The Breakdown

Explaining Southern California's economy

Amonix: More woes for government-supported solar startups

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43354 full

Solyndra, a solar startup that went bankrupt last year, has become a poster child for what many conservatives think is a failed effort by the Obama Administration to support the U.S. cleantech industry. The story isn't as simple or straightforward as that, but it does bring up the debate anytime another green energy company with government funding gets into trouble.

That's what appears to be happening now with Amonix, a Seal Beach-based solar company that's been struggling in the tragic aftermath of the death of CEO Brian Robertson in a plane crash last year. The startup has laid off workers in California and is now shutting down a manufacturing facility in Las Vegas, according to the company. Some kind of "restructuring" looms, but it's unclear whether that means Chapter 11 bankruptcy or Chapter 7 liquidation. 

The Orange Country Register runs the government numbers:

Amonix received  a total of $9.5 million in federal advanced energy manufacturing tax credits for 269 new clean energy manufacturing jobs at the plant in Nevada and 167 new workers at a facility in Arizona. The U.S. Department of Energy’s Solar America Initiative also gave the company a $15.6 million grant.

Amonix has also gone to the private market for funding. The company raised $25 million in an initial round of private funding followed in April 2010 by $129.4 million in a second private investment round.

Among the investors were Kleiner Perkins Caufield & Byers, MissionPoint Capital Partners, Angeleno Group, PCG Clean Energy & Technology Fund, Vendanta Capital, New Silk Route, The Westly Group, Adams Street Partners, and Goldman Sachs.

Around $6 million of the $9.5 million in tax credits were tied to the Las Vegas operation, but its was never realized, according to the company, because Amonix never created enough revenue to have to pay taxes. The $15.6-million grant is another story. But it was a grant, not a loan guarantee. Solyndra received a $535-million loan guarantee from the DOE, which means that the federal government was on the hook for loans that Solyndra defaulted on. Amonix got a much smaller grant, effectively money provided directly to the company.

In the case of Solyndra, the DOE was acting (I've argued) as a "super venture capitalist," attempting to create an entire sub-industry in thin-film solar, a technology that would have been very different from traditional solar panel manufacturing, which has been turned into a commodity business by the Chinese. Here's my take:

The more you look at the way that the DOE is investing in solar, there more you realize that the government strategy has been to incubate a very high-tech, commercial- and utility scale thin-solar sub-industry that will leverage innovation, rather than be exposed to the inexpensive solar-panel market that the the Chinese have developed. China's panels could be competitive with…other silicon-based solar panels. But the energy that's produced by silicon-based panels aren't competitive on price with non-renewable energy, especially coal, which I actually think is literally cheaper than dirt when you figure in the value of some tracts of real estate in the U.S. 

Thin-film, on the other hand, promises a substantial over-the-horizon payoff. So the government isn't looking at the risk of losing money on some of the companies it dispenses loan guarantees to — it's looking at the risk of not supporting the alternative-energy industry through the middle of the decade.

For Amonix, the idea was similar, but executed at a smaller scale: the company had developed a technology that enabled more energy to be generated per acre of solar panels than with conventional solar panels. But unlike Solyndra, which was optimized to provide solar panels for the rooftop market, providing power for manufacturing facilities and warehouses, Amonix was trying to get its technology to "utility scale," installing panels with generators that have obtained power-purchase agreement from utilties.

What you want to notice about Amonix's funding is that private investors were providing far more capital than the DOE. And the second round raised was a lot higher than the first, suggesting that there was private-investor confidence that Amonix's technology would start finding its way into regional power generating facilities that sell solar-generated electricity to utilities.

But the thing that brought Amonix down might be unusual for solar startups. A major problem is the ability to scale the business: you need to occupy a big enough chunk of the market to make the math work. Amonix may have gotten there too fast, a factor that RenewableEnergyWorld.com notes. Solyndra was also going for scale and may have simply ramped up production before the market was in place. Both companies, with their disruptive non-traditional technologies, also reportedly suffered technical troubles before the financial woes set in.

The lesson is clear: Trying to reinvent the solar panel doesn't come without considerable risks.

Follow Matthew DeBord and the DeBord Report on Twitter. And ask Matt questions at Quora.

 

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