Solyndra

What did it do?

Solyndra was a Fremont-based solar company that made cylindrical panels built from copper indium gallium selenide (CIGS) thin-film cells. The panels were designed for large, flat commercial roofs and, laid horizontally in dense rows, promised to generate more electricity per roof. In 2009 the company received a $535 million federal loan guarantee.

Why did it shut down?

Between 2009 and mid-2011 the price of polysilicon, the key input for rival technologies, fell by around 89 per cent, and Chinese manufacturers' conventional silicon panels became very cheap. Solyndra's custom-designed panels could not compete at those prices; in November 2010 the company consolidated production into a single plant and made layoffs. Fab 2, the new $733 million factory built largely with the federal loan guarantee, became a heavy fixed-cost burden. On 31 August 2011 the company announced it had halted all operations, laid off its 1,100 employees and would file for Chapter 11 bankruptcy.

The story

Fab 2, opened in Fremont in September 2010, was a $733 million, robot-equipped, next-generation solar panel factory. Its construction had drawn on a $535 million federal loan guarantee and at least $198 million from private investors. A year later the factory was silent, and Solyndra was at the centre of one of the most controversial bankruptcies in US history.

Chris Gronet founded the company in May 2005. Solyndra made cylindrical panels built from copper indium gallium selenide (CIGS) thin-film cells; laid horizontally in dense rows on large, flat commercial roofs, with wind able to pass between them, the panels were meant to generate more electricity per roof. Its investors included the George Kaiser Family Foundation, U.S. Venture Partners, CMEA Ventures, Redpoint Ventures and Virgin Green Fund. In 2009 the Obama administration guaranteed a $535 million loan; the company reported revenue of $100 million that year and around $140 million in 2010.

The market, however, turned against it. Between 2009 and mid-2011 the price of polysilicon, the key input for rival technologies, fell by around 89 per cent. Conventional panels from Chinese manufacturers such as Suntech and Yingli became very cheap, and Solyndra's custom design could not compete at those prices. In November 2010 the company consolidated production into a single plant, laid off around 40 employees and did not renew the contracts of 150 temporary workers. On 31 August 2011 it announced it had halted all operations, laid off its 1,100 employees and would file for Chapter 11 bankruptcy.

The bankruptcy quickly became a political row. In September 2011 the FBI searched the company's offices; reports that the company had used inaccurate information that misled the Department of Energy when obtaining the loan guarantee fuelled the controversy. A four-year joint investigation by the Department of Justice and the Department of Energy's Inspector General, however, closed in 2015 without any criminal charges or finding of political corruption. The loan programme lost $528 million on Solyndra; the company later secured settlements totalling around $52.5 million in predatory-pricing lawsuits it brought against Chinese manufacturers.

Solyndra shows the price an ambitious hardware start-up pays for misreading the cost curve. When raw-material prices collapsed, an expensive factory and a custom design stopped being advantages and became burdens.

Lessons for founders

• In hardware, a sharp fall in a raw-material price can make a rival technology cheap overnight; test your cost advantage against different price scenarios.
• Investing in a giant factory before demand is proven creates an immovable fixed cost when the market turns; add capacity in stages.
• Companies that receive public support are closely watched; keep your statements and records ready for independent scrutiny at all times.

Sources

1. Solyndra (Wikipedia)
2. Solar panel firm Solyndra to cease operations (Los Angeles Times, 2011-09-01)
3. FBI searches shuttered Solyndra offices, plant in California (The Washington Post, 2011-09-08)
4. https://www.wikidata.org/wiki/Q3271267
5. Wikipedia (English)

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