Solyndra and the Perils of Green Industrial Policy
August 3, 2012
The Obama administration has made providing taxpayer dollars for so-called "green jobs" a top policy priority. Largely through the 2009 stimulus package, support for green jobs has taken the form of loan guarantees to renewable energy producers. The financial failure of a number of these firms, however, has raised the question of whether the policy itself is effective or sustainable, says Diana Furchtgott-Roth, a senior fellow with the Manhattan Institute.
The tangled tale of Solyndra, a startup company that thought it could make solar panels and sell them profitably, has become the premier example of how the government is ill-equipped to distinguish between winning and losing investments. However, Solyndra is now in the company of a number of other failed firms as well.
- Abound Solar, a solar panel manufacturer based in Colorado, filed for bankruptcy on July 2 after spending $70 million of a $400 million Department of Energy (DOE) loan guarantee.
- In August 2010, Beacon Power Corporation received a $43 million loan guarantee from the DOE to build a $69 million, 20-megawatt flywheel energy storage plant in New York, but it declared bankruptcy in October 2011 after spending $39 million of its loan.
- Nevada Geothermal, a struggling company heading into financial trouble, received a $98.5 million loan guarantee in September 2010; it is now failing to generate positive cash flows and has accumulated a substantial debt level.
- Ener1, a manufacturer of rechargeable batteries for the transportation, utility grid and industrial electronics markets, declared bankruptcy on January 26, 2012, after spending $55 million of a $118.5 million DOE grant.
- Range Fuels, a company attempting to convert forest waste into biofuels, failed to prove feasible: the company filed for bankruptcy in September 2011 after burning through loans from both the Departments of Energy and Agriculture for $76 million and $80 million, respectively.
Furthermore, e-mails released by the Office of Management and Budget (OMB) suggest that many of these bankruptcies may have been avoidable if investigating officers were allowed time to perform their due diligence. Specifically, OMB officers were forced to operate under timetables that did not allow for thorough research into the financial health of loan-receiving companies.
Source: Diana Furchtgott-Roth, "Solyndra and the Perils of Green Industrial Policy," Manhattan Institute, July 2012.
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