Either way, policymakers should be careful not to besmirch the
entire concept of clean energy subsidies because of this one bad
The DOE's loan guarantee
program is the most important of the government's clean energy subsidies. It was the centerpiece of Title
XVII of the Energy Policy Act of 2005. This was the section of the bill
devoted to creating incentives for new technologies that reduced greenhouse gas
emissions. It was offered as an amendment in the Senate, supported
by both Republicans and Democrats, as the consensus method for mitigating
climate change. The argument at the time, put forth by Republican senators like
Chuck Hagel and Pete Domenici, was that we should fight climate change by investing in new technology, not by government mandates or a carbon price.
shows how far the debate on climate has fallen that these arguments -- and
voices -- are seldom heard anymore. Whereas six years ago it was a question of "how"
government policy should address climate change and support the development of clean
technology, today those who question the science dominate the climate debate in
Congress. That means that the question has become "if" the government should create incentives for clean technology or not.
In this new context, the argument has taken hold that any spending and subsidies for clean energy are a "boondoggle"
or just throwing
money down a rathole. There is a real danger that the short
cuts that may have been taken on the Solyndra loan will poison this important
The solar industry is in a period of rapid flux right now. It
is seeing drastically reduced prices; they have dropped
from about $2 per watt in 2009 to about $1.40 today and are moving toward $1
per watt in 2012. This rapid drop
in prices will soon make installing new solar competitive with traditional
electricity generation, like coal or natural gas. Firms such Solyndra, whose
business models required a high price, will have a hard time staying in business
under such intense competition.
An important comparison for the solar industry today is the
auto industry a century ago. Have you ever heard of the Lexington Motor Company,
the Kissel Kar,
or the Liberty Motor Car?
These were all auto manufactures that ceased to exist over the course of the
Ford Model T's 19-year production run, between 1908 through 1927. They went
bankrupt because they could not compete on price, quality, or capacity with the
standard set by the Model T. You may, however, have heard of Pontiac, Cadillac,
Oldsmobile, and Chevrolet -- they were all independent companies that were acquired by
General Motors in this period. As an industry matures, we should expect to see
a shakeout through bankruptcies and mergers that leads to fewer, but bigger and
Today, we are seeing this consolidation in the solar
industry. The U.S. Solar Energy Industries Association
lists over 1000 member companies in the U.S. Around the world there are
thousands more. That is surely far too many for an efficient industry. Already,
the solar equipment industry has seen $3.3
billion in mergers and acquisitions activity this year. Solyndra is the
most high-profile American solar bankruptcy this year, but not the only one: Evergreen
Solar and SpectraWatt
have also filed for bankruptcy this year.