Solyndra and the future of solar power

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Of all the currently viable clean energy solutions, solar power makes the most sense. Unlike hydroelectric dams, solar plants don't disrupt the flow of rivers and uproot ecosystems and can be located safely in urban areas (some types of plants do use a lot of water). Nuclear power is efficient but mining uranium is a dirty business , while the challenges of making the plants 100 percent safe and storing the waste have not yet been solved (the worst solar radiation has ever done is give people sunburns). Wind power is even more expensive and more variable than solar, while natural gas , often listed alongside these technologies because it burns cleaner than coal and oil , is dangerous and dirty to extract.

For advocates of green energy, the last few months have been disastrous. Solyndra, one of the larger and more prominent solar companies in the U.S., went bankrupt and shut down at the end of August after receiving a federally guaranteed $528 million loan from the Department of Energy. In 2009, many in the administration hailed the deal as a major victory for solar power and U.S. energy independence. Steven Chu, the Secretary of Energy, said at the 2009 groundbreaking  ceremony that the department was "moving with unprecedented speed to help create new jobs that can't be outsourced and to help America's most promising companies grow."

Conservatives, along with the oil and coal industry, have seized on the federal loan and Solyndra's failure as a perfect political weakpoint, allowing them to slam both green energy and a Democratic administration for crony capitalism. Certainly, the deal looks bad politically and didn't do the U.S. taxpayers' balance sheet any favors.

Consider, though, the cost of the Iraq war: $800 billion thus far, but north of $4 trillion in the long term, according to the Christian Science Monitor , which is more than World War II. Iraqi oil production, meanwhile, rose to 2.6 million barrels per day in the last year, says CNN . That comes out to approximately $95 billion annually at current oil prices of $100/barrel - so if every cent of that oil money was somehow applied to U.S. finances (hint: it's not) it would be paid down in....42 years.

That might be a (slightly) facetious calculation, but it puts some perspective on the Solyndra deal. It's been a bad year for solar companies in general, as plummeting solar panel prices battered major producers. The biggest and most stable publicly-traded U.S. solar firm, First Solar ( FSLR ), is down 66 percent on the year and 75 percent down from February highs of $165 per share . Similarly, China's Trina Solar ( TSL ) lost 70 percent of its share value from January and JA Solar ( JASO ) is down 80 percent to just $1.63 per share.

Solar companies crashed because panel prices plummeted - and those fell largely because cash-strapped governments pulled support for the technology , both in terms of consumer rebates and funding for major installations. Manufacturing photovoltaic panels is a major, capital -intensive process, and companies simply overproduced and then watched as the bottom fell out of the market. In addition, China exerts an outsize effect on the sector , as its leadership looks to dominate clean energy industries in the long-term , post-petroleum future. The Chinese government is perfectly willing and able to pour large sums of money into solar panel and wind turbine manufacturing, knowing that what it loses in the short term may well get clawed back when oil becomes terribly scarce.

Combined with a weak housing market (it's tough to put solar panels on a rental), all these factors torpedoed a promising market. Lending Solyndra $500 million was probably a dumb idea (I'd have given it to First Solar, which was better at containing production costs and has a more promising technology). But it was the right kind of dumb idea, and China's willingness to back their own solar manufacturing titans will almost certainly pay off in the long game.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: News Headlines , Economy , Technology

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Daniel Pereira


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