Finally, a Clear Explanation on the Solyndra Loan

The Wall Street Journal has an excellent article today explaining exactly what Solyndra made, and what it did with the federal loan of $535 million.  The title of the article – – "The Loan Was Solyndra's Undoing" – – does not seem quite accurate.  According to the article, Solyndra was in difficulty before the loan, but use the proceeds of the loan to quintuple its manufacturing capacity,  This decision drove it over the cliff.

According to the article, Solyndra used a module of cylindrical tubes to manufacture solar power, while other manufacturers use photovoltaic silicon panels. Solyndra's problem was that its process produced much higher costs than the competing system. Solyndra's tubes cost $4.00 per watt of power to produce, while it could only sell each watt for $3.24.  At the same time, its Chinese competitors were producing silicon panels at less than a quarter of Solyndra's costs, and today produce panels at $.75 per watt.

Solyndra had a plant with an annual capacity of 110 MW, but actually produced only 65 MW in 2010.  However, it used the loan to build a new factory capable of producing 500 MW per year.  It could never make use of the additional capacity because it was simply not competitive with the makers of solar panels.  At least, the company has some physical assets – the factory – that can be sold in bankruptcy, and the government may ultimately get some of its money back.

The Wall Street Journal has another article today reporting that as recently as May, 2011, the company told the government that it was financially healthy.  It also reports the government's excuse for the company's failure – the Department of Energy says that the Chinese suddenly flooded the market with lower cost solar panels.  Based on the other article, this appears to be nonsense.  Solyndra made a different type of solar product, that was higher cost than the Chinese to start with, and there was no way it could match later price reductions.  It's problems were much more fundamental than sudden Chinese competition.