TightWind is written by Kyle Baxter. Stay Hungry. Stay Foolish.

Megan McArdle on Solyndra:

As far as I can tell, Solyndra was having these troubles with its first fab . . .  so we lent them money to build a second fab.  No one ever said, “hey, this manufacturing process is really fussy and may never work;” the idea was always that if you could just scale up and spend more money, somehow, eventually this product would break even.  Again, if they were going to discover cold fusion, maybe this would have been worth it.  But their only competitive advantage–using no silicon–was dependent on continued high prices of silicon.  No, it’s worse than that; it was dependent on there being a big cost wedge between the price of silicon, and the prices of the commodities that Solyndra did use, like copper, gallium, and iridium. This was a bad bet; Lending them money seems like a very complicated and expensive way to take a large bet in the commodity markets.  And not necessarily a good bet.  Copper, gallium, etc are mined and in limited supply.  The primary ingredients in silicon are wood, charcoal/coal, and silica, aka sand.

The more I read about Solyndra, the less it sounds like a scandal and the more it sounds like a disastrous example of where government subsidies for private businesses can go wrong. The government tends not to be the best judge of a business’s potential, and when they make a bad choice, not only are taxpayers saddled with the bill, but the government’s intervention shifts the market toward a company that wouldn’t have succeeded in the open market. And the companies that could have succeeded are the ones that are hurt.