Solyndra loan program wasn’t a failure

The failure was the US, under domestic politics, retreated and left the future of green energy to China.

The whole point of the loan program was to back high-risk, high-reward ventures that couldn’t attract private-sector financing, and to accept a few failures as the cost of discovering diamonds in the rough. In 2010, the program gave almost the same amount of money it lost on Solyndra to an electric vehicle start-up called Tesla, the CEO of which is now the world’s richest person.​

https://qz.com/1968184/biden-could-prove-the-solyndra-scandal-wasnt-a-failure/


In the summer of 2010, Nina Eichacker was an intern at the US Department of Energy, analyzing the successes and failures of energy projects that received DOE funding. She didn’t realize that a high-profile failure was brewing right under her nose, and would soon put the department’s loan program—one of the government’s biggest pots of money for clean energy innovation—on ice.

Ten years later, Eichacker is among the economists urging the Biden administration to revitalize the program, which is currently sitting on $44 billion in unused, Congressionally-authorized clean energy loans and loan guarantees that quietly gathered dust under Donald Trump. The question is whether the administration is willing to stomach the toxic politics that festered around the program because of one misplaced loan: Solyndra.

What was the Solyndra scandal?
In 2009, the California-based solar panel manufacturer became one of the earliest recipients of funding backed by DOE’s loan office, which had been established in 2005 legislation signed by George W. Bush. The lending program was created to support ventures that need a leg up in commercializing cutting-edge clean energy technology.

Solyndra received a $535 million loan guarantee to support production of solar panels that used no silicon, which at the time was a key but expensive component of most panels. Unfortunately for the company, technological innovations and a silicon mining boom in China suddenly caused the price of the raw material to plummet, and Solyndra lost its edge. By December 2010, the company was out of cash, and by August 2011, it was bankrupt. Taxpayers had to eat the loan.

The collapse was red meat for Congressional Republicans eager to chasten the Obama administration. It launched a tidal wave of Capitol Hill hearings and articles in conservative media that painted Solyndra as the epitome of government waste and eco-cronyism (bureaucrats were said to have ignored clear warning signs about the company’s financial stability in the interest of pursuing a green agenda).

In House testimony, DOE secretary Steven Chu defended the program’s overall track record and said that no one could have predicted Solyndra’s failure. But the debacle, which was embarrassing and distracting for the Obama administration, left an aversion to risk in the loan office, especially after a smaller loan to another panel producer collapsed the following year. DOE’s loan office has not issued more support for renewable energy projects since 2011.

There’s just one problem, says Eichacker, who is now an economist at the University of Rhode Island: The whole point of the loan program was to back high-risk, high-reward ventures that couldn’t attract private-sector financing, and to accept a few failures as the cost of discovering diamonds in the rough. In 2010, the program gave almost the same amount of money it lost on Solyndra to an electric vehicle start-up called Tesla, the CEO of which is now the world’s richest person.

“I just remember plaintively trying to tell my friends and family that this is what is actually is supposed to happen,” Eichacker says. “The failure of one enterprise is not a reason to shutter a whole lending program.”

The government’s most underutilized climate weapon
Since its inception, DOE’s Loan Program Office has issued about $32 billion in loans and loan guarantees to a portfolio of 35 projects and companies that include wind and solar farms, geothermal plants, electric vehicles, an advanced nuclear power plant, and a chemical plant equipped with a carbon-capture system.

For the most part, the projects have been successful: Total loan losses amount to $806 million, less than 2% of the portfolio (another high-profile failure was the EV company Fisker, which went literally underwater when a $30 million shipment of new cars was destroyed by Hurricane Sandy). In addition to Tesla, another high-profile success has been the program’s fleet of utility-scale solar farms, which acted as a proof of concept back when such farms were almost nonexistent in the US; now they provide the majority of the country’s solar power. Since fiscal year 2016, no project has missed a payment. The program is expected to generate at least $5 billion in interest for taxpayers, and has reduced carbon emissions equal to taking 14 coal-fired power plants offline for a year.

The failure rate is also much lower than in the average venture capital or bank’s lending portfolio, says Dan Reicher, a senior research scholar at Stanford University’s Woods Institute for Environment and a former DOE assistant secretary of energy under Bill Clinton. In the case of loan guarantees, which account for about three-quarters of the portfolio, the government doesn’t need to spend a penny of its own money unless the project goes bankrupt.

Yet only a few new projects have been approved post-Solyndra, and no new projects were approved under Trump. A pool of money for clean energy projects on tribal land has never been tapped at all.

Why clean energy projects stalled
Reicher and other experts point to a few reasons for the hiatus: high application fees and a tedious bureaucratic approval process, overly stringent rules to qualify, lingering risk aversion because of Solyndra, opposition to the program by Mick Mulvaney, who as director of the US Office of Management and Budget under Trump had the authority to stonewall approvals, and the growing availability of private-sector capital as clean energy projects prove less risky than they seemed a decade ago.

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Politics and corruption suck.

What I don't want to see is politics slow down or stop US innovation in green energy. The US gov loan of $465M to Tesla is a hugely successful story. Energy future is clearly green or carbon-neutral renewable and we need to be taking these high-risk high rewards play that the private sectors aren't willing to. We can't afford to step back and let China win. I want to see Biden opening back up these loans and fund some crazy new cutting-edge not yet proven tech that has huge potential.

 

You might be right there, but remember if Tesla didn’t get that loan and wasn’t able to get venture capitalists financing, they might have gone broke or is a very different company today with many other investors running the company. It’s too bad the 3m shares of Tesla options for the US gov (as part of the loan) was conditioned on paying off early (meaning no option if the loan was repaid early which was what happen) otherwise the US taxpayer would make a killing on that loan.

 

There is also the speed and the self-driving.

The volts go from 0 to 60 in 10minutes. Tesla? <2s. ICE cars embarrassed.

 

Almost every single nation in the world subsidize for a greener future. That’s necessary to move toward a better future. This isn’t taking from the poor and giving to the rich.. this is pushing toward a future with a more sustainable living and the slower we get there, the greater the chance of harm done to all of us, especially to the poor.

Telsa is a great success story. Beat the crap out of ICE car in almost every aspect, is getting more affordable over the year, lead the innovation in this field and everyone is now competing (trying to catch up). Plus Musk has used that winning to fund other green projects. Huge winner for the US and the world.

Let’s also not forget about the trillion in subsidies to fossil fuel industry over the last 100 years.