The solar industry was off to a hot start last January as manufacturers worldwide were churning out photovoltaic panels in record numbers. But by summer the boom in supply had given way to a spectacular bust in demand. Start-up Solyndra very publicly defaulted on a $535 million Department of Energy (DOE) loan in August, joining two other American solar-energy ventures in bankruptcy. Solyndra officials and a handful of politicians blamed cutthroat prices in China, coupled with declining demand in cash-strapped Europe, which represents 80 percent of the world’s solar market.
But the truth is more complicated. China’s outsize solar subsidies may make it harder for American solar companies to compete, but they have also helped drive down the cost of solar panels by 30 percent since 2010. The problem is that declining prices have done little to solve solar energy’s efficiency problem. Most photovoltaic panels on the market today convert less than 14 percent of the energy in sunlight into electricity, a number that has barely budged since the 1980s.
Low efficiency drives up all the infrastructure costs associated with photovoltaics, making it hard for even low-cost panels to compete with fossil fuels. “Everything scales with efficiency,” says physicist Ramamoorthy Ramesh, program manager for the SunShot Initiative, a doe program that aims to make solar energy cost-competitive with fossil fuels by 2020. “The number of panels you need at 20 percent is essentially half of what you need at 10 percent, so you can make do with fewer panels.”
Fewer panels working harder would reduce land-use issues, decrease the cost of installation, and make solar power more cost-competitive. The lesson of Solyndra, then, is not to dump solar subsidies, as some politicians have suggested, but to redirect that money into R & D, where it will spur innovation —the true solution to solar’s demand woes.