The solar media likes to talk about how government subsidies have given Chinese companies an unfair advantage because of government subsidies. But if we compare apples to apples, there's no shortage of government backing for solar in the U.S. -- it's just taken a different, much less successful form.
Witness the loss of most of the $58 million the state of Massachusetts gave Evergreen Solar
- SoloPower, a maker of thin-film cells and modules, recently received a $197 million loan guarantee to build a manufacturing facility in Oregon. The company uses CIGS technology, which has showed promise for years, but fallen on its face so far in large-scale manufacturing (see Nanosolar).
- Abound Solar and the CdTe technology it uses have received a $400 million loan guarantee to expand capacity from 65 MW to up to 1 GW. CdTe has been proven by First Solar
(Nasdaq: FSLR), and Abound hopes to take it to the next level.
- Solyndra received $535 million in a stimulus federal loan grant, but it has since cut 170 employees and closed a plant, slashing production output to 300 MW from an originally planned 600 MW. Not exactly a great start.
(NYSE: MMM)Ultra Barrier Solar Film recently received another $4.4 million as part of the DOE's $200 million-per-year SunShot Initiative.
Meanwhile, established firms like thin-film maker First Solar are doing just fine without loan guarantees and U.S. subsidies. True, it looks like FSLR will get approximately $20 million in incentives from Maricopa County to build a plant there, but many counties support manufacturing in this way.
And unlike rival startups, established firms such as SunPower
Who really needs the money?
I'm not suggesting thin-film solar -- Ultra-Barrier Solar Film in particular -- won't play a role in revolutionizing the industry. A few months ago, I argued that this technology could lead to an unlikely revolution in solar. But does 3M or solar really need the money, or require government help to pick the winners in the industry? A 3M film plant likely costing along the lines of $100 million is already under construction (I used to install capital equipment at 3M, and this is an estimate based on experience, not published company projections), so the company's clearly committed to the product already.
Venture capital funding for greentech companies has hit $1.7 billion in the first two months of 2011 alone. Thus, firms that have viable technology aren't exactly hurting for cash right now. The DOE is backing thin-film solar technology, which already had big money backers in the open market.
And here's this Fool's biggest problem. The government isn't a venture capital firm, and it doesn't share the same upside as equity investors. If some of these firms go belly-up, the feds lose our invested dollars in companies that probably didn't need the money anyway. The Chinese government may be providing subsidies for solar, but it's doing so through loans, not free money -- and China has been very successful so far.
I'm all for incentives to help solar become the industry power I hope it can be, and I'm also a big supporter of thin-film technology. But this doesn't seem like the best way to sort out who the winners and losers are in a high-tech industry -- that's the market's job.
So here's my open-ended question for Foolish solar investors. If you had $200 million of federal SunShot dollars to spend on stimulating the solar industry in the U.S., how would you spend it? Send a tweet to @FlushDrawFool, or leave a comment below with your thoughts.
And don't forget to add your favorite solar stocks to My Watchlist, and My Watchlist will aggregate all of our Foolish analysis on that stock.