Explaining Southern California's economy

Solyndragate: Picking winners will always be risky business

There's now pretty much a frenzy of Monday-morning quarterbacking going on with the Solyndra controversy. It boils down to essentially two core positions:

  • Solyndra was too risky a bet for the DOE to pony up a $535-million loan guarantee. The Atlantic's Megan McArdle has been grappling with this one, in strenuous detail, while somewhat evading the question of whether Solyndra needed to spend as much money as possible in a short period of time, to both achieve economies of scale and outrun a collapse in the price of silicon (Solyndra's solar panels didn't use this material).
  • Solyndra was a risky bet, but in the face of $30 billion in Chinese solar investment, the U.S. needs to leverage its innovation advantage to capture its share of the solar market. The government needs to subsidiize some of the risks and be willing tolerate failure in and effort to build up a new Green energy sector. I'm on this side, as is Wired's Jonah Lehrer and the New York Times' Joe Nocera. 

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Solyndragate: The problem with solar isn't growth, it's scale

At KPCC's Pacific Swell blog, my colleague Molly Peterson has a snappy take on the aftershocks of Solyndragate: SolarCity isn't likely to get a $274-million DOE loan guarantee is was counting on to install solar panels at more than 100 U.S. military bases.

In the post, she refers to a memo that was sent out by the Sierra Club, supporting the solar industry. Here's a taste:

Earlier this week, The Solar Foundation, in partnership with GreenLMI and Cornell University, released its National Solar Jobs Census 2011.  The Census reported incredibly impressive growth in the solar industry – nearly 7% from August 2010 to August 2011.  The solar industry’s growth is even more impressive when compared with the fossil fuel energy industry, which shrank by 2%. 

No one disputes that the solar business is growing. But as Solyndra found out, growth isn't always enough. You also need scale. Because without scale, you're going to have much more trouble attracting high levels of outside investment — enough to match the many billions that governments like China are throwing at their solar industry. And in Solyndra's case, you need to ramp up sales to the point where you can overcome falling prices driven by Chinese manufactures flooding the market with cheap solar panels. 

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Solyndra-gate and the reality of Green investment

I went on KPCC's AirTalk with Larry Mantle this morning to talk about the Solyndra bankruptcy and what's turning into something of a scandal. This was hot on the heels of the Atlantic's Megan McArdle and Reason's Tim Cavanaugh going after not just the politics of this sucker, but also the very notion that the Federal government should be investing in renewable energy in the first place. 

Just for background, Solyndra got a $535 million loan guarantee from the Department of Energy in 2009, four years after it was founded and well into an application process that was initiated under the Bush administration (Grist has the blow-by-blow on all this). Prior the the DOE loan, Solyndra had raised venture funding; after the DOE loan, it raised even more, eventually amounting to $1 billion. Post-bankruptcy, the Washington Post reported that the White House had been edging the DOE toward an approval, so that Joe Biden and DOE head Stephen Chu could schedule appearances. And just to make things extra juicy, a big Obama supporter and "bundler" of campaign donations, George Kaiser, has a venture fund that was heavy into Solyndra.

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