Abound Solar Races to Beat the Market, With a Public Boost
Amid criticism of government support for clean energy, Abound Solar is leveraging public investment for energy innovation.
The failure of Solyndra, a solar energy firm partially financed by the government, has prompted opponents of clean energy to question whether government programs that support private investment in innovative companies is a good idea. To help answer that question, we got in touch with GOOD Company finalist Abound Solar, a Colorado-based green-energy company participating in the same government program.
“We view the Solyndra ordeal as evolution at work in the industry,” says Julian Hawkins, the company’s senior vice president for marketing. Solyndra failed at least in part because solar panels became cheaper much faster than many anticipated. Solyndra couldn’t keep up, and when less competitive firms fail, that’s a sign that the system is working.
Abound’s business plan is radically different from Solyndra’s. While the latter bet on non-silicon, cylindrical solar panels, Abound relies on low-cost semi-conductor technology and an automated production system to produce solar modules more quickly, with less waste. If the government were picking winners, as critics allege, it seems strange that it would pick two divergent companies—the strategy looks more like maintaining a diverse investment portfolio.
“As with most startup companies, capital is necessary for expansion,” Hawkins says of the Department of Energy’s financing program. “While Abound Solar has dedicated and strong private investments, the loan guarantee allows us to expand our manufacturing capacity at much faster rate than would otherwise be possible. Increasing our production will allow us to lower our cost-per-watt, which will keep us competitive in the market.”
Abound says that it will have the largest solar manufacturing facility in the United States once its current projects are seen through. So far, less than a third of the total loan has been drawn on, since access to the guarantee depends on whether the company can meet various benchmarks on the way. Analysts argue that reaching scale is the hardest part of succeeding in the clean energy sector, so putting loans to work expanding manufacturing makes sense.
Besides the intrinsic sustainability impact of solar energy, Abound is also working to make sure the modules it creates are 90 percent recyclable. “This reduces the cost of ownership for end-users and provides a cradle-to-cradle solution for solar,” Hawkins says. “Our modules offer the fastest energy payback and lowest carbon footprint in the industry.”
Solar is growing incredibly quickly, expanding more than 60 percent between 2009 and 2010, at the same time as solar prices dropped 16 percent. The sector creates jobs at higher rate than the U.S. economy as a whole (though that’s a low bar to jump). Still, solar isn’t quite ready to supplant fossil fuels as an energy source. Yet between global warming and rising oil prices, developing cost-effective green energy solutions is a critical factor in future economic expansion: Without a stable environment and cheap energy, the whole system will stagnate.
Economists point to two ways society can act to help speed up this innovation: Putting a price on the costs imposed by fossil fuels that are currently being absorbed by the public, and helping private markets finance innovation. Examples of the latter approach include a carbon tax or some kind of emissions cap, while loan guarantees and R&D tax credits come in the former vein.
Researchers say that pricing environmental costs is a much more effective way to incentivize energy innovation, but it’s politically challenging: Congress failed to create a market for tradeable emissions allowances proposed by the Obama administration largely because business leaders feared the disruptive change.
Limited to loan guarantee programs (which, incidentally, began under the Bush administration), the government is doing what it can to lay the foundations for clean energy with one hand tied behind its back. Still, Abound is confident it can beat the odds in a tough market: Hawkins told Bloomberg News that by 2013 it will be able to sell its panels at a dollar or less per watt, beating the $1.05-per-watt price that analysts say is the competitive floor for solar power.