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How Bright Is Solar Power’s Future in a Post-Solyndra America?

October 18, 2011 at 12:00 AM EDT
After the Obama administration-embraced solar-panel company Solyndra collapsed and defaulted on its government-backed loans, the surging U.S. solar industry is suddenly worried that the subsidies it receives -- tax credits and loans guarantees -- could dry up in the face of opposition from conservatives. Spencer Michels reports.
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GWEN IFILL: Next, the future for solar energy in the U.S., now clouded by the collapse of a California company backed by government loans.

NewsHour correspondent Spencer Michels reports.

SPENCER MICHELS: The solar industry boasts that it’s growing fast, installing roof top panels that turn sunlight into electricity at a record pace. This year, it expects to create enough electricity to power 350,000 homes, double last year’s rate. And that, say proponents, saves a lot of fossil fuel.

LYNDON RIVE, SolarCity: The average cost of electricity would be just under 10 cents.

SPENCER MICHELS: Lyndon Rive is the founder and CEO of the privately held company SolarCity in an industry that gets various forms of government subsidies, including tax credits and loan guarantees, that make it cheaper for companies to borrow money to expand.

LYNDON RIVE: The solar industry has grown 60 percent year on year. Last year, it grew 50 percent. This year, it’s grown 60 percent. There’s over 5,000 companies that are in the solar industry.

SPENCER MICHELS: His firm, SolarCity, operating in 11 states, is the largest solar installer in the U.S. with 1,300 employees, 500 of them hired in the last 12 months. Nationally, solar employs 100,000 workers.

Yet industry groups and leaders have seen trouble signs ahead for a while.

Dan Reicher, director of Stanford’s Center for Energy Policy, says the industry is at risk.

DAN REICHER, Stanford’s Center for Energy Policy: We may not see the loan guarantee program extended. We may see a major cut in federal support for clean energy research and development. There’s going to be a major battle next year over extending some key tax credits for clean energy.

SPENCER MICHELS: Despite its growth, solar still supplies less than 1 percent of American electricity. The troubled economy has hurt investment in solar, and competition from China has undercut U.S. sales.

Several solar companies have failed, including OptiSolar in 2009, victims of what insiders call consolidation of the industry.

LYNDON RIVE: Those companies that cannot keep up with the innovation and the reduction of costs, they will go out of business. But it’s for the health of the entire industry.

SPENCER MICHELS: And then this year came the collapse of Solyndra, a California company making cylindrical solar panels, a firm President Obama visited and touted in May of 2010.

The company found it couldn’t compete with cheaper Chinese-made flat panels, so it defaulted on a government loan of half-a-billion dollars

The incident has contributed to a growing national debate on the value of green energy.

SolarCity’s Rive is concerned that Solyndra’s failure will make an embarrassed administration and a skittish Congress hold back on what he calls incentives or subsidies to help this fledgling industry, the kinds of government support the oil industry has always enjoyed.

LYNDON RIVE: Now, if all the incentives disappeared, absolutely, that would be catastrophic for the solar industry.

SPENCER MICHELS: House Republicans highlighted the Solyndra failure in a committee hearing last month titled “How Obama’s Green Energy Agenda Is Killing Jobs.”

Rep. Darrell Issa of California chaired the event.

REP. DARRELL ISSA, R-Calif., Oversight and Government Reform Committee chairman: The guise of green jobs has become a political rallying cry designed to unite environmentalists, union leaders to consolidate an ideological-based agenda. This would be OK if, in fact, it produced the jobs. And it didn’t.

SPENCER MICHELS: While the White House claimed that its investment in clean energy created 225,000 jobs by last January, Issa charged, the government used gimmick accounting in tallying green jobs.

In any case, Rive said the political reaction immediately slowed down a big project SolarCity had planned to equip military bases, including Hickam Air Force Base in Hawaii, with solar power. A government loan guarantee the company was expecting didn’t come through.

LYNDON RIVE: It has affected us slightly on a project called SolarStrong. The effect that it has caused, it has caused is a slight delay. SolarStrong, our project which deploys solar to 160,000 military homes, will still proceed. We will just now go ahead and raise the capital without the loan guarantees.

SPENCER MICHELS: Around the country, conservatives have begun attacking the administration’s support for alternative energy of all kinds.

In Sacramento, Calif., for example, conservative activist Eric Eisenhammer founded the Coalition of Energy Users to fight government spending on green power.

ERIC EISENHAMMER, Coalition of Energy Users: The green energy industry involves a lot of hedge fund managers who are making a lot money off it. And a lot of these guys are also making large donations to politicians and then they’re getting these massive taxpayer-funded subsidies in return. But it’s for an economic model that doesn’t really pan out.

Green energy is a few times more expensive than conventional energy. So, I don’t believe that it really competes very well in a free market.

SPENCER MICHELS: But President Obama voiced his continuing support for green energy subsidies.

PRESIDENT BARACK OBAMA: A lot of these small startups, they can get angel investors, they can get several million dollars to get a company going, but it’s very hard for them to then scale up, particularly if these are new cutting-edge technologies. It’s hard for them to find private investors.

And part of what’s happening is China and Europe, other countries, are putting enormous subsidies into these companies and giving them incentives to move offshore.

SPENCER MICHELS: Since the Solyndra collapse, the administration has announced several new loan guarantees, claiming green energy is a big job creator, a view shared by Stanford’s Reicher.

DAN REICHER: Go in and retrofit somebody’s home to make it more energy-efficient, there’s a lot of jobs there. Put solar panels on the roof, there’s a lot of jobs there. Make the chemicals that you need ultimately to make a solar panel, there’s jobs there. There’s a lot of jobs here to be created in clean energy broadly.

SPENCER MICHELS: Reicher sees tremendous growth potential for green energy.

DAN REICHER: I think the government has a serious role to play, and I would hate to see too serious a pullback, particularly at a moment when the Chinese role is on the rise, when the German role is on the rise, when many other countries around the world are realizing the importance in terms of jobs and economic development of what will literally be a multitrillion-dollar industry over the next couple of decades.

SPENCER MICHELS: Still, even some Democrats think the Solyndra debacle invites a cautious approach.

California Treasurer Bill Lockyer heads a state agency that grants exemptions from paying sales tax to green energy companies. He wants to delay new exemptions.

BILL LOCKYER, California state treasurer: We want solar power. We want these jobs in our state. But let’s do it smartly. Let’s try to avoid these bad results like the Solyndra disaster, if we can avoid it. Let’s see if there’s a effective way to do it that doesn’t cost taxpayers money.

SPENCER MICHELS: People on all sides of the debate acknowledge that Solyndra’s collapse has intensified the battle.

DAN REICHER: I think this has become a political football in Washington. And Solyndra has crystallized this in an unfortunate way.

SPENCER MICHELS: Both proponents and detractors of government support for green energy show little sign of backing down.