energy

The Solyndra Syndrome

We’re so good at learning the wrong lessons Oct 5 2011

That the Solyndra bankruptcy and the loss of $528 million in government backed loan guarantees smacks of scandal there is no denying. A money “bundler”for Obama’s 2008 campaign who was linked to a venture capital fund invested in Solyndra made 16 visits to the White House since 2009, four of them the week before the loan guarantee was awarded. An award to the company that was rushed, say accusers, so that the President could turn the award announcement at a Solyndra plant into a publicity event. A deal that an analyst at the Office of Management and Budget had characterized just two months earlier as “NOT ready for prime time”. Company principals who appeared before a House investigative committee and pleaded the 5th amendment rather than answer questions. An FBI criminal investigation on “whether Solyndra executives knowlingly misled the government” according to the Wall Street Journal.

When does the movie open?

No question that this debacle has aspects that require investigations to go wherever they lead. But where the reaction went off course has been its use by Republicans to discredit the entire loan guarantee program. A hearing before a House committee led by Darrell Issa (R. Ca) used this one case of
Solyndra rooftop array with individual cylinder as inset.
failure — which represented only 1-1/3% of the $40 billion loan program — to say that money would be better spent on “domestic carbon-based resources” — that is, coal, oil and gas — than on the development of new non-polluting industries. A Michigan Republican named Fred Upton called it a “taxpayer rip-off”, he from a state that saw the entire auto industry set back on its feet by taxpayer money.

Republicans were somehow unembarrassed by Eric Cantor’s jaw-dropping requirement for matching spending cuts to pay for disaster relief after a particularly ravaging year of weather and hardship. So what did they cut? The very program meant to create new industries leading to new jobs — $1.5 billion from the final $4 billion of the loan guarantee fund yet to be disbursed. After all, the fund “gave us the Solyndra scandal”, Mitch McConnell said.

Illuminating the hypocrisy of it all, Dana Milbank of the Washington Post reminded us that Republicans are decrying a program they originally authored. The loan guarantee measure was part of the 2005 energy bill of the Republican-controlled House. Bush’s energy secretary said in a press release:

> “Loan guarantees aim to stimulate investment and commercialization of clean energy technologies to reduce our nation’s reliance on foreign sources of energy.”

Solyndra itself was cleared to participate in the loan program by the Bush Energy Department. Its innovative technology wasn’t covered in the regulations, so they were altered to make Solyndra specially eligible.

Beyond Solyndra

All of which obscures the importance of the loan guarantee program. Having reversed field by disavowing a government initiative that they themselves put in place, Republicans now find it wasteful and somehow think that, in a free market, if an industry is viable, it should arise on its own. (At the same time refusing to end the billions of dollars in subsidies to the long ago matured oil, gas and coal industries.)

That is the posture that has allowed China, which subsidizes solar heavily, to take over the industry, rising from 6% of world market share a few years ago to 54% now. This is how we lose one after another industry, all the while proclaiming that the first priority is jobs. “The American solar industry employs more people than either steel or coal, and it’s a net exporter”, says New York Times financial columnist Joe Nocera, yet Republicans seem to want to snuff it out altogether.

So there was Bloomberg Business Week joining the chorus saying “Solyndra’s rapid rise and fall should have played out entirely in the private sector. Silicon Valley is thick with venture capitalists willing to finance risky, iconoclastic startups.” Half a billion? What nonsense. If all those venture capitalists were ready to step up, how to explain why China made off with our solar industry?

Development of transformational industries, involving science and engineering that may or may not work, entails risks the private sector won’t take. It requires a governmental energy policy or else we hand the win to China, which invested $30 billion in subsidies to just its solar industry last year alone.

Without a government assist, no new technology can compete with an American power industry that burns cheap coal in plants built up to 50 years ago. That is the technology we will find ourselves stranded with if we do not invest in the future. And those power plants additionally benefit from not having to pay a cent for consuming an irreplaceable Earth asset — the hydrocarbons that took millions of years to form — and then pay no cost for spewing millions of tons of carbon dioxide into the atmosphere when they burn those hydrocarbons. The result is to socialize the cost of pollution while privatizing the profits.

And yet no movement toward the obvious: some form of carbon tax to end that free ride. Making fossil-fuel power more expensive would give nascent green energy industries the chance to compete, which in turn would attract capital. Instead, the nation stumbles along, making no changes, developing no comprehensive energy policy, as we watch China take away another industry.

Immediately the cry goes up: “A carbon tax means we would have to pay more for electricity”. Of course we would! And we should. Our power is too cheap. We waste it in unconscionable amounts. Let’s make it cost more. We’ll use less.

Technology: Our Only way to get ahead

Solyndra’s technology was cutting edge. Rather than flat-panel photovoltaic cells using silicon, it arrayed cylindrical tubes coated with copper-indium-gallium-selenide, a design that picks up light from any direction. The loan went forth at a time when a worldwide shortage of silicon owing to the demand of the mushrooming solar panel industry had boosted prices 1000-fold. That made Solyndra’s silicon-free technology attractive. Then new silicon plants were built and the price plunged nearly 90 percent from the peak in 2008.

So in hindsight Solyndra’s ingenious technology was a risky bet, but a zero failure rate in a program that probes unknown and untried technologies defines a program that is too risk-averse. “If you place no bets, you lose every single time”, says Jennifer Granholm, former governor of Michigan. This is high stakes poker. The nation’s future is in the pot. It takes money to play against China.

Bloomberg Business Week later redeemed itself by labeling “heartening” that the Energy Department awarded just one day after Solyndra’s crash $145 million spread on 69 solar energy projects in universities, government research labs, and major corporations.

And that’s just solar. The loan guarantee program is funding dozens of other innovative projects such as crucial advanced automobile battery development — once again, in a race with China.

The right lesson? Wake up America. We’ve got to do this.

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