On a September day two years ago, a crowd of luminaries gathered at a Fremont field to toast the groundbreaking for Solyndra's new factory.

The country was shedding jobs at an alarming rate. Anxious to create more, federal officials had given Solyndra a $535 million loan guarantee to build a factory that would make tube-shaped solar modules. It was the Obama administration's first big gamble on green technology, a young industry it hoped would drive the nation's recovery.

"These are the jobs of the future," Vice President Joe Biden said via video screen. "These are the jobs that won't be exported. These are the jobs that are going to define the 21st century and the jobs that are going to allow America to compete and to lead like we did in the 20th century. Out there at Solyndra, you guys have it figured out."

Two years later, Solyndra has filed for bankruptcy, its gleaming factory shuttered, a casualty of competition from low-priced solar manufacturers in China. Most of Solyndra's 1,179 employees have lost their jobs.

On Sept. 8, the FBI and the Energy Department's Office of Inspector General raided Solyndra's offices, carting off boxes of documents. Although neither agency will discuss the investigation, it is widely believed they are looking into the government loan.

Firestorm of criticism
Solyndra's rise and fall came in just six years - quick even by Silicon Valley standards. The bankruptcy touched off a firestorm of criticism over Obama's green-jobs efforts, with Republicans questioning the wisdom of the federal government playing venture capitalist. They also asked whether political pressure from the White House led bureaucrats to green-light Solyndra's loan guarantee without properly weighing the risks.

"In an apparent rush to push stimulus dollars out the door, the Obama administration wasted $535 million in taxpayer funds in guaranteeing a loan to a firm that has proven to be unviable in the global market," said Rep. Cliff Stearns, R-Fla., who chaired a congressional subcommittee hearing on Solyndra last week.

A review of Solyndra's brief history shows a company that generated intense buzz and big private investments for an innovative product, only to see dramatic changes in the market leave that product behind. It reveals government officials taking risks to salvage their investment as the company's outlook dimmed. And it shows Solyndra executives telling members of Congress not to worry, even as the company teetered on the brink of bankruptcy.

Solyndra started life in 2005 with an insight - and a different name.

Company founder Chris Gronet had noticed that traditional, flat solar panels squander room on a rooftop. They're tilted toward the sun, and in order to stack multiple rows on a single roof without shadowing each other, they must sit several feet apart.

"Look at the picture long enough, and you're going to realize there's a lot of wasted space, and a cylinder might work better," Gronet, a former semiconductor executive with Applied Materials, said in a 2008 interview with The Chronicle.

Module's advantages
He founded Gronet Technologies in May 2005 and changed its name to Solyndra eight months later. In classic Silicon Valley fashion, Gronet and his team kept their work quiet.

They developed a solar module consisting of one glass tube nested inside another. Wrapped around the inner tube were 150 solar cells made from copper, indium, gallium and diselenide, rather than silicon.

The oddly shaped module had several big advantages. It could absorb light from many angles, so it didn't need to be tilted skyward. It didn't weigh much. Placed in open racks several inches off the rooftop, the modules didn't catch the wind, so they didn't need to be bolted or weighed down with ballast. Installation was easy.

The absence of silicon also was a bonus. Because of a worldwide shortage, silicon prices were rising from 2005 through 2007. That kept the price of standard solar cells from falling, even as production increased.

By the time it exited stealth mode, in October 2008, the startup had raised a hefty $600 million in private funding. Solyndra had established its first factory, in Fremont, and lined up $1.2 billion in orders for its solar tubes.

The company was growing fast, with roughly 500 employees. Software engineer Lindsey Eastburn joined in 2008, attracted by Solyndra's vision. "I picked it because, of the solar companies I'd worked for, it seemed to be the most determined to manufacture in the United States," he said. "They had determined what their process would be and how to make it faster and cheaper."

The company's game plan depended on automating and expanding production to drive down costs. To do it, Solyndra needed a bigger factory.

Anticipating that need, company executives had applied in 2006 for a new federal loan program that was designed to fund innovative energy technologies. The program had been established under President George W. Bush's Energy Policy Act of 2005.

Making the cut
By October 2007, the U.S. Department of Energy had done enough preliminary vetting to reject more than 120 companies. Solyndra was one of just 16 to survive the cut. By the end of 2008, the company was considered the likely winner of the program's first loan guarantee, Jonathan Silver, current head of the department's loan office, told a congressional panel last week.

But in January 2009, the department's credit committee decided against the staff's proposal to issue Solyndra a $535 million loan guarantee, saying to do so would be premature. The department still needed an independent study of the company's long-term market prospects, including the possibility of "obsolescence," the committee wrote in a memo. At the same time, the committee concluded that "the project appears to have merit."

Expediting U.S. loan
After Obama's inauguration that month, incoming Energy Secretary Steven Chu made speeding up the department's loan programs a priority. Obama had touted renewable power and green jobs, and he made the loan program part of his stimulus package.

As the Energy Department moved closer to approving Solyndra, the White House pushed for faster action, according to e-mails later obtained by congressional investigators.

The e-mails show that the White House wanted Obama to announce Solyndra's conditional loan guarantee in March, during a previously planned California trip, and staff at the Office of Management and Budget raced to finish their review of the deal.

"If you guys think this is a bad idea, I need to unwind the WW (West Wing) QUICKLY," Ronald Klain, then chief of staff for Biden, wrote in a March 7 e-mail.

Troubled economy
The credit committee finally gave its blessing. Solyndra received a preliminary loan guarantee on March 20, 2009, the first in the loan program's four-year history.

Much had changed in those four years. The economy had tanked, banks had stopped lending, and green-tech companies trying to expand were struggling to find financing.

"To get this kind of financing today from a public bank would be a challenge," Kelly Truman, Solyndra's vice president of business development, told The Chronicle at the time. "To have this government opportunity is great."

Scheduling pressure from the White House resurfaced months later, as the Energy Department prepared to finalize Solyndra's loan guarantee. White House staff wanted Biden to speak at the loan announcement ceremony, which would double as the new factory's groundbreaking. He could speak via satellite on Sept. 4.

"I would prefer that this announcement be postponed," a senior staff member of the Office of Management and Budget wrote in an e-mail. "This is the first loan guarantee and we should have full review with all hands on deck to make sure we get it right."

In the end, Solyndra got its full loan guarantee.

The company, however, wasn't done trying to raise funds.

Sobering filing details
Solyndra management wanted to build its new factory in two phases. The government funding would help pay for the first phase, which would cost an estimated $733 million. For the second, the company decided to turn to the stock market.

In December 2009 Solyndra filed papers with the U.S. Securities and Exchange Commission for an initial public stock offering worth $300 million. For a company that had generated so much excitement, the filing's details were sobering. The company had an accumulated deficit of $505 million and expected to incur net losses "for the foreseeable future." The second phase of factory construction would cost an additional $642 million.

"When you first heard about the (venture capital) money, you'd think, 'Wow, there must really be something going on here,' " said Stephen Simko, a senior stock analyst at the Morningstar research firm. "And then the S1 (filing) came out, and it was 'Holy crap, these numbers are really bad.' "

Solyndra also turned, for the second time, to the federal government. It applied for an additional loan guarantee, this time for $469 million, to help pay for phase two of the factory's construction.

Neither the second loan nor the IPO would happen.

The solar market was changing quickly. The silicon shortage was over, heavily subsidized factories were opening in China, and solar cell prices were starting to plunge.

Solyndra, still too small to achieve economy of scale, had production costs of about $4 per watt in late 2009, while its competitors could make cells at $1.25 a watt.

Market prices drop
While innovative, "Solyndra's technology was capital intensive," said Shyam Mehta, senior analyst with GTM Research, which tracks green companies. "It was expensive to design and manufacture, and they chose a manufacturing approach that made it quite difficult to lower the cost."

The competition's prices were changing so quickly that the company couldn't keep up.

"In all our employee meetings, Solyndra had a road map to becoming cost-competitive once we reached a certain volume target," said Char Tang, a quality engineer who joined the company in 2007.

"The second-generation machines coming online were supposed to make our manufacturing more efficient and lower our costs. But the market pricing kept dropping at a faster rate than was in the initial assumptions. Every time they tried to plan a competitive cost for two or three quarters ahead, it always ended up being revised. It felt like we were aiming at a moving target."

In March 2010, auditors with PricewaterhouseCoopers questioned whether Solyndra could survive. Despite raising $970 million in venture capital by that point, the company's deficit had reached $557.7 million.

Obama visited the new plant - still under construction - that May, praising the company and insisting he was "not prepared to cede America's leadership" in green technology.

The next month, Solyndra canceled its IPO, citing market conditions. In November, it closed its original factory, firing 40 full-time employees and 135 part-time workers.

"Pretty much everybody had lost their fantasy that there would be a big IPO and we'd all be rich," Eastburn said. "We had all lowered our expectations quite a bit to just being in the market and making a difference. In the back of our minds, we were all probably hoping some large company would buy us out."

Solyndra was running out of cash. Last fall, the Energy Department warned that it would not disburse any more of the loan money unless Solyndra lined up additional private financing, according to congressional investigators.

Restructuring loan
Solyndra's two largest investors - Argonaut Ventures and Madrone Partners - agreed to provide a $75 million loan with the option of another $75 million later. In return, they wanted the department to restructure Solyndra's loan agreement, extending the repayment schedule and giving the private investors the right to have their $75 million repaid first in case of bankruptcy.

In February 2011, the Energy Department reluctantly agreed. It was a risk, but officials decided that the company's value as a going concern would be greater than in liquidation. Solyndra had already received $460 million of government money, and the new factory had started production in January.

"Accordingly, DOE determined that restructuring the loan guarantee gave the U.S. taxpayer the best chance of being repaid," Silver told members of Congress last week.
Deciding to close plant

But the market changes that had pushed Solyndra to the brink kept accelerating. In the first eight months of this year, solar cell prices fell another 42 percent, by the Energy Department's estimate.

Solyndra executives hunted for more private financing. But their troubles had caught the attention of Republicans on the House Energy and Commerce Committee, who started investigating the company's loans. They noted that Argonaut Ventures is run by George Kaiser, an Oklahoma oilman who served as a campaign contribution bundler for Obama's 2008 campaign. (Democrats would later point out that Madrone Partners is linked to the Walton family of Walmart fame, known for supporting Republican candidates.)

Brian Harrison, who had replaced Gronet as CEO in 2010, met with committee members in July to assure them the company was on firm footing. According to two members of Congress present, Harrison said the company was "in no danger of failing."

Market conditions continued to deteriorate, forcing Solyndra to cut its revenue expectations. Its private backers balked at giving the second $75 million loan, according to investigators.

At the beginning of August, the company asked the Energy Department to restructure the loan a second time. Solyndra also searched for more investors, with the department's help. But the office ultimately decided a second restructuring wasn't feasible and told the company so on Aug. 30.

The next morning, Harrison met with Solyndra factory employees finishing the night shift and told them the plant would close.

Industry's evolution
Solyndra filed for bankruptcy on Sept. 6. In the end, the company received $528 million of taxpayer cash, and analysts say it's highly unlikely the government will get all of it back.

The political storm over the bankruptcy is gaining strength, with Harrison scheduled to testify before the House Energy and Commerce Committee this week. Clean-tech analysts, meanwhile, say Solyndra's demise is part of the solar industry's evolution. Inevitably, as technologies mature and prices decline, some companies will thrive and others will die.

"This is the nature of the venture industry," said Ron Pernick, managing director of the Clean Edge Inc. market research firm. "It's no surprise that you're going to have losers. For every Amazon, there were a dozen Webvans."

Solyndra's short history
2005

May: Company founded by Chris Gronet. Department of Energy loan program created.

2006

December: Solyndra submits pre-application for DOE loan.

2007

Company leases first factory, Fab1, in Fremont.

October: DOE invites Solyndra and 15 other companies to submit full applications.

2008

July: First commercial shipments of Solyndra's solar panels.

2009

March: DOE gives company conditional loan guarantee for $535 million.

September: Loan guarantee finalized, Fab2 construction begins.

December: Company files papers for initial public stock offering.

2010

March: PricewaterhouseCoopers auditors question company's financial outlook.

May: President Obama visits factory.

June: Solyndra cancels IPO.

November: Company closes original factory, Fab1, and lays off 40 full-time employees.

2011

January: Commercial production begins at Fab2.

February: DOE agrees to restructure loan, and private investors provide another $75 million.

June-July: Company tries to raise more funding, from outside investors as well as ongoing investors.

July: Solyndra CEO Brian Harrison tells members of Congress that company is "in no danger of failing."

August: Company and DOE negotiate over a second loan restructuring. DOE and investors discuss bridge financing. Investors purchase $3 million of Solyndra's inventory on Aug. 29. DOE tells the company on Aug. 30 that the restructuring and bridge financing wouldn't happen. Company closes factory on Aug. 31.

September: Company files for bankruptcy. FBI raids Solyndra office.

(By David R. Baker and Carolyn Said*, San Francisco Chrnonicle, 18/09/2011)

* E-mail the writers at dbaker@sfchronicle.com and csaid@sfchronicle.com.