Saturday, November 19, 2011

Solyndra Chu Chu

Despite Stephen Chu's testimony, Solyndra's problem was NOT that the market price of PV modules dropped unexpectedly.  Many investors were expecting poly-silicon prices to drop when new production capacity came online, and most non silicon PV plays using alternative materials like CIGS or Cd-Te had such price erosion built into their forecast scenarios.  The DOE certainly knew this was a possibility long before the Solyndra decisions were made.

Solyndra, and all the thin film producers except perhaps First Solar (which just passed 5 GW of  production), have a problem with how much it costs to get down their learning curve (see ).  In the long term they have a realistic chance to have a cost advantage over silicon, and CIGS should have a further cost advantage over Cd-Te.  But all of the thin film business plans so far have been wildly optimistic about how fast they can get their prices down, and thus greatly underestimated the losses they will pile up during early low volume production at prices that are usually higher than an efficient silicon based producer. The market price erosion certainly exacerbated this, but Solyndra and most others were not economically viable even if module prices stayed high.

Unless DOE was privy to some incredible materials, labor, and overhead cost and yield data from Solyndra that no one else has heard about, Solyndra's cost of goods sold (COGS) was way too high to be viable even if PV module prices had not dropped. This is why their IPO was stopped, not "poor market conditions".  Also, Solyndra's propensity for huge non production staffing and administrative costs (like lobbyists) meant they would have lost big even if their production costs had been better.

The Solyndra investors used political influence and played the DOE to get the taxpayers to take all the downside risk, while allowing themselves to retain most of the upside potential for gain. This is exactly what Democrats have been accusing the evil Wall Street firms of! Stephen Chu was just the designated cut out and bag holder, a role apparently that having a Nobel prize does not protect you from!

The real irony, which would be amusing if it weren't so financially painful, is that all of the these firms were competing to be "the next First Solar" ( and most of them did it, i.e., the initial investors got completely burned out and lost everything, and profits, if any, will accrue to the second or third capitalization.

The lesson we should all learn is that only markets can pick winners, and only markets can accurately monetize technology commercialization. If we let governments do anything other than give R&D tax breaks, we all lose!

Sunday, November 6, 2011

What's the end game for OWS?

The Occupy Wall Street protests seem to have taken up space in the midstream media that would have otherwise been used by Solyndra, Beacon Power, Fiskar, Fast and Furious, and growing calls for Eric Holder to resign. So they have probably accomplished their tactical purpose for the Obama White House.

Which leads us to speculate, one year ahead of the 2012 general election, what are the middle and end games  for the OWS 'movement'.

As more and more people no longer receive unemployment benefits that have maxed out, some of them will just hang out at the OWS sites instead of looking for work.  This means more chances for trouble and favorable MSNBC style coverage without the organizers having to spend more money.

The end game scenarios are more disturbing.

Most likely is an orchestrated widespread upswing in disruptive actions and real and threatened violence, in order to try to suppress voter turnout of the law abiding kind.

Unlikely but possible; enough violence to allow martial law to be declared just before the election.