From sunny forecast to dark clouds: The city solar project that didn't happen

Two years ago, Gov. Rendell announced that a Greek company would build a $500 million plant at Philadelphia's Navy Yard to make solar cells. The factory would employ 400 people when it began operations in late 2011.

Despite a promise of $49 million in state inducements, HelioSphera US Inc. never broke ground. Economic development officials quietly wrote off the project earlier this year.

"The project proponents were unable to raise capital and decided not to proceed," said John Grady, senior vice president of Philadelphia Industrial Development Corp., which had pledged to donate a 40-acre Navy Yard site to the solar-panel producer.

The demise of HelioSphera's American venture is a sensitive topic these days amid a solar market in upheaval. Three American solar companies sought bankruptcy protection in August, including Solyndra L.L.C., a Silicon Valley firm whose acceptance of $528 million in federal loans has renewed a Washington debate over the Obama administration's support for renewable energy.

HelioSphera, which had shopped itself to eight states, was promised a package of grants and loans including $5 million in federal stimulus money to locate in Philadelphia. Since the company could not secure private support, no public funds were expended, state officials said.

"We were able to not lose any taxpayer money on it," said Steven Kratz, spokesman for the Pennsylvania Department of Community and Economic Development.

HelioSphera's American venture appears to have been doomed by the same volatile market conditions that undermined Solyndra and other struggling solar-panel producers.

Despite soaring demand for solar cells in the United States, induced by 30 percent federal tax credits and additional state incentives, manufacturers have produced a worldwide oversupply because of huge increases in Chinese manufacturing capacity. Solar-cell prices have dropped 42 percent this year, according to the U.S. Department of Energy.

"Chinese companies have flooded the market with inexpensive panels," Jonathan Silver, the executive director of the Energy Department's loans programs, testified to Congress this month. "And Europe, historically the largest purchaser of solar panels, is in the midst of an economic crisis that has significantly reduced demand."

Silver defended the Obama administration's solar investments, which he said last year totaled 5 percent of the $30 billion that the Chinese government spent on developing solar.