TradeEdge Exchange:Can Solyndra’s Breakthrough Solar Technology Outlive the Company’s Demise?

The TradeEdge Exchangepolitically charged investigation into the collapse of Solyndra, the California solar start-up that received millions of dollars in federal loan guarantees, has overshadowed the innovation underway at the firm’s recently shuttered facility. Now, as Solyndra executives search for a buyer, the fate of their cutting-edge technology remains uncertain. 

Back in 2005, when solar energy was on the brink of today’s boom, Solyndra set out to produce a lower-cost alternative to panels made with crystalline silicon, a century-old photovoltaic (PV) technology that uses polysilicon to produce solar cells and wafers. At the time, polysilicon was scarce and expensive, which meant that solar panel prices were high. So Solyndra invested in a nascent thin-film solar technology called CIGS for the copper, indium, gallium and selenium elements it contains.

Thin-film technologies, which were initially used as small strips on handheld calculators, had been around for a couple of decades, although CIGS was one of the latest players to emerge. Thin-film solar panels are generally less efficient than crystalline silicon panels at converting sunlight to electricity, but they are lighter and easier to install.

What set Solyndra apart from its thin-film peers was the shape of its modules. Instead of using a flat-plated panel, it coated tubes of glass with its CIGS technology and mounted the cylinders to metal frames. When installed on commercial rooftops that were painted white, the tubes could absorb direct and reflected sunlight from 360 degrees. Flat panels receive sunlight only when it shines overhead. 

Solyndra’s cylindrical modules could also be installed faster than flat panels and were highly resistant to wind. Dirt and snow can build up on traditional modules and keep out the sun. But the elements fall through the gaps in Solyndra’s rows of cylinders.

Nicolas Gourvitch, a director at Green Giraffe Energy Bankers in Paris, a financial advisory firm, described Solyndra’s technology as “groundbreaking” and “innovative.”

Shayle Kann, managing director of solar research at GTM Research, said “the hope was that it would drive lower costs” in the overall expense of installing and maintaining a solar system. GTM is a green technology research firm with offices in the United States and Germany.

But Solyndra struggled to realize that vision.

When it closed, it was still improving its thin-film technology, which couldn’t yet convert as much sunlight to electricity as its crystalline silicon competitors. And the racks of cylinders that are so well suited for large, flat industrial rooftops weren’t ideal for homes with angled roofs or for ground installations, which can’t be painted white.

The speed with which Solyndra could install its modules would have had a significant impact on the economics of industrial projects, Gourvitch said, but such projects aren’t yet widespread to create the demand for panels that the company needed.

In the United States, for instance, commercial building owners have little incentive to invest big bucks in solar systems. The solar lease—a financing tool that allows consumers to obtain solar systems by paying only for the electricity they produce, not the installation—is offered primarily to homeowners or small shops. Utilities, which are often required to get a portion of their electricity from clean power, often opt for hundred-megawatt solar farms to reach economies of scale.

Solyndra “tried to compete in today’s market with the product of tomorrow,” Gourvitch said. “They were too ambitious and confident in their capability to attract financing [quickly], their production cost were still too high, and their market still a niche.”

On Aug. 31, Solyndra suspended production at its Fremont facility and laid off some 1,100 employees. It had installed more than 1,000 modules, or 100 megawatts of solar capacity, in Europe and the United States, according to the company’s website, a drop in the bucket compared to the installed capacity of leading solar manufacturers.

Solyndra attributed its financial failure to a global glut of solar panels and a dramatic drop in prices, largely the result of scaled-back incentives programs in Europe and generous manufacturing subsidies in low-wage nations like China.

According to an Associated Press review of Solyndra’s regulatory filings, the firm had already lost hundreds of millions of dollars when the U.S. Department of Energy awarded it a $535 million loan guarantee in 2009. (It eventually received $528 million.) The company was simply spending far more on its technology than it was earning.

Solyndra is now contacting 100 potential buyers in an effort to reopen its eight-month-old factory. Last week it set an Oct. 25 deadline for potential bidders to either take on the entire company or its individual assets, including specialized equipment for module manufacturing and possibly its unique thin-film technology.

But the solar industry has changed so much since Solyndra opened in 2005 that prospective buyers may be wary of taking on such a risky bet.

Global polysilicon supplies—one-quarter of which are made in the United States—have caught up with rising demand, reducing prices from a high of $500 per kilogram in 2008 to about $50 today. That price reduction, combined with a Chinese manufacturing boom, lowered the overall cost of panels by 40 percent this year, making it even more difficult for developing technologies to compete.

“Any buyer would have to believe that they could succeed where Solyndra failed in making the technology cost competitive,” said Kann of GTM Research. “It’s tough to say whether there will be a buyer.

“It is a very difficult landscape right now if you are in the early stages of commercializing a new solar technology … and really trying to ramp up capacity and drive down costs,” he added. “While you do that, your cost structure is going to be higher than you ultimately want it to be.”

While the CIGS solar cells that Solyndra developed still require more research and development to make them cost competitive with their PV peers, another thin-film technology is already poised to compete with crystalline silicon panels.

Since 2002, Tempe, Ariz.-based First Solar has made commercial-scale thin-film solar cells from cadmium and telluride. It currently holds about half of the world’s market for all thin-film technologies and is one of the largest global manufacturers of PV panels. Thin-film technologies now account for about 20 percent of the solar market, according to GTM Research.

First Solar is producing solar panels at 73 cents a watt, the world’s lowest price, thanks to ongoing advancements in its technology and the 24 production lines it operates in Ohio, Germany, Malaysia and Vietnam. Chinese crystalline solar module makers now cost about $1.10 a watt to make, and Solyndra’s cost $2 a watt, according to GTM Research.

First Solar’s panels are flat and can be installed on a variety of surfaces, so they have more potential solar customers than Solyndra’s industrial rooftop panels. The Arizona firm can currently produce a total of 1,500 megawatts of solar panels, and it expects to raise that to 2,300 megawatts by the end of the year. Solyndra, on the other hand, could produce only about 100 megawatts at its single facility in California, a level still too low to achieve economies of scale.

But even established thin-film firms like First Solar have seen their profits take a hit this year from an industry-wide slump. Kann said traditional silicon-based solar manufacturers are also struggling to compete as prices continue to fall.

Marlboro, Mass.-based Evergreen Solar, a leading maker of silicon solar wafers, filed for bankruptcy protection in August, and SpectraWatt, a smaller solar cell maker in New York closed its doors soon after. In early September, SolarWorld, Germany’s second-largest solar firm by sales, shut down production at its solar panel plant in Camarillo, Calif., citing stiff competition abroad and declining demand for its supplies.

“If you don’t have cash … you are ultimately going to be insolvent. Any company that is in that position is in trouble right now,” Kann said.

Clean energy advocates say the loss of less competitive technologies is an inherent risk in any cutting-edge industry and remain optimistic about the future.

“Solyndra was a victim of the success of the industry,” said James Barrett, chief economist of the Clean Economy Development Center, a Washington, D.C.-based nonprofit. “As markets accelerate and change, this kind of stuff happens all the time. There is a huge wave of consolidation and bankruptcies.”