Abound Solar of Loveland, Colo., has become the third federally supported solar panel company to go bust in the past year, weakening the government's efforts to salvage the spluttering industry.

The photovoltaic startup is scheduled to file for bankruptcy next week. The firm's insolvency is the latest hurdle for an industry that is still facing competition from China and reeling from the 2008 recession.

In September 2011, California-based solar industry rock star Solyndra closed its doors after obtaining a federal loan of $535 million. Less than two months later, an energy storage company, Beacon Power Corp. of Massachusetts, declared bankruptcy a year after it received stimulus funds of $43 million in a loan guarantee from the Energy Department.

The closure of three government-backed solar companies in less than 12 months is an embarrassment for President Barack Obama, who has actively endorsed federal assistance to promote alternative energy and create green jobs.  

Abound Solar will complete its exit formalities and shut down its operations next week, taking away 125 jobs, the company said Thursday. The clean-energy company was approved for a $400 million loan guarantee from the Obama administration in 2010 to expand its operations at a plant in Longmont, Colo., and build a new factory in Tipton, Ind. -- a move that held the promise of 1,200 additional jobs. But the startup eventually got less than $70 million from the U.S. Department of Energy.

The Abound management's decision to seek bankruptcy protection comes in the wake of its recent failure to sell the company to potential buyers.

Plunging solar panel prices threw the company into deep waters, leading to a severe cash crunch when skeptical Energy Department officials blocked its line of credit in September last year

Competition from China made it more difficult for Abound to stay afloat. Aggressive pricing actions from Chinese solar panel companies have made it very difficult for an early-stage startup company like Abound to scale in current market conditions, the company said in a statement.

Meanwhile, the U.S. Commerce Department has decided to impose stiff tariffs on Chinese imports. In a preliminary ruling, Commerce said Chinese companies were swamping the U.S. market with government-subsidized products. Tariffs on Chinese solar-panel imports could average as much as 31 percent, as a result of the ruling.

Critics have been accusing China of manipulating its currency to gain an artificial export advantage to make Chinese goods cheaper in the U.S. and worldwide.

The reason China does it is that it works. It's steroids, said Steven Capozzola, communications director at Alliance for American Manufacturing. If you defend free trade, you have to be appalled at what China does. It violates trade agreements. It's distorting world markets.