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Solar Power Business Model Unsustainable

By: Ben Howe (Diary)  |  September 1st, 2011 at 02:34 PM  | 

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The Obama administration has been trying to foist green industry on uninterested Americans since he first stepped in to office three years ago.  So far, the efforts have been less than successful.  The Chevy Volt has miserable sales, wind-power has proven to be something less than a viable alternative, and now it appears that reality is catching up with solar power as well.

Solyndra is a solar panel maker that was propped up by the administration having been awarded over half a billion dollars in loan guarantees.  Now, the company is going under and taking all that money and 1,100 employees jobs with it.

Solyndra, a California solar panel maker, had long been an administration favorite. Over the past two years, President Obama and Energy Secretary Steven Chu each had made congratulatory visits to the company’s Silicon Valley headquarters.

The RNC has released a video that documents the rhetoric and the reality that has surrounded this big government test case:

The reasons for it’s failure are simple enough.  Consumers simply haven’t expressed an interest in paying the exorbitant fees associated with upgrading to solar, even with the massive subsidies that are available.

But solar industry analyst Peter Lynch said that Solyndra struggled from the beginning with an imbalanced financial model. “You make something in a factory and it costs $6, you sell it for $3, but you really, really need to sell it for $1.50 to be competitive,” Lynch said of Solyndra. “It was an insane business model. The numbers just don’t work, and they never did.”

It’s pretty clear that President Obama knew that this was the case judging by how much effort he has put into shutting down the coal industry in hopes that American’s would have no other alternative but to fulfill his dreams of green industry and carbon trading.

I take no joy in a company going under, much less the loss of income for those 1,100 people that worked there.  As the real estate sector continues to struggle, banks that had received TARP are in danger of financial meltdown, publicly financed cars sit on the showroom floor with no buyers, and government guaranteed corporations with unsustainable business models go under – is it perhaps time to consider that whether it’s TARP, auto bailouts or stimulus loans, the market is much better at picking winners and losers than Barack Obama or George W. Bush?


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COMMENTS

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  • keysconservative

    In order to help American businesses I suggest Obama go on a worldwide tour of foreign businesses.

    • http://www4.webng.com/rickbull/lostlucky/ rickbull

      something on the order of about 16 months . . .

      • rattlerjake

        Or off of a building.

    • williamjameson

      to all the Asian Tiger countries, that would create jobs at home.

  • http://docweasel.wordpress.com docweasel

    I think you mean “foist” not “hoist”, but Obama may be hoist by his own petard, as the failures of the green lobby help sink his reelection.

    • apex_phil

      would be a “foist”. Haha. I’ll be here all week.

    • Ben Howe

      Good call.

    • msherf

      “hurt, ruined, or destroyed by the very device or plot one had intended for another.” However, Obama and his friends at Solyndra SHOULD be investigated. Why is it that a major investor in Solyndra was also a “bundler” of campaign contributions for Obama’s election, that the Office of Management and Budget did NOT approve the loan of more than 1/2 billion of our dollars (the business model/plan was deemed inadequate), yet the money was loaned anyway due to WH pressure? Add to that the $75 million that Solyndra borrowed last spring – guaranteed by the Department of Energy that those banks would be repaid first, pretty much leaving us, the taxpayers holding the worthless 1/2 billion dollar note. Why isn’t this theft of taxpayer dollars being investigated by the DOJ? Oh, wait . . . hmmm . . . Eric Holder probably will help it go away kind of like what’s happening with the “Fast and Furious” debacle.

  • Michael Dugas

    The economic lives of 1100 people disrupted during tough economic times. All of it criminally un-necessary and it was the abuse of our common federal wallet to fund a personal political agenda and a very expensive photo op for his like minded minions.

    • davesinsanantonio

      THROWN away!

      • Michael Dugas

        I believe they used this business to redistribute our money to their buddies and expected the business to close. They gave that money away.

  • renl57

    In the GOP video, did you notice that clueless female reporter who said “Solyndra started off strong in 2009, when it got half a billion dollars in Federal stimulus money.”

    Evidently to the liberal media, a business “starts off strong” when it gets a politically motivated handout from the Government. Now that’s the liberal way of doing business.

    • http://www4.webng.com/rickbull/lostlucky/ rickbull

      and I’ll start off stronger than an outhouse on an August day.

  • reaganbuckley

    Compared to the money we spent bailing out banks for poor investment decisions. We don’t talk about that much anymore. If we’re gonna throw away money would prefer it be real manufacturing products than to have the American taxpayer buy crappy manufactured exotic derivative products.

    • Scope

      some solar.

    • mspector

      n/t

  • fmaidment

    …couldn’t make money on its own. The problem is that the people building these “green companies” want to build a business that saves the world instead of one that makes money. And they always want to build it BIG right away when the market is obviously so very small.

    Businesses that get this kind of boost from government never have to through the growing pains that make effective, smart, lean businesses. Government programs like this are a model for failure.

    • acat

      to squeeze 1% more efficiency out of the water pump for the SHO Taurus. Okay, it’s an old story.

      He had a lot of advantages over the guy who’d designed the pump in the first place, better CAD, better materials science, faster computer modeling…

      He found a way to squeeze 5% more efficiency out of it. Doesn’t sound like much, does it? Water pump on a car, 5% more efficient.

      Ford ran with the new pump, they put it into not just the SHO Taurus, but every Taurus and several other models. That 5% got multiplied across most of the Ford line that year, and the next, and so on.

      So, while the water pump saving 5% isn’t much, it’s likely not even another full mile per gallon, if you look at all the gallons that went into all the Fords since the SHO Taurus came out … that’s a LOT of savings.

      Doing “green” that way makes sense, but isn’t sexy.

      Which is too bad, because there are a lot of very good ideas, a lot of 5% ideas out there that don’t happen, because they’d better fit a big corp than a startup.

      Mew

    • easyb

      …poorly executed. What they invented was cylindrical thin-film solar tubes, racked together like a lounge chair. Very little wind uplift, so they don’t need to be bolted down, just ballasted and tied together. It’s an entirely different thing than traditional crystalline silicon modules that you see on houses.

      The problem is that they built an elaborate factory in Silicon Valley, using some of the most expensive construction labor to build on some of the most expensive real estate, then to be run by some of the most expensive labor in the country. They might have had a spitting chance in Texas, and probably would have succeeded if they built in China.

      It’s more a story of a bad business plan in a state that is un-friendly to business. Many in the industry are predicting Solyndra will be bought for pennies on the dollar (OUR dollar, unfortunately), and the idea will be run with overseas. Sad state of manufacturing in the U.S., green tech or otherwise.

      • http://www.gmsplace.com/ civil truth

        Obama (and Congress who enabled it) took money from the citizens of our country and redistributed to curry favors with a political friendly neighborhood, in the process stranding the investment by insulating it from market discipline, until the whole project fell of its own weight.

        Once again, demonstrating that government is the worse enemy of alternative energy.

        Had this endeavor been subject to the brutal realities of the market, they would have had to come up with a viable model. Instead, the intellectual capital paid for by our dollars will go elsewhere. More capital fligth.

        • acat

          Manufacturing would have been done in or near Huntsville, AL – good rail and road access, lots of techie labor, struggling economy so existing sufficiently-high-tech spaces are for lease cheap…

          The question I have to ask, though, is who said “build in the valley” or “hire these contractors” or “hire these employees” … ? More bluntly, was the problem the management, or the political influence?

          Mew

          • http://www.gmsplace.com/ civil truth

            and aligned yourself with venture capital to develop and execute a viable plan. And part of that would have been to locate a manufacturing facility in an area like Huntsville rather than Fremont.

          • acat

            And yes, private sector.

            It sorta turns the danegeld idea on its’ head, but .. once you take the government money, they own you.

            Mew

          • gunslingr45

            but he also would have not given to Obumber’s pockets err campaign so there is more money saved!

        • easyb

          Instead of building a good product at a viable price, they built a good product that was drastically overpriced. Their sales guys were reduced to bullying us into lowering our install labor costs to ridiculous levels. They were making the modules at $6/watt, and selling them at $3 or $3.50, and it was still not competitive with traditional modules.

          Our response to them was to stuff it. No reason for us to take a hit on margin just so they could stay in business long enough to get another injection of Obama-money.

    • mspector

      “Green” is touted as the future of our economy. Obama directs “investment” of “stimulus” funds in companies like Solyndra to show that immediate success on a large scale is possible. That’s sexy. Until it fails, of course. Then it’s an embarrassment Obama can only hope people won’t notice.

      The Ford initiative discussed here is not big, not immediate, not sexy, not worth this kind of government “investment.” But it’s how real business is done.

      • acat

        The Green CEOs are just proving the same thing.

        Obama sure looks like proof that rock stars make bad presidents too.

        Maybe they should stick to being, you know, *rock stars* ?

        Mew

  • Jack_Savage

    1) There was once a significant government subsidy given to an individual to develop something that the government deemed important. Samuel Langley contributed greatly to the field of aviation but said he needed more money and time to complete his work. The Wright Brothers went ahead and finished the job working out of a bicycle shop.

    2) Commercial and residential buildings use 40% of the energy in this country. There is ample HVAC, lighting and building envelope technology readily available to reduce energy consumption significantly. It, like the Prius, did not require a dime of government subsidy, and it, like the Prius, actually works.

    Obama is an idiot, and the Treasury has become his little money-laundering slush fund.

  • popster

    for “throwing good money after bad”. Just give out the money without looking at possible unintended side effects.

  • fashinefa

    These things are now more and more applications are wide. After the age will be their master.
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    • gunslingr45

      SPAM HERE SPAM HERE SPAM HERE SPAM HERE SPAM HERE

      • Bill S

        .

  • Wayne

    equivalent to the Tin Men of the 50′s and 60′s. My opinion is based on empirical equivalent to the Tin Men of the 50′s and 60′s. My opinion is based on empirical experience wherein I was duped into believing in this product and bought into it hook line and sinker. But as I began my learning curve to be able to appropriately and accurately represent the technology, the luster and infatuation faded. Gradually, I came to the conclusion I had wasted a year of my life believing in a technology that is not only not economically viable when competing against cheap oil and coal, it is morally and ethically wrong to promote it as such.

    The idealogical rationale required to support this technology requires such a leap of faith that the only possibly one would be the idea that “global warming” is a reality. So, naturally, I began my “layman’s” educational journey searching for any reason to save the time, money and resources I had devoted to the “start-up” division in my company. That was the nail on the coffin to all things “solar” in my mind.

    After having done my homework and reached my own conclusions, I refuse to discuss the use of solar power as a “replacement energy source” with anyone. It is so mind numbingly stupid, I transform into blithering idiot when I think how much time and energy (no pun intended) I wasted trying to “think out of the box” as my company faltered when the recession began and selected “renewable energy” as the solution to “save” my company.

    We’re still around, worse for the ware, but doubtful about the future based on the national debt and general stupidity of politicians and the average American educated in the public school system.

    In closing, I acknowledge that I am not a scientist in the traditional definition of the word. However, I am an educated and resourceful individual, determined to support myself without the aid of the government or politicians. My journey may have, resulted in being force to accept just how stupid a educated and resourceful individual can be, when faced with a desperate situation (or willing to surrender their intellect, morals and ethics for the almighty dollar).

    In retrospect, I would have had to swallow my pride, promote a product I didn’t believe in any longer and take advantage of a naive and uninformed public. I couldn’t do it. And, the result has been returning to my original profession, hoping that someday, I will have the standard of living I once enjoyed without having to be a liar and a thief. Which is what I equate salesman of solar power to be.

    I think this rant is long enough? but I had to post my experience for the benefit of anyone that might take the time to actually read it.

    • easyb

      I’m a solar salesman in California. The Tin Men guys are still out there. They went from siding to windows to solar now. Big pressure, “this deal is only good today,” kind of stuff. Not everyone out there is like that though.

      In territories like PG&E in the Bay Area, and SCE down south, electrical rates are high enough that solar pencils out. Most people in my region are getting ROI’s in the 10 to 15% range (rate of return on cash invested, first year). Net investment back in 5 to 7 years. Then they’re making their own power for a long time to come. I think it makes sense in those circumstances. (Of course, these numbers are how they are due to the tax credit. Still, it’s not my fault the government is dumb)

      In the case of large solar farms, municipal ARRA solar projects, etc., I think solar is a big mistake. For people with very small utility bills, I tell them it’s not worth their while.

      I offer real pricing, no sales gimmicks or pressure. If it makes sense to a person for their house, then we do business. If it doesn’t, then we don’t. As things are, I’m feeding my family. Not getting rich, but getting by in a bad economy. I don’t think I could correctly be categorized as a liar and a thief.

      • Wayne

        and, my words about being a lier and thief were not intended as an insult to solar salesmen in general. One would have to have developed the understand that I have in order to see themselves as a lier and thief. The comment was specifically directed to me and no one else. But… it is telling that you feel the need to defend your profession.

        Everyone has a right to make a living and the consumer must assume some responsibility before signing any agreements. My best wishes for you, your family and your future.

        • easyb

          Everyone in every industry has antagonists or opponents. Is it telling when folks in oil or natural gas defend their industry?

          Correct me if I’m wrong, but I get the general feel from your posts that you feel that solar is completely worthless in all cases, and that anyone who installs it is naive and uninformed. I disagree, and think it warrants at least my explanation.

          Most of my clients are Silicon Valley engineers or Livermore Lab employees. They know full well what they’re doing. If their average cost per kilowatt-hour is more than the average cost per kwh of solar production, then it makes sense for them. They’ll spend less money with solar than they will by continuing to pay the utility company. This scenario happens to be true in my region, because PG&E is one of the most expensive utilities in the country. People with large houses here can be spending up to $.34 per kwh here. In neighboring utilities, prices are as low as $.11 or $.12. In those cases, I recommend to people that they don’t go solar.

          What part of the country are you in? I’d be interested to hear more about the experience you had in your company.

  • rattlerjake

    The government gave over 50 million to a company to start an ethanol plant here and the onl;y stipulation was to get it up and running. They built it, ran ONE batch and then closed, and took the money and ran. We need to go back to town lynchings. These people are crooks and need to be removed from our society permanently!!!!!!!

    • acat

      Mew