The surprise announcement Wednesday that Solyndra, the Fremont-based solar power company, would immediately close its doors prompted a round of gleeful I-told-you-so's from Republican Party leaders who have long opposed the Obama administration's green energy programs in general and the $535 million federal loan guarantee for Solyndra in particular.
But industry officials and analysts say the partisan knife fight obscures a larger point: that the very economic forces that helped drive Solyndra out of business — namely competition from Chinese manufacturers — are actually contributing to the expansion of solar power in California. Building solar panels in Fremont with government subsidies proved to be a poor means of creating jobs, but the growth of solar as an electricity source continues to accelerate, and that has job-creation (and environmental) benefits of its own.
According to a June report from the California Public Utilities Commission, Californians installed 194 megawatts of new solar electric generating equipment on their homes and businesses in 2010 — more new distributed solar generating capacity than in any other year in the state’s history, and an increase of 47 percent over the capacity installed in 2009. Figures for 2011 are expected to show further growth.
In a seeming paradox, even amid that growth, the U.S. share of solar panel manufacturing fell from a peak of 43 percent in 1995 to just 7 percent last year, according to a Department of Energy report released Wednesday. But the two phenomena are directly linked. China's low wages and generous subsidies for the solar industry have helped drive the price of solar cells down by 42 percent since January.
"Price is becoming the Holy Grail, and manufacturers outside the United States have really driven down cost," said Jeanine Cotter, president and CEO of Luminalt, a solar installation company based in San Francisco's Mission District.
"Having cheaper panels makes installing solar much, much more affordable," said Sheeraz Haji, CEO of the CleanTech Group, a market research firm.
Solar remains substantially more expensive than traditional sources of electricity, and one of the purposes of the Obama administration's solar subsidies was to close that gap. A cap-and-trade program for carbon emissions, which was blocked by Republicans in Congress, would have had the effect of raising prices for fossil fuel power, and thus would have also helped narrow the price difference.
As it stands, generating electricity from the sun still costs about twice as much as using natural gas, according to Brett Prior, a clean technology analyst at Greentech Media Research in Boston.
In light of the Solyndra debacle and general cost-cutting fervor in Washington, federal support for solar panel manufacturing is likely to diminish. Yet foreign government subsidies and cheap overseas manufacturing will continue to drive costs down — and that has its upsides.
The cheaper panels, Haji said, have helped spur a hiring boom at solar installation companies like SolarCity, SunRun and SunGevity, which are "hiring fast and making a go of it because the price has gone down."
In the meantime, Haji said, even local panel producers like Bay Area-based SunPower are taking advantage of the cost differentials.
SunPower, a world leader in panel production, employs nearly 1,000 people at its corporate headquarters in San Jose and Richmond, but does only about 10 percent of its manufacturing locally, according to the company's executive vice president, Julie Blunden.
About 150 people are employed at a SunPower's plant in Milpitas, while about half of the company's manufacturing is done in China, Malasyia and the Phillipines. SunPower also has factories in Mexico and Europe, according to the company.
But Blunden said her company's local economic impact is more significant than its overseas manufacturing might suggest. Component parts are produced all over the country and the world, she said, and when SunPower's panels are installed, they produce energy locally and use local labor.
"The real story in solar is how radically the costs have fallen in the last few years," said Dan Shugar, CEO of Solaria, a Fremont-based silicon solar panel manufacturer.
"Production volumes have increased and technologies have improved," said Shugar. "It's the same thing that happened with cell phones and DVD players."
John Upton and Sydney Lupkin contributed reporting.