The Real Reason Solyndra & Evergreen Solar Failed

Politicians love to point fingers at the other guy when something fails even if it has nothing to do with the real reasons behind the failure or collapse.  The whole ordeal around the Solyndra Scandal and the finger pointing has me outraged, but I’ve already written about that in Fact Checking Political Campaigns – Solar Company Loans.  Instead, I want to get out of the politics and discuss the real reason Solyndra failed, and for that matter, what happened with Massachusetts based Evergreen Solar.

Solyndra failed because the price of silicon plunged more than 90% in less than 3 years.

Both Evergreen Solar and Solyndra’s competitive advantage came from technologies that reduced the amount of silicon used to make their solar panels. At the time, the raw material cost of silicon accounted for about 45% of the final cost of the solar panels.

Photo courtesy Evergreen Solar

Evergreen Solar did this with MIT Professor Emanuel M. Sachs’ String Ribbon process.

Reducing the cost of solar power requires slashing the cost of manufacturing the silicon wafers on which solar cells are built. A technique first proposed in the 1980s by Professor Emanuel M. Sachs of mechanical engineering is doing just that by doubling the number of wafers made per pound of expensive silicon.
According to Sachs, if photovoltaic (PV) solar power is to compete economically with conventional power sources, the total cost of manufacturing PV systems must drop by a factor of three or more. Making silicon wafers currently accounts for 45 percent of that total cost.
From MIT Energy Initiative Article: Building Solar Cells from Ribbons 2/7/2007

Solyndra’s approach was to use a different PV material, namely copper indium gallium diselenide (CIGS) which they could apply in a thin film using significantly less material and no silicon.

Photo from Solyndra

Both approaches were great and worthy of investment at the time.  I even invested my own money in Evergreen Solar after several presentations to alumni by Professor Sachs.  Unfortunately, I hoped Evergreen would pull it out and lost most of my investment.

According to Bloomberg News, the price of PV Grade Silicon was $475 per kilogram and with the growing solar markets there was more demand than supply.  Unfortunately for Solyndra and Evergreen Solar, supply ramped up faster than anticipated and exceeded demand causing the commodity price of silicon to drop by 93% in just three years to just $33 per kilogram. Silicon was now just about 5% of the cost of the panel and therefore practically not a factor, thereby removing the competitive edge that both Evergreen Solar and Solyndra had.

The price of silicon has continued to drop and is expected to stay low for a while.  As of May 30, 2012 the price of PV Grade Poly Silicon was $26.50 per kilogram.  With the cost of the raw silicon used in the panels practically vanishing, companies that were based on reducing the amount of silicon in their solar panels like Evergreen Solar and Solyndra just could not compete in the global market.

So, before you go finger pointing at which elected official used tax payers money to stimulate local American job creation by supporting a solar company, be sure you understand what really happened to the market.

Happy Greening!
Jon

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