China Flooded U.S. Silicon, Photovoltaic Market Before Collapse of Solyndra and Other Solar Companies

The story of Solyndra has been repeated often. A California startup with an innovative technology for solar power received a $535 million loan guarantee from the Department of Energy only to collapse soon afterwards and default on the loan.

The company and those government officials who made the decision to provide the loan were heavily scrutinized, with accusations that the loan was made for the benefit of Obama campaign donors at the expense of taxpayers and that the financial underpinnings of the loan were not sound.

Emails from 2009 released by the Department of Energy (DOE) show an ongoing debate over the viability of Solyndra and its finances by both DOE and the Office of Management and Budget (OMB) in 2009* despite the loan being approved years before under the Bush administration and the loan being based on Solyndra’s innovative technology, not business opportunity. A 2011 report from the House Energy and Commerce Committee lists most of the criticism coming from the Office of Management and Budget (OMB) staff.

Yet it wasn't the corporate finances that led to Solyndra's demise but the price of photovoltaics mainly as a result of import dumping by heavily subsidized Chinese companies that caused the collapse, not just of Solyndra, but a number of U.S. solar manufacturers.

Solar panel imports had been growing for over a decade as the technology has improved and grown in popularity. From 2000 to 2011, the total value of imported photovoltaics and silicon, mainly from Asia, doubled approximately every four years.

Between 2008 and 2010, imports would grow from $250 million a year to over $400 million, mainly from China and other Asian countries.

The U.S. International Trade Commission (ITC) would eventually find numerous Chinese companies guilty of dumping their product on the U.S. market via pervasive underselling to the detriment of domestic manufacturers, and that the underselling was being subsidized by their investors. As a result ITC instituted a duties of over 30 percent on some imports. But that investigation began in 2011 after much of the domestic industry had already collapsed.

According to a report published by the law firm Wiley Rein LLP for the ITC investigation, imports of solar cells and panels from Chinese and Taiwanese companies increased over 1,000 percent between 2008 and 2011. Companies actively avoided tariffs and intentionally priced their products below U.S. prices.

Besides Solyndra, a slew of U.S. companies would have factory shutdowns or declare bankruptcy at a time when demand for solar panels was at its peak: Schott Solar, Evergreen Solar, SpectraWatt Solar, World Solon Corp, BP Solar, Transform Solar, Abound Solar, Solar World, Amonix, Konarka, MiaSole, and Siliken.

In bankruptcy filings, Solyndra would point to the oversupply of imported panels due “to the growing capacity of foreign manufacturers that utilized low cost capital provided by their governments to expand their operations.”

Solyndra would eventually sue some of the Chinese solar companies that were undercutting its business—Suntech Power, Trina Solar, and Ytngli Green Energy—in 2012, after the company filed for bankruptcy and ceased producing solar cells. The lawsuit accused the companies of not just coordinating to underprice the U.S. market, but intentionally exporting 95 percent of their product and pricing it at a loss. In 2008, prices for solar panels dropped from $3.30 a watt to $1 a watt.

The lawsuit would also implicate the China New Energy Chamber of Commerce, a Chinese solar technology trade organization that may have enabled the price coordination, Chinese silicon producers that offered silicon at below market rates, as well as the China Development Bank, the Bank of China, and the Export-Import Bank of China for providing $17 billion in below market loans to subsidize a five year plan to obtain market dominance. The case would eventually be settled out of court in 2015.

Chinese Solar Companies Collapse

Eventually the glut of solar on the U.S. market would eventually affect some of the Chinese companies that were enabling it.

The main subject of Solyndra's lawsuit, Suntech, would eventually go down in flames itself. The company hid its major liability, large loans from the China Development Bank by claiming it was backed by German bonds, and therefore did not need to be listed as a liability on its annual filings.

Another Chinese solar technology firm, Hanergy, that benefitted from state investment would also collapse in 2015. The company developed “thin film” solar products which had struggles with efficiency. Along with the glut of solar products flooding the market, the Chinese Development Bank began withdrawing its investment in solar, spelling the end to the company that was booming a year earlier.

* This story was edited to add clarification that criticism came from both DOE and OMB