Solar Power Bankruptcies Loom as Prices Collapse

This article found on CNN Money about the recent collapse of certain Solar Companies is interesting because of the political ramifications that they have.  We have started to see signs of this due to the Governments presence in financing many of these Solar Companies like Solyndra.  Because of the last few years and the desire to rid ourselves from foreign oil, demand for solar panels soared cause over speculation and excitement about this industry.  Similar to the housing market speculation in this industry looks to have lead to another bursting bubble; and like the housing market when the prices get low enough demand will pick up.  Another issue that this industry needs to take into consideration is all of the other competing energy industries.  If the US decides to drill for oil again someday or harvest more natural gas the desire for solar paneling which is expensive and for the most part have a short life span will be volatile.  These companies that make these huge investments into these speculative companies must maintain a safe level of supply even if the prices of the products are inflated a little.
Solar Energy will always be an important part of our countries energy policies but we should never put all of our efforts as a company in just one industry to try and fix our energy dependence.http://money.cnn.com/2011/11/30/technology/solar_power/index.htm


Thomas said...

The video in the article on another company, SolarReserve, does offer a refreshing alternative business model. SolarReserve also participated in the same government loan program as Solyndra. However, their plans for power facilities that generate electricity throughout the southwest and internationally (even Saudi Arabia) seam solid. Time will tell, but on the surface (pun intended) this investment of our tax dollars could yield some positive returns financially and politically in the long-run. Let’s not declare failure because of one big bad apple in the mix. Go SolarReserve!

Lando said...

I recall SolarReserve receiving government funding just a few weeks or months after Solyndra's bankruptcy. I was dumbfounded at how broken the system must be to guarantee more tax dollars to a company such as SolarReserve right after the Solyndra collapse. However, I have been corrected in my assumptions. After viewing the video (and business model), that Tom discussed on this site, I was impressed. Something rang clear to me. We must be innovative as a country; however, we must be wise with tax dollars, and what they are going toward. For a company such as SolarReserve, I see a lot of benefit because this money is not just going to the company to keep them afloat in a hurting economy. That funding is dedicated to projects (such as the Nevada power production plant), that may payback to us as consumers in the long-run, although not directly. Also, profitability for a company such as this could change in 12 months when we are able to start drilling again.

Dr. Tufte said...

-3 on Gubler Family: 1) for inappropriate capitalization, 2) for poor sentence structure, and 3) for a poorly formatted link.

If I can add a note of seriousness to this topic ... do any of you know of any solar company that is profitable without subsidies? There's a folk theorem in economics about this: if you aren't profitable without subsidies, you're just not profitable.

Owen said...

I don't get why instead of giving these solar companies money, the government doesn't just buy a ton of the solar panels and create solar farms themselves. At least if they did this, they would be able to recoup most of their losses if not all by selling the energy produced.

Dave Tufte said...

Owen: you're missing 1) one of the commas on a subordinate clause, and 2) a question mark. 44/50

There are a bunch of reasons for this.

1) I tend to think that most of us regard a bestower-of-gifts more highly than a customer. So a politician thinks they look better if they give a subsidy.

2) More practically, if they don't subsidize production first, there may not be any solar panels to buy later.

3) Actually establishing the solar farms would require a certain level of expertise. It's not clear that the government actually cares that much.

4) There's a huge urban myth repeated here: that solar panels will pay for themselves. The payback period for a solar panel is in the range of 50-100 years, at current energy prices. Most panels will wear out long before then. Plus ... if you recall your basic finance, payback period is the weakest and most misleading measure of whether a project is a good undertaking. If you used a more accepted method like NPV or IRR, just about no one would buy a solar panel at all.

That last point may be a bit surprising. But, think about it: solar panels have been in use for a long time in situations in which they are cost effective. Typically this is for situations where you need a small amount of power, and where the cost of maintenance may be high. Two situations come to mind: remote lighting like on highways, and calculators where fiddling with tiny batteries is a pain in the neck.