Thursday, May 2, 2013

Solyndra Sues Chinese Solar Makers: Entire Nonsense

Solyndra has decided to try and sue several of the Chinese solar panel makers over the bankruptcy of the firm. This is entirely stuff and nonsense: Solyndra’s bankruptcy came as a result of a technological choice they made, not as a result of any subsidies to any other manufacturers.

Solyndra LLC, the bankrupt solar- panel maker that received a $535 million U.S. government loan guarantee, accused Suntech Power Holdings Co. (STP) and other Chinese panel makers of driving it out of business by running an illegal cartel.

Solyndra, which filed for bankruptcy protection in August 2011, is seeking compensation “for the loss of the $1.5 billion value of its business and more which defendants destroyed,” according to a complaint filed yesterday in federal court in San Francisco.

The defendants schemed with each other, raw material suppliers and certain lenders to flood the U.S. market with solar panels at below-cost prices, the Fremont, California-based company said in the complaint. Panel prices for Wuxi, China- based Suntech, the biggest solar-panel maker, and two other companies moved in tandem, falling 75 percent in four years in the U.S. market, Solyndra said.
It’s possible that there was such scheming. It’s also possible that Chinese panel and cell makers were subsidised by hyte Chinese Government. As was Solyndra subsidised by the US one. But even if these things did occur they were not the cause of Solyndra’s bankruptcy. That was caused by the technological option they had taken.

Please do note, I’m not about to claim that Solyndra were wrong to make the choice that they did, nor that they made a mistake. Not in the sense that it was obviously wrong or a mistake when that choice was made. Rather that circumstances out of their control meant, over time, that it became a mistake. Prediction, especially about the future, is after all quite famously difficult.

The basic design choice people faced with solar cells a few years back was quite simple. Silicon, the basic raw material from which the cells are made, was expensive. $450 per kg is a reasonable enough estimate of the price back then. There are therefore two possible routes you can take. One is to either make such silicon more efficient in use or to economise on the amount of silicon used. These two are really the same option: using less to get the same power output is the same as making the silicon more efficient. The other is to look at ways of lowering the cost of the silicon.

Solyndra used the first of those two possible technological paths. Their tubular design was aimed at optimising the efficiency of the silicon that was being used. A reasonable enough choice at one time. Except for the fact that others decided to pursue the other route. Silicon ingot, from which you can slice off the wafers to make solar cells, has become much cheaper. New fabrication methods were developed and the supply shortage vanished. Essentially, the solar industry used to exist on the cast offs from the computer industry. Then people started making the ingot in the purity and quantities that solar required. As a result prices fell through the floor: to perhaps in the $30 to $40 a kg range today.

I’m afraid that if your business plan, your technological decision, is to optimise the efficiency of an expensive input, then that input falls in price by 90%, well, I’m afraid that while you didn’t actually make a mistake, one that people can blame you for, it does turn out that you have been mistaken. And you’re highly likely to go bust. By analogy, imagine that you decided to build small engined cars because you predicted that gasoline was going to get ever more expensive. Then gas falls to 50 cents a gallon. Your small engine decision isn’t likely to make you much money as everyone goes out and buys the 6 litre V8s.

I do of course wish everyone luck in the upcoming litigation: but Solyndra was pretty obviously going to go down from the moment that silicon ingot prices started to fall.


No comments: