And his mean green wealth-wasting machine.
Oct 3, 2011, Vol. 17, No. 03 • By STEVEN F. HAYWARD
The spectacular collapse of Solyndra has all of the trappings of an epic Washington scandal, with serial revelations of embarrassing and potentially improper White House machinations to secure a $535 million federal loan guarantee for a startup company with dubious prospects of success. The sudden bankruptcy of the Fremont, California, manufacturer of solar panels—after it was feted as a model creator of “green jobs” by President Obama and Vice President Biden—has already featured FBI raids, contentious congressional hearings, and demands for a special prosecutor to investigate. The plot thickened further last week when Solyndra’s two top executives, who made 20 trips to the White House while their loan application was under consideration, invoked the Fifth Amendment rather than answer questions from the House Energy and Commerce Committee.
Hey, it looks creditworthy to me: Obama tours Solyndra, May 2010.
Even if the administration eventually escapes any finding of legal wrongdoing, Solyndra threatens to haunt the green energy campaign in much the same way that the collapse of Lincoln Savings became the emblem of the savings and loan industry’s recklessness in the 1980s. The Solyndra story includes Obama campaign donors and everybody’s favorite Wall Street whipping boy, Goldman Sachs, in the middle of the whole sorry mess. Yet it would be a mistake to mark the story down as merely another excrescence of crony capitalism. It is much worse.
The green energy lobby is probably hoping that Solyndra’s failure can be portrayed as an isolated case of illegal influence, lest it cast a shadow over the entire edifice of massive subsidies that green energy requires to survive. But Solyndra is merely the most spectacular of several recent green energy failures. And beyond the domain of green energy, the Solyndra fiasco is emblematic of the Obama administration’s economic philosophy, which harks back to the mid-20th-century hubris of state-planned enterprise. It is also fair to note that the origins of this fiasco predate the Obama administration, and illustrate the continuing incoherence and wishful thinking of U.S. energy policy.
Here’s what we know so far: Solyndra was founded in 2005 on the concept that lightweight, high-efficiency thin-film solar panels in a unique tubular design could compete effectively with traditional silicon-based flat panels. Thin-film solar is the energy equivalent of thin-thigh diets—dazzling results are always promised but seldom delivered. Still, the high price of silicon solar panels at the time, along with $78 million in initial capital from several investors, including the Walton family (of Walmart fame) and George Kaiser, an Oklahoma energy billionaire and subsequent donor to the 2008 Obama campaign, were enough to get the company up and running in 2006. At roughly the same time, Congress passed and President George W. Bush signed the Energy Policy Act of 2005, another in a long series of energy acts that essentially gave a little to “all of the above” on everyone’s wish list. One section of the law created a new loan guarantee program in the Department of Energy “to support innovative clean energy technologies that are typically unable to obtain conventional private financing due to high technology risks.” In other words, it was intended to back projects too unpromising for the marketplace.
Solyndra came knocking at the DOE’s loan office in December 2006 asking for a loan guarantee to enable it to build a brand new manufacturing facility in Fremont. (The loan amount requested in the initial application has been redacted from the publicly available documents.) This was only a few weeks after the DOE announced the program but before Congress had appropriated funds and before DOE had even begun the formal rule-making process for the program. DOE didn’t issue the final regulations until October 2007, so the due diligence process for Solyndra and every other applicant spilled over into 2008. DOE’s main interest with the loan program at that time was in pushing nuclear power technology and improvements to the electricity grid. So Solyndra’s application proceeded slowly. Meanwhile, Solyndra raised another $144 million in private capital during 2008.
In the closing days of the Bush administration in January 2009, the Department of Energy tried to get the Solyndra loan through the Office of Management and Budget’s review, but the OMB team found Solyndra’s application insufficient. OMB “remanded” the application back to DOE for further review and modification. As when the Supreme Court remands a case to lower courts for reconsideration, this step is usually tantamount to killing the application.
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