How NOT To Develop Alternative Energy -- Throwing Good Money After Bad

During 2009, no single clean energy company was touted as much as Solyndra, a start-up in Northern California that manufactured solar panels.  Although the company had intellectual property and was already in production with its custom-designed products, they were unable to get financing for a second, more efficient production facility in Fremont, California -- a town known for union labor and Democratic politicians. 


An attractive logo that cost taxpayers $390 million

The Obama Administration, therefore, decided to provide for Solyndra a $535 million guaranteed loan during May 2009 for this second facility as part of the Administration's stimulus program.  The company announced plans for 1,000 factory (e.g., union) jobs, local politicians cheered, Governor Schwarzenegger, Energy Secretary Steven Chu, Senator Barbara Boxer, and President Obama toured the plant, and there was much back-slapping about the "green economy" and "sustainable growth."

Fast forward to November 2010.  After groundbreaking and launching forward with the government-backed loan for its modernization, Solyndra announced that:

1) Plans to finish the new plant were suspended after expenditure of $390 million.
2) The company decided not to hire any of the 1,000 new workers.
3) In fact, 175 current employees were to be laid off, almost 20% of the work force.

What happened?  The plant could not compete with products made overseas and in the USA.  An auditor's report said that the company was never profitable and the loans from the Federal Government will not be repaid.  Despite their claims for innovation, Solyndra products remain 4X more expensive than the industry leader in Arizona ($3/watt versus $0.75/watt) and 2.5X more expensive than Chinese imports ($1.20/watt);  Chinese subsidies can't be blamed for the lack of sales. 

Should we be surprised?  No.  Lest readers not already know such -- Northern California is a very expensive place to live; California taxes are amongst the highest in the nation, both personal taxes and business taxes; union labor is the most expensive labor in the country;  and no doubt the unions spent the last 12 months haggling over work rules and union benefits rather than focusing on helping a for-profit corporation make a profit.  You don't need a rocket scientist to surmise that perhaps Fremont, California was a lousy place to build anything.

Financial markets no doubt had already made exactly such a judgment.  In Northern California, there is no shortage of capital firms focusing specifically on clean energy; yet experts at these places know a lemon when they see one.   For clean energy investments, $1.5 billion was spent in North America during Q1 2010; $1.4 billion in Q2 2010; see below.   Why didn't any of this flow toward Solyndra?  No doubt because because their business model could not stand up to even the most generous scrutiny.

Only a Stalinist could really, really believe that the Government can truly pick winners and losers in business.  In this case, the taxpayers have to eat the $390 million in defaulted loans.  Hats off to Washington DC, which is never short of fools who squander money -- our money, never their own -- with abandon.  Hats off to Sacramento, where both Democrats and Republicans continue to prove they are clueless when it comes to common business sense. 

A Crying Shame:

March 23, 2009 -- "Energy Department Delivers Solar Loan to Solyndra"
http://news.cnet.com/8301-11128_3-10201858-54.html

January 30, 2011 -- "Time to Investigate Obama's Solyndra Solar Green Fraud in California"
http://www.uncoverage.net/2011/01/time-to-investigate-obamas-solyndra-solar-green-fraud-in-california/

January 31, 2011 -- "Fremont's High-Flying Solyndra Hits a Rough Patch"
http://www.mercurynews.com/business/ci_17221170?source=rss&nclick_check=1

Feb 22, 2011 -- "Panel:  Green Jobs Company Endorsed by Obama and Biden Squandered $535 million in Stimulus Money"
http://dailycaller.com/2011/02/22/panel-green-jobs-company-endorsed-by-obama-and-biden-squandered-535-million-in-stimulus-money/

Smart Investors Know Better:

March 31, 2010 -- "Record Number of Clean Technology Venture Deals in 1Q 2010 [$1.9 billion]"
http://cleantech.com/about/pressreleases/Q1-2010-release.cfm

July 1, 2010 -- "Global Clean Technology Venture Investment Increases 65 Percent in 1H 2010 [$2.02 billion]"
http://cleantech.com/about/pressreleases/Q2-2010-release.cfm

Obama at Solyndra announcing that "the future is here,"
blissfully unaware of the consequences of
his use of taxpayer money 




Energy Secretary Chu and Governor Schwarzenegger --
all smiles and ignorance at the groundbreaking

  

Senator Barbara Boxer waxing eloquent about "green jobs"
and the "sustainable economy," unaware that the
end result would be no jobs and squandered taxpayer money.