Obama’s so­lar stim­u­lus snafu

The Washington Times Weekly - - Editorials -

Pres­i­dent Obama made a high­pro­file visit in May 2010 to Solyn­dra Inc., a so­lar-panel man­u­fac­tur­ing plant in Fremont, Calif. The com­pany re­ceived $535 mil­lion in loans from the En­ergy Depart­ment and was a cen­ter­piece of the Obama ad­min­is­tra­tion’s eco­nomic stim­u­lus ef­fort.

“Com­pa­nies like Solyn­dra are lead­ing the way to­ward a brighter and more pros­per­ous fu­ture,” Mr. Obama chirped. On Aug. 31, Solyn­dra closed its cor­po­rate head­quar­ters, an­nounced that it’s fil­ing for bank­ruptcy and lay­ing off 1,100 work­ers.

The Solyn­dra de­ba­cle is a case study in the fail­ure of gov­ern­ment in­ter­ven­tion in the econ­omy.

Founded in 2005, the com­pany man­u­fac­tured a rooftop so­lar panel de­signed chiefly for com­mer­cial ap­pli­ca­tions. Solyn­dra was a poster child of the utopian fu­ture en­vi­sioned by the Obama ad­min­is­tra­tion when oo­dles of green jobs would re­lieve the na­tion’s un­em­ploy­ment rate, gen­er­ate clean en­ergy and help the en­vi­ron­ment.

En­ergy Sec­re­tary Steven Chu rushed through loan guar­an­tees, and money be­gan to flow to Solyn­dra from the Fed­eral Fi­nanc­ing Bank.

The terms of the loans, just more than 1 per­cent in­ter­est in most cases, were well be­low the rates com­peti­tors had to pay.

Com­pe­ti­tion in the so­lar mar­ket­place is stiff, par­tic­u­larly from China, and Solyn­dra couldn’t make a profit.

In the spring of 2010, the com­pany spent around $3.5 mil­lion pro­mot­ing an ini­tial pub­lic stock of­fer­ing (IPO) to raise $300 mil­lion to re­tire some of the gov­ern­ment debt, but the com­pany couldn’t es­cape an in­con­ve­nient truth: In the first three quar­ters of 2009, it grossed $59 mil­lion against pro­duc­tion costs of $108 mil­lion.

Solyn­dra ar­gued that economies of scale would even­tu­ally drive down the red ink, but the in­vest­ment com­mu­nity wasn’t im­pressed, and the IPO was with­drawn.

When gov­ern­ment loan guar­an­tees of more than half a bil­lion dol­lars were se­cured, Solyn­dra bragged that its new plant ex­pan­sion would cre­ate 3,000 con­struc­tion jobs and 1,000 per­ma­nent man­u­fac­tur­ing po­si­tions.

On a plant-site visit, Vice Pres­i­dent Joseph R. Bi­den Jr. en­thused, “These are jobs that won’t be ex­ported.” Not so, Joe. After the fail­ure of the IPO at­tempt, Solyn­dra sent half its man­u­fac­tur­ing to China.

The House Com­mit­tee on En­ergy and Com­merce is at­tempt­ing to in­ves­ti­gate Solyn­dra and the ex­tent of its po­lit­i­cal con­nec­tions to the White House, but it’s be­ing stymied by no-show wit­nesses and White House re­fusal to turn over records.

One of the com­pany’s lead­ing in­vestors, oil bil­lion­aire George Kaiser, was a cam­paign-do­na­tion “bundler” for the 2008 Obama cam­paign. An in­ves­ti­ga­tion by the Gov­ern­ment Ac­count­abil­ity Of­fice found the Depart­ment of En­ergy an­nounced Solyn­dra’s loan ap­proval “prior to com­ple­tion of ex­ter­nal re­views re­quired un­der pro­ce­dures.”

Last month, the Of­fice of Man­age­ment and Bud­get agreed to com­ply with a House sub­poena for up to 1,800 pages of records re­lated to the Solyn­dra loan de­ci­sion.

What­ever sweet­heart, back-chan­nel deals the in­ves­ti­ga­tion even­tu­ally re­veals, the les­son is that it takes more to sur­vive in the mar­ket­place than just trendy green cre­den­tials, po­lit­i­cal pull and a boat­load of tax­payer cash.

Last year, Mr. Obama said, “The true en­gine of eco­nomic growth will al­ways be com­pa­nies like Solyn­dra.”

Let’s hope not.

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