra is their trophy. The moral of the Solyndra story is not that the government spends too much on solar, it is that we do not spend enough!
The United States has a long history of subsidizing strategic infrastructure industries. From rail to agriculture to banking. In fact it is a challenge to find and infrastructure industry that has not been subsidized. The idea that subsidies are a partisan issue is a fiction as evidenced by the fact that the Bush administration did not eliminate the huge and counterproductive corn ethanol subsidies or the obsolete oil industry subsidies when the republicans had control of both the house and senate.
So if we want to remain players in the soon to be more than $100 billion solar industry, we will need to meet the Chinese head on and subsidize the solar manufacturing industry. And by allowing the likes of Solyndra, Evergreen Solar, ECD and others to collapse rather than supporting them to scale, we have left ourselves with a lot of ground to make up.
Lets start by looking at how easy it was for the Chinese to do what they did. It is well known in solar circles that for every doubling of cumulative production of solar modules, the cost to produce them drops by about 17% when using the same technology. This is based on simple industrial engineering 101 learning curve theory. In fact I predicted $1.00 / Watt PV a decade ago using this approach. This trend had been consistent for decades so the Chinese could calculate exactly how much manufacturing subsidy was require to not only knock out the US silicon solar cell industry but also knock First Solar’s thin film module production on its economic ass. Due to collapsing margins their stock price has plummeted from about $170 a year ago to $13 today – there were few who would have dared predict this as recently as 2 years ago.
The Chinese couldn’t do it with new technology because that would require innovation which they aren’t so good at. So they did it the brute force way. Traditionally, the US has had the philosophy that it would nurture strategic industries and they were successful with subsidies, grants and research partnerships that facilitated the emergence of FIRST Solar for example and a number of other renewable energy success stories. And in fact, Solyndra was getting pretty positive reviews in the solar industry as was Evergreen and FIRST was hugely successful and in fact they were looking like a disruptive technology. They developed thin film, low efficiency modules that are the low cost leader. At the high end another US company Sunpower held on and produces the highest quality, and at 21 1/2%, highest efficiency modules available. Both Sunpower and First are Gigawatt scale manufacturers and are the only two US companies in the top 10 PV module manufacturers.
To get in the game, the Chinese took the lowest risk, but probably highest cost, brute force path. They poured huge dollars into traditional silicon solar cells and moved rapidly down the learning curve. Their subsidies acted like nitrogen flowing into the solar pond. It created the silicon algae bloom that choked off all innovation that may have led to technologies that would be better in the long term. And left only silicon solar cells as the long term approach to solar energy.
The failure in the US is that we are unable to identify and agree on two things. 1) that Solar is a strategic industry that we must keep by out-competing the Chinese, and 2) that to do that the government needs to be involved and to spend comparably. However we could and should play to our strength and develop the innovative path. Many technologies such as Dish Stirling engines (which were on the cusp of commercialization with huge orders from SCE), and solar concentrators. Some may still be in the game but they will need help given the artificial acceleration silicon has received. They likely would be less expensive in the long run but they need support to get down their learning curve. And at this point that support would have to be for deployment as well as development.
Developing technically better approaches to solar energy is in danger of not happening as all are pointing to the failure of government funded Solyndra as proof that government shouldn’t be involved. But there is another conclusion that can be drawn. It is that government funding of the Chinese solar companies has very nearly won them an entire industry and they are just watching us fade in the rear view mirror. The best hope of catching up is a commitment to developing this industry and strategically implementing government support of the development of paradigm shifting solar technologies.
Here is a well written piece that details the situation.