NCPA - National Center for Policy Analysis

The Domino Effect of Green Energy Failure

January 15, 2013

The collapse of a government-subsidized battery manufacturer has caused the production of a government-subsidized electric car company to halt, raising questions about the government's decision to support the two companies, says The Free Beacon.

  • Fisker Automotive received approval for a government loan totaling $529 million in 2010 to make an extended-range electric luxury car called the Karma.
  • The Karma uses a battery pack made by A123, which received a grant from the Department of Energy in 2009.
  • A123 filed for bankruptcy in October, leaving Fisker, at least temporarily, without a battery manufacturer.
  • Fisker has suspended production of the Karma until A123's sale is complete.

Meanwhile, documents obtained by the Free Beacon indicate Fisker has its own financial issues. But the Department of Energy had reason to worry even before then. An internal email dated Feb. 26, 2010 --almost two months before the department announced Fisker's finalized loan -- says Fisker was "undercollateralized."

A123 added to Fisker's woes when it recalled many of their batteries, including the ones manufactured for the Karma. Fisker does not have a battery manufacturer now that A123 is bankrupt. It will restart manufacturing once A123's sale is finalized and it is able to renegotiate with A123's new owner, according to Yahoo! News.

A123's bankruptcy is not the first time that a government-subsidized company has collapsed and hurt another government-subsidized company.

  • The company Prologis received a $1.4 billion partial loan guarantee for its Project Amp from the Department of Energy in September 2011.
  • Solyndra's collapse delayed Project Amp, however, raising concerns among Republican lawmakers of favoritism within the Energy Department for Solyndra.

William Yeatman, an energy expert at the Competitive Enterprise Institute, described the Obama administration's funding of green energy companies as "vertical monopoly-type subsidy," where a company owns an entire industry's supply and production chain. He said that the government, under Obama, has subsidized the entire green industry, from suppliers of car parts, to manufacturers of the cars themselves, to buyers through tax credits for purchasing hybrids.

Source: Andrew Evans, "The Domino Effect of Green Energy Failure," The Free Beacon, December 20, 2012.


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