Solyndra vs. SunEdison: 2 bankruptcies show how solar has changed

By David Ferris, Saqib Rahim | 04/28/2016 08:26 AM EDT

When solar manufacturer Solyndra went belly up in 2011, it led to a full-blown Washington scandal, with congressional hearings and accusations of White House wrongdoing. Solyndra became a one-word expletive that tagged the young solar industry as a boondoggle.

Five years later, a far larger solar company, SunEdison Inc., has also gone bankrupt. But there are no recriminations on Capitol Hill, despite the fact that SunEdison has received more than twice as much federal assistance as Solyndra. The market values of other big players in the solar industry remain stable following the announcement last week.

What a difference five years can make.


Solar power accounted for 28 percent of all new power added to the U.S. electric grid last year, and solar panel prices have fallen so steeply that in some areas of the country, solar power can go toe to toe with the price of coal or natural gas.

Five years after Solyndra, Wall Street and the energy industry as a whole have a growing stake in making sure that a big bankruptcy doesn’t rock the boat.

"The Solyndra bankruptcy became so huge mainly because of the loan guarantee it had received under Obama’s stimulus fund. In a relatively nascent solar market, many critics wrongly saw Solyndra as a symbol for the fall of the green economy," Josefin Berg, a solar analyst at IHS, said in an email.

"SunEdison doesn’t have that same symbolic value, because solar power is becoming more mainstream," she added.

One sizzles, one fizzles

In many ways, Solyndra and SunEdison have little in common: Solyndra was a startup manufacturer with a novel product, while SunEdison is a sprawling multinational corporation that organizes large renewable energy projects.

Solyndra’s key technology was a cylindrical solar panel, which used a sophisticated thin film to turn sunlight into power. The Department of Energy gave it a $545 million loan guarantee to help build a manufacturing plant in California.

But a solar manufacturing boom in China crushed the price of conventional crystalline photovoltaic (PV) solar panels. The economic rationale for Solyndra’s pricey tubes was undermined, and the company declared bankruptcy in August 2011.

Republicans pounced, grilling Obama administration officials for picking a losing technology — and waging a broader offensive against the clean energy investments President Obama had supported since 2009.

SunEdison doesn’t have that political charge, analysts said.

SunEdison’s bankruptcy had been widely telegraphed, and it occurred for different reasons. A ravenous expansion run had left the company with $11.7 billion in debt through September. Then energy markets crashed, making Wall Street much more skeptical of President and CEO Ahmad Chatila’s growth vision. SunEdison no longer had the cash to pay for its debt.

Now SunEdison faces the fallout. The Department of Justice and the Securities and Exchange Commission are investigating its financials. Two hedge funds are suing the company for exploiting its subsidiaries, called yieldcos.

While SunEdison is bankrupt, the renewable energy projects it runs are widely expected to remain on solid financial footing.

Ironically, SunEdison has been the recipient of more federal dollars than Solyndra. SunEdison has received almost $598 million in federal grants and $582 million in loans or loan guarantees, according to a compilation of subsidies by the organization Good Jobs First. Unlike Solyndra, the funds arrived not in the form of one giant loan guarantee but as dozens of payments, loans and guarantees to the company and the many subsidiaries and companies it acquired.

Growing despite stumbles

It shows that while the solar industry has gone mainstream, it isn’t that far removed from a past in which it was more dependent on the government. Some say it still is.

"SunEdison could have been mismanaged. However, the government deserves a lot of blame for it," Veronique de Rugy, a senior research fellow with the Mercatus Center at George Mason University, said in an email. "Most of the solar boom is artificially driven by government interventions in this market. That type of interventions [led] to malinvestment and major market distortions."

But the U.S. industry has also evolved. Fewer companies are trying to come up with a cutting-edge solar panel, as Solyndra was. For most companies today, the money is not in breakthrough gadgets, but in the work of putting up solar farms and selling them.

Another difference from 2011: Big Solar says it has a path to getting off government support.

Solar costs have further to fall, they say. Utilities are building more renewables — whether or not U.S. EPA’s Clean Power Plan is upheld. Rooftop solar, on homes and businesses, offers a growth runway.

"I’m hopeful that when we look back on this in a few years, it’ll be just as far in the rearview mirror as Solyndra is right now," said Tony Clifford, CEO of Standard Solar, which builds distributed solar projects. "The solar industry’s big enough that it can shrug it off. I think you can write it off to bad financial management and maybe some bad luck. I think these guys wanted to grow too fast, and their reach exceeded their grasp."

In 2011, every solar company had to defend itself from predictions that it was the next Solyndra. Similarly, this year everyone is distancing itself from SunEdison.

But the difference is that companies seem to be distancing themselves not from a narrative about a sick industry, but from a single misguided company that overplayed its hand.

"I would have told you a year ago they were going to go bust," said Andrew de Pass, CEO of Conergy. "Totally self-inflicted."

Solar companies are "trying to get out in front of it by saying SunEdison is a unique case, and they screwed up," said Shayle Kann, senior vice president of research for Greentech Media. "If you don’t screw up and make mistakes, you’re not in a bad market … it doesn’t tell you much about the solar industry overall."

Solar has become a mainstream investment, meaning that all of the service industries in the energy industry — investors, lawyers, accountants — now have a stake in solar’s success.

This year, "chances are your bonus is being paid by the solar industry," said Jigar Shah, a founder of SunEdison who left the company in 2008.

The solar industry installed 7,260 megawatts of solar in 2015 and expects to more than double that number in 2016, according to the Solar Energy Industries Association. And last year, employment in the solar industry grew 12 times faster than the nationwide employment rate.

The impact of the two bankruptcies "really highlights how the PV industry has progressed," said Tyler Ogden, a solar analyst at Lux Research.

"What can solar do for us? Is it a technology that can be competitive in the market? These questions have been answered," Ogden said. "Now it can be discussed without scaring away potential investors that might come into the solar industry."