As the following article by Diana Furchtgott-Roth points out,
the Department of Energy is hell-bent on spending taxpayer dollars on
not-yet-proven renewable energy technologies.
They are not only unproven, but their results in almost every case are
By spending more taxpayer dollars on these efforts, the DOE continues to heap debt on the heads of taxpayers. Kind of makes one wonder why!
The DOE Hasn't Learned Its Solyndra Lessons
By Diana Furchtgott-Roth
October 6, 2011.
Some might think the Energy Department learned from the September Solyndra bankruptcy, in which taxpayers have a $528 million exposure. Surely September would have been a good time to halt the Energy Department's loan guarantee program and understand why this program has become the poster child for crony capitalism.
But instead of pausing, the Energy Department recklessly issued another $8 billion of loan guarantees in September under the Energy Policy Act of 2005.
Why last month's haste to put taxpayers at even more risk? No doubt, the administration was aware that the legal authority for the loan guarantee program was going to end on September 30. Rather than understand why the program was defective, the administration, ardently committed to promoting renewable energy, rushed ahead where a more angelic government might have feared to tread.
Twelve companies received loan guarantees last month, including First Solar ($2 billion), Sunpower Corporation ($1.2 billion), and Abengoa Solar (a second load for $1.2 billion, following a first loan for $1.4 billion in December). This brings to $16 billion the sum of guarantees issued by the government under the program since 2009, according to Energy Department spokesman Sonia Taylor.
Which one will be the next Solyndra?
Will it be 1366 Technologies, Inc, located in Lexington, Massachusetts, which received $150 million on September 8? The company's plan, as stated in an article by Katie Fehrenbacher in Gigaom.com in March 2011, is to break ground on its factory in March 2012 and start shipping silicon wafers in 2013.
Ms. Fehrenbacher, by the way, is the reporter who forecast the Solyndra failure back in 2010. Just like Solyndra, 1366's sales are two years in the future.
On its Web site, 1366 Technologies states, "The science is understood. The material is abundant. The products work. All that is left is to build the largest manufacturing industry in the history of mankind. This is what we intend to do."
Then why can't 1366 Technologies attract private financing? Perhaps because the schedule is unrealistic. Surely, the break ground date is pushed back since loan was only just now approved. So, how can wafers start shipping in December 2013?
It probably takes one year to build the plant. Then, three months to commence production. Of course, there is selling, delivery and finally collection of accounts receivable. That's bumping up against two years. The loan is interest-only for about two years. But 1366 still has to pay interest, so it will be under financial stress. This is very Solyndra-like.
Another Solyndra-type loan is POET LLC, in Emmetsburg, Iowa, which received $105 million to make cellulosic ethanol on September 23. Cellulosic ethanol, a fuel made from plant waste products, is still too costly to be commercially marketable.
Although cellulosic ethanol consumption is mandated by the 2007 Energy Independence and Security Act (250 million gallons in 2011, 500 million in 2012, gradually increasing to 16 billion gallons in 2022) no one has yet worked out how to make it in large enough quantities to make it cheap enough to succeed as a commercial source of energy.
The Energy Department has obviously not learned from the example of Range Fuels, a cellulosic ethanol plant in Soperton, Georgia. It closed in January 2011 after receiving $156 million in federal grants and loans in 2007 and 2008 from the Bush Administration, $6 million in grants from the State of Georgia, and $100 million from private investors. POET's prospects are similar.
Why is the government, under pressure from voters and rating agencies to reduce the budget deficit, issuing these loan guarantees at all?
The answer, we repeatedly hear, is fear of China, the new Red Scare. In the 1950s we were afraid that the Soviet Union might get ahead of us. "We will bury you," threatened Nikita Khrushchev.
Now we are throwing billions of dollars at renewable energy, electric cars, and high speed rail, projects that are too weak to attract private funding, because we're concerned that China is getting ahead of us and stealing our jobs.
On Monday, in a TV interview with ABC, President Obama said, "And what we always understood was that not every single business is going to succeed in clean energy, but if we want to compete with China, which is pouring hundreds of billions of dollars into this space, if we want to compete with other countries that are heavily subsidizing the industries of the future, we've got to make sure that our guys here in the United States of America at least have a shot."
Similarly, Brookings scholars Mark Muro and Jonathan Rothwell conclude in an article that loan guarantees are necessary because America is battling China for technological advantage in renewable energy.
And Jonathan Silver, Executive Director of the Loan Programs Office at the Energy Department, testified at a House Energy and Commerce subcommittee on September 14, "But no country has been as aggressive as China, which last year, alone, provided more than $30 billion in credit to the country's solar manufacturers through the government-controlled China Development Bank."
Surely we have descended to great depths as a nation when we have lost confidence in our own reason and instead can think of nothing better to do than mimic the actions of a commercial rival.
Despite substantial government investment and industrial policy, the Soviet Union is no more, and Russia's economy is collapsing. In the 1970s and 1980s we were worried that Japan, whose government poured money into cars and shipbuilding and high-definition TVs, would race past us. But Japan's growth has been slow for the past two decades.
If we are afraid of China's growth, domestic industrial policy is not the answer. Rather, we should improve economic growth through more efficient tax and regulatory policies. China is more to be feared with government loan guarantee programs than without, because they slow our economy and make it less efficient. America is more likely to best China without government help.
America grows when it relies on the strength of market forces, rather than when our government attempts to pick winners and losers. Loan guarantees are not a sign of confidence in markets but the exact opposite, and make no sense in these economic times, when corporations are flush with cash.
The reason that these renewable energy projects need to turn to the government for loan guarantees is painfully obvious. Their prospects are weak, and private investors and lenders would not fund the project otherwise. China and other countries might want to invest in projects that have no business case, but the American taxpayer deserves better. Much better.
Solyndra came to the attention of the American public at the end of August. Since then, the Department of Energy worked overtime to sign more loan guarantees that private investors and lenders are unlikely to make.
Some of the new Energy Department loans may actually be repaid. But others may not. Perhaps the administration can make money by organizing bets on which of its loans will go bad. Call it the Solyndra Derby.
Diana Furchtgott-Roth is a senior fellow at the Manhattan Institute.