'Solar-coaster' hits as sun sets on federal subsidies

— -- The booming U.S. solar industry faces a potential tipping point — what some call a "solar-coaster" — as the sun starts to set on billions in federal subsidies.

Can it make it on its own? Can it compete with China, which U.S. officials say spent $33 billion in 2010 alone on solar loans?

Energy Secretary Steven Chu posed these questions Saturday, one day after finalizing the last federal loan guarantees via a controversial program that gave a half-billion-dollar loan to newly bankrupt solar panel manufacturer Solyndra.

"Where do we go from here?" Chu asked at the closing ceremony of the Solar Decathlon, a biennial U.S.-sponsored collegiate contest to build the world's best solar house. He said the United States is at "a crossroads" and must decide whether to "sit on the sidelines and fall behind" or "play to win the clean-energy race."

Chu said Americans invented solar cells, wind turbines and lithium ion batteries, but added: "We are no longer the leading manufacturer … we are working to recapture that lead."

The U.S. solar industry, though decades old, didn't begin booming until about five years ago as federal subsidies became available and Silicon Valley venture capitalists began pumping in cash and creating a sort of Solar Valley.

It now employs more than 100,000 Americans, twice as many as in 2009, and has become the country's fastest-growing energy sector, says Rhone Resch of the Solar Energy Industries Association, an industry group. He says solar panel installations were up 69% at the end of June, compared with a year prior.

Still, the industry produces less than 1% of U.S. electricity and has lost global market share to China in the last decade. Even backers say the collapse of Fremont, Calif.-based Solyndra, now being probed by House Republicans including California Rep. Darrell Issa, won't help.

"It is reasonable to predict that we could have the collapse of the entire solar panel manufacturing business in America," Issa, chairman of the House Oversight and Government Reform Committee, said at a House hearing last month as he cited China's ascendance.

Not so fast, says energy historian Daniel Yergin, author of the newly released The Quest: Energy Security and the Remaking of the Modern World. He says the Chinese bring "a relentless competitive advantage in manufacturing," but the U.S.' tech savvy is vital in the swiftly changing solar market.

Even with subsidies decreasing, he doesn't expect the solar industry to wither as it did in the 1980s when he says it entered the "Valley of Death." Today, he says, "This is really global business. … This is not game over."

Solyndra's collapse does not portend doom but rather reflects "the industry's success in lowering costs," says Jonathan Bass of SolarCity, a solar installer. He says Solyndra's unique tube-shaped solar panels did not rely on silicon, an advantage when silicon prices were high. When those prices plummeted, Solyndra could no longer compete.

Bass and others in the industry say it's a good thing that panel prices have fallen 30% since the beginning of 2010, because it makes solar more affordable and expands markets.