Solyndra -- "Hate to say it, but I told ya so!" **

Frequent readers of this blog will recall my prior post (How NOT to develop alternative energy,), when I critiqued the current Adminsitration's practice of crony capitalism, e.g., for which the Federal Government selectively hands out taxpayer dollars  to green energy companies, especially those well-connected to the Obama Administration.  In the article I also forecast the demise of Solyndra, the darling of the solar industry, which received over $500 million in Department of Energy-backed loans  (yes, they were stimulus funds) to build a new solar panel manufacturing plant in Fremont, California.  There were so many reasons why this was a brilliant political decision (consult the blog post -- be advised that Obama, Governor Schwarzenegger, and Senator Boxer all were part of the festivities), and countless more why it was a horrible, wretched business decision, doomed to failure.  Once again, the marketplace delivered its unbiased, Darwinian, harsh message.  Solyndra filed for bankruptcy this week , unable to compete in the marketplace, and the taxpayers are out $500 million and change.*  Even the mainstream media is horrified at the waste of taxpayer dollars (see this video, this video, and multiple articles that come up via Google).

To say this is maddening is an understatement.  It doesn't surprise me that businesses try and get Government money; after all, such has been happening since the foundation of the Republic and was even predicted by
Benjamin Franklin.  The tragedy is that the current Administration, with all of its leftist tendencies, wholeheartedly gave Solyndra so much money, all because of the romantic notions that "green energy" conjures up in the heads and hearts of today's leftists.  Sheesh.

The Federal Government provides countless ways for companies to get funding, relatively easily, for good ideas -- Small Business Innovation Research (SBIR) contracts, DARPA seedling contracts, NRO Director's Innovation Initiative (DII) contracts, and countless others.  DefCon is certainly willing and able to help any and all clients pursue funding sources via these paths.  The dollar amounts are smaller, but the long-term opportunities are always excellent for ideas with merit, and you don't need to be a multimillionaire businessman, already cozy with the Obama Administration.

So, Solyndra, begone!  Trouble us no more.  And it is my fervent hope that the nation has learned a lesson, once again, that the Government should not be picking winners and losers in the economy.
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* I suppose we should be thankful that the Obama Administration, while having extreme socialistic tendencies, is not Stalinist.  Were such the case, the Administration would have banned competing import products, restricted the market share of American competitors, and FORCED the population at large to purchase Solyndra products.  Just image how effective THAT action would have been.  

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** This may well become the Obama Administration's largest scandal, dragging well into the 2012 election season.  FBI raids, favoritism due to excessive lobbying, favoritism because Solyndra's owner was a FOB (friend of Obama), ignored warnings of impending disaster, employee awareness that the company was doomed even as the money was being spent.  Even John Stewart of the Daily Show is using the Solyndra Scandal (as it's now called) as fodder for his evening show.  As for whether one should take comfort in the exposure of this corruption ... well, suffice it to say that eternal wisdom might well be a source of comfort.. 

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.

Energy -- Even Splitting the Difference is Good News

The next few upcoming years could be difficult for defense and government contractors.   Budget cuts are coming, as commented upon in earlier blogs, especially to large-ticket military hardware and defense items.  But there is good news for innovators, especially in alternative energy.

The Obama Adminstration has been a boon to alternative energy.  During its first budget year, it finally provide funding to the previously-moribund DOE's version of DARPA, called ARPA-E.  Stimulus funds totalled $400 million and they continue to be issued in various programs, often in collaboration with the Department of Agriculture. 

Obama's proposed FY12 budget provides for $550 million for ARPA-E, which is a huge amount of funding for what is still a fledgling agency; it also provides for $588 millio for advanced vehicle concepts.

House Republicans countered with much lower values -- $50 million for ARPA-E and similar large cuts elsewhere.

Where will the budget battle end?  No doubt, somewhere in the middle.  This is good news for small businesses looking to get new business with alternative energy solutions.

Canadian Innovations and Solutions

Defense Connections LLC supported 8 Canadian companies last week at the AFCEA West 2011 conference in San Diego. Many of them had very unique solutions, technologies, and services to offer, and Defense Connections' role was to provide introductions and help foster new relationships. I thought it important to feature each one here, too, with a brief overview of capability and, especially, value and impact. More details about each company, and official company information, is available on the respective web sites.

Delta Crypt provides security and encryption solutions for networks and personal computers. What is most significant about this gem is the availability, as COTS, of a solution to "data leak" or the deliberate or accidental loss of information on thumb drives. An enterprise that issues (and thereby controls) the PCs and thumb drives can limit the exchange of information to only "allowed" devices. If someone tries to download information onto an unapproved device, the transfer is disallowed; if an approved device is placed into the USB port of an unapproved computer, the information cannot be transferred or even viewed due to encryption. For more information, see www.deltacrypt.com.

SAE Inc. provides innovative, grounding, cathodic (e.g., corrosion) protection, and AC mitigation solutions. They use multiple proprietary solutions that significantly extend the life of the grounding protection solution and the physical hardware (tower, building, piping, fuel tank) itself. In addition, the solutions are considerably more environmentally friendly by restricting the contamination of groundwater. For more information, see www.saeinc.com.


Alphacasting Inc. is a world leader in precision casting for over 120 different types of alloys of aluminum, stainless steel, carbon steel, bronze, titanium, and other exotic alloys. What distinguishes Alphacasting is their breadth of their capabilities to cast multiple alloys and their service to multiple industries including aerospace, defense, transportation, communications, and medical. Website: www.alphacasting.com

Sensor Technology Ltd. (SensorTech) offers creative and high-performance solutions for underwater sensors, including and especially hydrophones, using piezoelectric materials. Piezoelectric materials offer the advantage of wider bandwidth and reduction or elimination of unwanted modes of vibration in low frequency transducers. They have hundreds of thousands of units deployed worldwide in a variety of environments including adverse conditions such as Arctic deepwater, and they are shipping tens of thousands per year to both defense and commercial customers. Standard product lines and custom designs are available. For more information, see: www.sensortech.ca

Gallium Visual Systems Inc. focuses on COTS software development tools for Command and Control (C2) and Situational Awareness displays for defense, aerospace, aviation, and commercial uses. They have incumbency in multiple major US defense programs including the Navy's Aegis and the USMC's Common Aviation Command and Control System (CAC2S). Their tools are powerful and enable more rapid programming and reprogramming as requirements or demands grow on the C2 systems. Information: www.gallium.com

Norsat International Norsat provides telecom equipment to defense and commercial markets, including microwave components and portable satellite systems. Current US customers include the Army and the USMC, and their systems are frequently procured by the Public Affairs agencies of government offices. Consult: www.norsat.com

Medatech Engineering provides engineering solutions to the mobile and heavy machinery industries. The name derives from Mobile Equipment Design and Automation Design and Automation TECHnologies and the company's focus in providing custom software, hardware, electrical, mechanical, and hydraulic solutions for mobile equipment. They are an excellent source for control systems and retrofits and have designed systems for markets including defense, construction and mining. For more information: www.medatech.ca

London (Ontario) Economic Development Corporation (LEDC) The city of London, Ontario is a center of technology and innovation in Canada and offers a skilled workforce, a breadth of industries, and a regional commitment to business. American defense companies, especially those with contractual commitments to meet offset requirements, will find LEDC an especially receptive partner. For further information, please consult: www.ledc.com

Small Businesses -- Essential to our Nation's Securty

The National Defense Industrial Association (NDIA) recently released its "NDIA Top Issues 2011" annual report. Issue #3 is: "Increase Government Contract Usage of all Small Businesses." I can only offer my strongest endorsement of this matter.

Most of my colleagues, peers, and clients know that my focus has primarily been technology. After 25 years, at all levels of industry (engineer, project engineer, program manager, business development, Vice President, Corporate Vice President) I can sat categorically that, in order to meet today's technology challenges, the US Department of Defense needs small businesses more than ever. Here's why.

1) Small businesses are the premier source of innovation in today's market. This is widely recognized in the customer community. When a critical problem arises, requiring engineering or applied science, customers traditionally look to established small businesses.

2) Small businesses are better able to innovate, in shorter time and for less money, than large businesses such as Lockheed Martin, Boeing, Northrop Grumman, and General Dynamics.

3) Small businesses can make enormous strides with a small amount of funding, e.g., the $100K Phase 1 SBIR and the $400K Phase 2 SBIR contract amounts. Larger businesses won't even talk to you unless the discussion begins in the millions, or tens of millions, of dollars.

4) Small businesses spawning out of universities or other research institutions are hungrier, more nimble, and able to drive results in spite of deadlines or other non-technical obstacles.

So, I say, bravo to NDIA for its continuing advocacy of small business!

Stuxnet -- the "Second Greatest Story Ever Told" *

It has been almost impossible to miss the recent stories in the media, with leadership by the New York Times, about the Stuxnet worm and its impact on the Bashehr and Natanz nuclear enrichment facilities in Iran. There is no official estimate, either from the Iranians or the "purveyors" of Stuxnet, but the worm has no doubt cost the Iranians many billions of dollars and set back their bomb program by many years. The Israelis are privately reporting that the Iranian nuke program has been set back until at least 2015.

The attack had a second salvo, which most casual observers have missed; the Iranian scientists saddled with "fixing" the problem have been targeted by assassins; 2 of 3 attempts have been successful. No doubt this added element of terror has increased the burden on the Iranian government significantly.

The Times observed that the Stuxnet worm, developed by USA and Israel, with implied cooperation from the Germans (Siemens) and a stolen cryptographic key belonging to the Taiwainese, was released with the precision of a Marine sniper targeting an enemy at 2,000 yards. A tremendous amount of damage, and fear, inflicted on an enemy without the delivery of one bomb, missile, or traditional type of ordnance. Also, the impact of this computer worm is in stark contrast with the ineffectiveness of a decade or more of inspections by the United Nations.

There have been a lot of words written, and spoken, about cyber warfare and the threat from the Chinese to the USA. This threat remains very real. However, the Stuxnet worm makes it clear that the first truly successful salvo in cyberwarfare was lobbed by the USA and Israel; it was a direct hit. Stuxnet reveals the power of classified intelligence work. Think of how many lives will have been saved if it forestalls an Iranian nuclear bomb program by 5 years, or stops it altogether. It will be many years before the full value of this incident is known, but I expect that it will be as significant a development as the breaking of Nazi Germany's Enigma code system.

It also amplifies the positive impact of classified funding of national intelligence initiatives. The breadth of the program appears to have been extraordinary.

From a business perspective, therefore, as Congress cancels weapons and homeland security programs (e.g., the Virtual Fence) and cuts back on other traditional defense spending, you can be certain that intel spending will remain strong and vital.

* With credit to Hotair.com for this clever twist of words