First, here’s some not-so-good news on the solar panel industry from USA Today:

Summer may be winding down, but investors holding solar energy stocks are getting one nasty burn. Shares of companies that make solar panels have flamed out this year, missing out on what’s been a significant recovery in the stock market.
Market leaders, including First Solar(FSLR) and SunPower(SPWRA), for instance, are down 12% and 30% this year, even as the benchmark Standard & Poor’s 500 index is up 13%. And the Market Vectors Solar Energy ETF, which tracks stocks in the industry, is down 6% this year.
Unlike the big drops in other once-hot stock groups, solar’s troubles aren’t just caused by speculators rushing out. There are some real problems in the industry behind the sell-off of the stocks:
Last year, for instance, Spain put a cap on its solar incentive program, causing the demand from a country that accounted for a big piece of the market to shrink 80%, Bullard says. Of even more concern is Germany, the largest solar consumer in the world, which is mulling a cut to incentives to buyers of solar power, Hersey says. “Since Germany is the largest market, it sets the tone,” she says, adding some solar companies get 60% of revenue from Germany. The subsidies have become unpopular because much of the money is going to Chinese, not German, solar companies, she says.
A glut of solar panels. Makers of solar panels were so sure demand would surge this year, they went into overdrive producing them, says Christine Hersey, analyst at Wedbush Morgan.
But the flood of supply has swamped demand. Prices of solar modules are in free fall, down about 50% since last year, says Nathaniel Bullard of energy market research firm New Energy Finance. Solar panels now sell for about $2.50 per watt, he says.
Questions over government subsidies. Thanks to generous programs to encourage green power, European nations have been top buyers of solar modules. However, many are scaling back their subsidies, causing more softness in demand.

Which makes the finialization of the Department of Energy’s $535 million loan guarantee to solar panel maker Solyndra all the more suspect:

September 5, 2009
by The White House
Recovery Act funding will accelerate job creation and help expand marketplace for innovative solar electric panels
FREMONT, CA – September 4, 2009 – (RealEstateRama) — Vice President Joe Biden, appearing via satellite from Washington D.C., today announced the Department of Energy has finalized a $535 million loan guarantee for Solyndra, Inc., which manufactures innovative cylindrical solar photovoltaic panels that provide clean, renewable energy. The funding will finance construction of the first phase of the company’s new manufacturing facility. Annual production of solar panels from the first phase is expected to provide energy equivalent to powering 24,000 homes a year or over half a million homes over the project’s lifetime. Solyndra estimates the new plant will initially create 3,000 construction jobs, and lead to as many as 1,000 jobs once the facility opens. Hundreds more will install Solyndra’s solar panels on rooftops around the country.
“This announcement today is part of the unprecedented investment this Administration is making in renewable energy and exactly what the Recovery Act is all about,” said Vice President Biden. “By investing in the infrastructure and technology of the future, we are not only creating jobs today, but laying the foundation for long-term growth in the 21st-century economy.”
“It is time to rev up the American innovation machine and reclaim our lead on clean energy,” said Secretary Chu. “This investment is part of a broad, aggressive effort to spark a new industrial revolution that will put Americans to work, end our dependence on foreign oil and cut carbon pollution.”

Archival Planet Gore coverage of Solyndra here.