By Rob Nikolewski, The San Diego Union-Tribune

April 11--Less than a year ago, SunEdison was a solar industry titan, billing itself as the world's largest renewable development company.

Today, it has lost $9.2 billion in equity and seen its stock price plummet from $33.40 last July to 39 cents a share Monday.

Two weeks ago, SunEdison revealed it is facing scrutiny from the Department of Justice and the Securities and Exchange Commission on questions surrounding its financing practices and how much cash it had on hand when its stock meltdown occurred.

A public filing on March 29 reported SunEdison is facing "substantial risk" of bankruptcy, prompting
Greg Jones of the financial research firm CreditSights to tell the Economist magazine, "It's like a giant layer cake of debt."

How did things disintegrate so fast?

"SunEdison expanded much too quickly, with probably too little thought,"
Jenny Chase, head of solar analysis for Bloomberg New Energy Finance, told the Union-Tribune.

Based in Missouri with solar headquarters in San Mateo County, SunEdison went on a spending spree, buying up assets and amassing $11.7 billion in debt on projects based on every continent in the world except Antarctica.

"They sent development teams all around the world, spent a lot of money, launched a lot of projects and basically none of their gambles paid off," said Chase, who is based in Zurich, Switzerland.

Accelerating the process was SunEdison's embrace of what's called a "yield co."

A financial vehicle that a number of renewable energy companies turned to in the current low-interest rate environment, a yield co is a subsidiary that buys projects from its parent company to fuel growth and free up cash.

SunEdison formed a yield co called TerraForm Power on the premise that SunEdison would build solar facilities and then sell them to Terraform, which would own the project and pay shareholders a big dividend yield.

But as capital markets got shaky, partly due to crashing oil prices, investors started taking a closer look at the quality of SunEdison's new acquisitions and concluded the company was paying far more for the assets than it should have, and the vicious cycle began.

Now the other SunEdison yield co -- TerraForm Global -- has turned on its parent company, filing a lawsuit, accusing SunEdison of failing to deliver on $231 million on projects in India.

Making things worse, SunEdison has twice delayed filing an annual financial statement and admitted to "material weaknesses in its internal controls over financial reporting."

"Based on the fact that they still haven't filed their 10K, I'm wondering whether central management even knows what is going on in all their sub-offices and development teams," Chase said.

SunEdison isn't the only renewable energy giant in trouble.

Since last fall, a Spanish multinational named Abengoa has desperately trying to hang on and not become the biggest company in the country's history to go broke.

Even though Abengoa is based in Seville, Spain, it received $2.65 billion in grants and loan guarantees through the U.S. Department of Energy to undertake solar projects in California and Arizona.

Abengoa received $1.2 billion to construct the Mojave Solar Project, about 20 miles northwest of Barstow. Pacific Gas & Electric has agreed to a 25-year power purchase agreement at the site.

DOE gave Abengoa $1.45 billion to build the Solana solar generating station near Gila Bend, Arizona.

SunEdison also got plenty of government money.

According to one subsidy watchdog organization, SunEdison has received more than $846 million in federal loans, loan guarantees and bailout assistance, not including repayments.

On the heels of the loss of $535 million in Department of Energy loan guarantees when the solar panel company Solyndra went belly-up in 2011, the SunEdison and Abengoa debacles have given solar energy critics plenty of ammunition.

"I wish I could say that I'm shocked," said
William Yeatman, senior fellow specializing in environmental policy and energy markets for the Competitive Enterprise Institute, a think tank that supports free-market solutions to energy issues.

"There's nothing more fickle than political winds and when they're not at your back and you have to compete on your own, trouble can ensue when your company or business hasn't been formed by the market forces of supply and demand."

Solar energy supporters acknowledge the SunEdison and Abengoa stories hurt the industry's image but insist their problems don't indicate larger, existential issues for the sector.

"I think the industry has been and continues to be much larger than any single company," said
M.J. Shiao, director of solar research for Greentech Media.

For instance, California has installed 3,266 megawatts of solar electric capacity, ranking it first in the nation. Utility-scale solar electric generation in the state has grown from less than 1 percent of California's energy mix in 2012 to 7.6 percent in 2015.

"The economics for solar continue to be very strong," Shiao said. "We expect the U.S. solar market to more than double this year in terms of installed capacity that's being deployed."

Last December, Congress agreed to extend federal renewable tax credits for solar another five years.

But renewables analysts say the energy landscape is growing so fast that companies have to be careful.

"Solar and wind companies have always gone bankrupt, frankly," Chase said. "Just because an industry is growing very quickly doesn't mean that all players will do well. And in fact, one reason the renewable energy industry is growing so quickly is that costs have been coming down very rapidly."

The price of U.S. solar power has dropped 70 percent since 2009, according to a report released last September from the Lawrence Berkeley National Laboratory.

But critics say the solar industry in particular and the renewable sector in general relies too much on federal, state and local tax credits and subsidies.

"Very, very rarely are subsidies a cost-effective way of addressing a problem," said
Julian Morris, vice president of research at the Reason Foundation, the Los Angeles-based libertarian think tank.

"That's because it's difficult to know which technology to subsidize and even if you have subsidies that are technology-neutral, you don't necessarily know how much the subsidy should be."

Yeatman put it more bluntly.

"None of these solar power sources can compete with conventional power sources," he said.

Chase countered by saying, "If you said every industry where something goes bankrupt was a poor industry, then there wouldn't be many good ones, would there? Coal and oil drilling, there are plenty of companies having trouble now but nobody is saying, oh it's totally built on the sand."

Chase said problems of utility-scale companies like SunEdison have little effect on the rooftop solar market, which is booming.

"It's a completely different thing," Chase said. "Keep in mind that you don't need a multinational company to do rooftop solar. Basically, you can put up rooftop solar panels if you're a company with two people, a van and a dog. Actually, you don't need a dog."

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