In a move that everyone saw coming, SunEdison—the world’s biggest cleantech developer—filed for Chapter 11 bankruptcy protection, a sorry end to the company’s long struggle with mounting debts. The FT reports:
[T]he world’s largest developer of renewable power projects filed for bankruptcy with debts of $16.1bn, and assets valued at $20.7bn. The collapse is full of the usual cautionary tales, of corporate hubris and excessive debt, but also offers a new one in its industry: the dangers of financial engineering taken to extremes. […]
The past 12 months have been rough on many US solar power companies, including SunPower and Elon Musk’s SolarCity, but SunEdison is the only one to have blown up in such a spectacular fashion. The root cause of this is its complex financial structure.
There’s a lot to unpack in SunEdison’s demise, the vast majority of which isn’t unique to the renewable energy industry: these were mistakes that have been made before, and you don’t need to be in the clean energy business to learn something from this solar giant’s collapse. To put it simply, in its quest to become the world’s largest renewable energy developer (a title it rightfully claimed), SunEdison grew too much, too quickly. The Icarus parallels are a bit too obvious, but there they are just the same.
What does this say about the state of solar energy? For one, that it’s not in a solid enough position yet to support companies with the kind of ambition that SunEdison displayed. SunEdison might be the only big player to file for bankruptcy at this point, but many of the other major solar producers and developers are having a hard go of it, too. Margins aren’t exactly large, and the technology isn’t efficient enough yet for producers to make much headway without government support, which leaves the industry vulnerable to the kind of political wavering that we’ve seen in Nevada, Indiana, and Maine recently, where concerns over a subsidy scheme called net metering have threatened to all but erase solar’s business model in those states.
This is also a useful reminder that green lipstick can’t disguise a pig—bad business is bad business, even if it’s in the name of saving the planet. In fact, given the extensive government support renewables still require and the distorted markets these subsidies create, the cleantech industry is especially vulnerable to snake oil salesmen looking to take advantage of cushy deals with no intention—or in SunEdison’s case no ability—to deliver on what they promise.