In Solyndra’s case, its innovative cylindrical thin-film technology was simply uncompetitive on a cost basis with other technologies and producers.  First Solar’s thin film technology is less efficient at converting sunlight to energy than those made of polysilicon by its Chinese rivals.  

One analyst summed up First Solar’s production situation this way:  “[its] technology is barely competitive with silicon solar cells.  They make super cheap, very inefficient solar panels.  Everyone else makes cheap, very efficient solar panels.” Although investors in First Solar won’t be taking the haircut that those (including U.S. taxpayers) who invested in Solyndra will take, some First Solar shareholders have taken a bath. The company’s stock price has fallen from its high of $170 earlier this year to the low $40s following Gillette’s exit.  Today, the stock climbed back above $52 following the company’s early release of third quarter financials announcing a healthy increase in quarterly profits of 11-percent.  At present, the company’s project pipeline is filled with commitments for its panels, and there doesn’t appear to be a whiff of scandal like that encompassing the Solyndra bankruptcy.

On another somewhat sour note, however, the Wall Street Journal reported today that several other clean energy companies that received federal loan guarantees may be facing financial difficulties resulting from “. . . flagging competitiveness of some renewable energy projects.” One of the projects named in the article is a large solar project in Southern California by Mohave Solar, LLC, which would sell the power from the facility to Pacific Gas & Electric under a purchased power agreement.  The Mohave Solar project received a federal loan guarantee commitment of $1.2 billion.  However, California regulators have flagged the contract for its high costs and could ultimately reject the contract, thus jeopardizing the loan guarantee.

In September, First Solar announced that it had failed to close on a federal loan guarantee for its Topaz Solar project located near San Luis Obispo, CA.

So, what does this all mean for Arizona’s solar future?

The grim news of late must be making some policymakers and players in the State’s economic development community very anxious.   They’ve been counting on clean energy, and solar in particular, to bring new jobs to the state and jump-start our lagging economy.

One very obvious question is whether the growing storm clouds over the solar industry will affect First Solar’s plans for its newest manufacturing plant, which broke ground in Mesa earlier this year.  You might recall that Arizona competed against other states, including Texas and New Mexico, in attracting the facility along with its high-paying jobs to Mesa.  Arizona’s winning offer to First Solar incorporated an array of state and local government concessions, including tax breaks.  The $300 million plant with an annual solar panel production capacity of 250 megawatts will employ 400-500 construction workers and about 600 production employees when it becomes operational in the third quarter of 2012.  (In this photo from the August 2011 dedication of their Mesa Factory Site, CEO Rob Gillette, Mesa Vice Mayor Scott Somers, and Barry Broome unveil a ceremonial marker.)

When the Mesa project was announced in March of this year, Mesa City Manager Chris Brady stated that the 135 acre site, together with First Solar’s option to acquire an additional 100 acres, could provide room for expansion of production lines employing up to 4,800 workers.

With slowing demand for First Solar’s panels, however, the company included this statement in its recent press release:

“In preparation for 2012, the company is reducing capital expenditures and evaluating opportunities to reallocate overhead expenses to fund increased investments in market development, sales, and R&D.”

What this foretells of the Mesa plant’s future expansion is uncertain, but it does indicate a pause in the aggressive capacity building that occurred during Gillette’s watch.

So, where does this leave us?

First, while there have been some set-backs in the solar industry on a national basis, Arizona projects continue to move forward.  For example, the Abengoa/APS Solana plant near Gila Bend received its federal loan guarantee and is on course to begin production in 2013.  When fully operational, Solana will produce 280 megawatts of solar power - enough to supply 70,000 homes.  Similarly, SRP’s community solar project, Copper Crossing Solar Ranch near Florence, has its dedication ceremony scheduled for November 8.  Copper Crossing will supply 3,700 homes with solar power.

Second, despite the California PUC’s concern over PG & E’s purchased power agreement with Mohave Solar, that state’s aggressive renewables requirement of 33 percent by 2020 is not going away.  California utilities will have to get renewable energy from someplace, and Arizona’s abundant sunshine and proximity to California markets make it a likely place to locate exportable solar generation.

Finally, I found the following First Solar statement attributed to Mike Ahearn, founder and newly appointed interim CEO, instructive of the future:

"Going forward, our goal is not just to survive the current environment, but to transcend it by creating and expanding markets worldwide that do not depend on today's subsidy programs. This requires that we re-focus our strategy and commit our resources to solving the pressing energy needs that exist in much of the world."

Without a doubt, subsidies have been an enabling force in solar’s ability to compete with fossil generation in the U.S. and throughout the world.  But, as the European model has demonstrated, subsidies distort economic decisions by producers and consumers and are not sustainable over the long-term.  Recently, an article appearing in The Economist (“Thou orb aloft full-dazzling” Oct 15, 2011) went so far as to describe them as “. . . massively wasteful and squalidly political.”

Eventually, solar generation must stand on its own without government intervention in the market.  I think companies like First Solar will make that happen.