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The Perils of Innovation: Solyndra, Solar's Most Financed Company, May Fail

Revolutionary companies are often lauded for their daring. But what about those that don't quite make it? Solyndra, one of the solar industry's most feted, financed, and generally gawked-at companies is at risk of failing, according to an independent audit by PricewaterhouseCoopers.

The auditor noted its concerns about Solyndra as part of the company's S-1 filing for a possible initial public offering on the stock markets. PWC pointed out that Solyndra has lost a great deal of money, leaving its future as a "going concern" at risk, especially if the company can't match the prices of other solar cell manufacturers.

That risk goes without saying for every solar company around today; none have an assured future. But the risk is magnified for Solyndra because of its unusual approach. Rather than a flat solar panel, Solyndra sells round tubes that contain a rolled solar cell -- the shape of each tube is close to that of a commercial fluorescent light, though at a smaller scale.

By spacing out these tubes, Solyndra says it can capture more sunlight, both because the tubes are better at catching slanting rays of sunlight and because they capture reflected sunlight from any surface underneath, typically the white roof seen on big box stores.

Other companies have had the same idea, but Solyndra has so far been the only one to risk doing it. For its daring, the company has been amply rewarded with almost a billion dollars in venture funding and loans.

But while financiers love an original approach, it may not fly in a more down-to-earth market of flat panel makers. In the same S-1, Solyndra notes that at a sale price of $3.24 per watt, its tubed solar panels cost 66 percent more than a standard silicon panel. That's a huge gap at this point in the game.

Worse, Solyndra is losing money even at $3.24. In a post about the price differential at Greentech Media, commenters savage Solyndra for its many other risks, including using more material than other companies, relying on the relatively marginal benefit of reflected light, and selling a product that could age badly. Other warning signs have also cropped up; last year, for example, one of the scientists who helped create Solyndra's product defected to rival First Solar.

The warning and various issues don't necessarily mean game over for Solyndra. Cost is the big issue, and it's still possible the company could catch up. And as PWC points out elsewhere in its statement, Solyndra has actually met all its plant construction time lines. All the other CIGS thin-film companies (those who use the same solar material as Solyndra), like Nanosolar and Miasole, have badly overshot various deadlines.

But as Solyndra's own CEO points out in an open letter response to the audit, Solyndra's future does depend on finding more financing, either through an IPO or privately. If it doesn't, the leading question about what happens to revolutionary companies that fail, at the top of this post, will get an answer. When big expectations lead to big disappointments, entire industries can be affected.