Last January, with typical understatement, President Obama
proclaimed, in his State of the Union address, that alternative
“clean” energy would be “our generation’s Sputnik moment,” and that
it would be “an investment that will strengthen our security,
protect our planet and create countless new jobs for our people.”
(Never mind that the federal government does not make investments,
it only spends money that otherwise belonged to taxpayers.)
Making Uncle Sam a venture capitalist was a surefire way
of accomplishing these modest goals, or so he thought. He put the
Secretary of Energy, Stephen Chu, in charge of the program. Mr.
Chu, a physicist whose research was primarily in the study of
biological systems at the single-molecule level, had no known
business or economics background with which to judge the many
applications for solar and wind plants coming his way.
What he and the White House did have, according to a
Washington Post article
published on Christmas Day, was the ability to grant “easy
access” to investors in some companies “backed by the
administration.” What they wanted was loan guarantees and more
subsidies. Many were Obama campaign donors.
According to the Post article, senior
administration officials “pushed career bureaucrats to rush their
decision” on a large loan guarantee for Solyndra, largely to
validate a planned plant ribbon-cutting by Vice President Joe
Biden. Solyndra became a much-hyped favorite of the White House,
including a later visit by President Obama
The Bush Administration had left office without approving
a Solyndra loan guarantee and there were ample signs that the
company lacked sound financial footing. The field was booming with
start-up companies. By 2000, however, the Chinese government was
giving banks free rein to lend money (more than $43 billion) to
companies making cells and modules. New factories sprang up like
mushrooms after the rain. Chinese solar equipment flooded the
market, forcing companies not yet financially ready, to cut prices
to match the competition. Not long ago, solar panel buyers would
pay $1.60 per watt for them. Today it is $1.05.
Solyndra, never in solid financial shape according to its
own auditors, sought and obtained from the Obama administration an
unprecedented change in its loan documents so that, in the event of
bankruptcy, a group of private investors would stand at the head of
the line, in front of the U.S. Government. One of these investors,
George Kaiser, paid more than a dozen visits to the White House
over the space of a few months. White House press secretary, Jay
Carney, claimed — with a straight face — that Mr. Kaiser was
there to discuss his many philanthropic interests.
By late summer, Solyndra abruptly threw in the towel and
went into bankruptcy. It closed the doors on its new plant in
California. At that point, a counter version of Mr. Obama’s
shovel-ready jobs theory went to work. All 1,000 Solyndra employees
were shoveled right out the door — for good.
Altogether, the solar equipment industry is in a deep
recession. Six of the 10 largest publicly-traded solar
manufacturers in the U.S. have debt on their books in excess of
their market capitalization.
Ironically, the boom in shale-gas production and the
resulting decline in natural gas prices is leading ever more power
plants to turn away from plans to get electricity from solar and
wind sources. They are taking advantage of the low price of natural
gas. The only hope for blunting this source of economic growth is
for the Obama Administration’s friends among the environmental
extremist movement to throw road blocks into the shale-gas
business. They are claiming, without proof, that the process of
fracturing (“fracking”) deep rock formations using water and some
chemicals will ruin groundwater supplies. Their usual modus
operandi is to throw the road blocks in order to slow projects to a
crawl and tie them up in investigations and costly court
proceedings for months — or years
Obama & friends can only hope this works. Meanwhile,
the moral of the story is: The federal government should not try to
predict winners and losers. It almost always ends up with
losers.
