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Sunday, January 30, 2011

Solynda losing raison d'etre

Solyndra had a terrible 2010: it cancelled its IPO, announced plans to close a factory and cancelled its ambitious hiring goals. Many analysts started asking whether the government would ever get back the $535m in Federally guaranteed loans — over and above the $1b in private capital.

Solyndra was once the poster child for green jobs in the Bay Area, with its factory rising only a few miles from the old GM (later Nummi) plant. Instead, it’s looking like California’s answer to Evergreen Solar — except that Evergreen IPO’d early enough to bail out its VCs.

Will 2011 be any better? Not according to Dana Hull of the Merc, who normally offers an optimistic bent on local cleantech companies. Today’s story on the website says “Fremont's high-flying Solyndra hits a rough patch.” However, as lead business story in the dead tree Sunday paper, the headline is more blunt: “Cloudy future.”

Looking at the story, this is one of those balanced stories where the reporter strained mightily to suggest a possible happy ending. The company has money (for now), a top flight team, and has completed some successful installations. It’s still hoping to make a dent in its niche, commercial rooftops.

As for any PV maker, the challenge is the price: if the commodity PV panels aren’t cheap enough, no one will buy them. This is particularly true for most thin film producers, that hoped their lower manufacturing cost would give them an advantage against the established crystalline silicon.

The problem is, crystalline silicon prices continue to fall — driven by an explosion of capacity and scale economies achieved by Chinese makers. Except for First Solar, thin film makers have been unable to keep up.

The prognosis in Hull’s article is grim:
Many low-cost Chinese manufacturers, which benefit from massive government support, are manufacturing at costs in the $1.10 to $1.20 a watt range. Thin-film leader First Solar, based in Tempe, Ariz., manufactures at 75 cents a watt and aims to be at 53 cents a watt by 2014. Solyndra says its current manufacturing costs are about $3 per watt..

"Our manufacturing cost per watt is coming down every quarter," Harrison said. "By the end of 2012 we should be at the $1.30 to $1.40 per watt range, or $2 a watt if you include installation."

But even if Solyndra hits that goal, analysts such as Jeff Bencik of Kaufman Brothers warn that competitors are similarly racing to drive down their costs -- and have a head start.

"It's a moving hurdle," Bencik said. "It will be really difficult for Solyndra to match (other manufacturers' costs) at this point. I'm not saying they can't do it, but I haven't seen it."
Evergreen took a dramatic step — moving production offshore — but did so too late to save the company. Solyndra is fighting the same commoditization, low cost producers and laws of economics.

So if this article is the hometown paper putting the best face on things, I guess we should expect a major (but unsuccessful) reorg in 2011, and a liquidation or other forced exit within 18 months.

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