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Allen Gilmer

Allen Gilmer

Allen writes the popular energy news blog Open Choke

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Looking for Renewable Energy That Actually Works

White House renewable energy darling Solyndra, the beneficiary of a $500 MM+ loan guarantee from the DOE, is featured on the White House Blogs...

Written by Matt Rogers, Senior Advisor to Energy Secretary Chu, it has beautiful pictures about how that $500 million+ of taxpayer money positively effects the economy in many other states.

http://www.whitehouse.gov/blog/2010/05/26/recovery-supply-chain

Renewable Energy benifits to the U.S. Economy

Renewable Energy State Benifits

Nice, huh? Amazing what government dollars can do. Except...

...this isn't any different than any other investment made by any other company, funded by any other source. The magic of capitalism. The only difference is here the government made the bet that a banker or Private Equity group normally does. With our tax dollars.

Solyndra is known as the darling of the sustainable energy investment community, its investors have made a billion dollar bet on this particular flavour of solar energy.  

There is a problem, though. It's auditors placed a "going concern" risk on its pre-public 2009 audit released a couple of months  back. http://news.cnet.com/8301-11128_3-20001652-54.html

"Going Concern" risks are not unusual in the startup and growth phase of a company. It happens all the time in the risky world of startups and venture capital. The root of this particular  problem? The sale price of its product is $3.24 per watt. In addition, it actually loses money on that sales price, and, according to this source, it's money-losing price is 66% more than the per watt cost of old technology flat panel solar.  http://industry.bnet.com/energy/10003806/solyndra-solars-most-financed-company-could-fail/

Solyndra counters this critique by marketing its product not as the cheapest cost per watt produced, but on maximizing the electrical output of a finite roof space.

The overall point to make, though, is that if Solyndra fails, this was tax money pissed away. The beautiful map showing government money flowing all over the US?  It quits flowing. Businesses don't make infrastructure investments based on a one-off sale to some company. They make those investments based on the assumption of ongoing viability of its customer base. The benefits of our more Free Markets is that it is comprised of literally millions of separate and similar maps of capital flow, with the added benefit that it largely recurs. Unlike the Solyndra map. At least as of now. 

Was this the best place for the government to play VC? What is the government's record AS a VC? The government has successfully seeded a lot of companies with one-time Small Business Innovative Research (SBIR) grants. Similarly a lot of companies have taken the money and run. I doubt if it comes as a surprise that this success/failure/fraud information for this is hard or impossible to access.

Obama was visiting Solyndra last month to make a speech supporting his push for Cap and Trade, the sleight of hand that takes from those industries that are capital efficient and gives to those that are not. It creates a wholly subsidized society paid for by those with the audacity to hope that running a nice, profitable, economically sound business would be rewarded. Think again, chump.

The ultimate irony is that Free Trade FORCES a sustainable economic system. 

No business can stay in business selling people things they don't want. It is fundamentally "unsustainable". However in our real world, where politicians feel bad for "the workers" that build stuff we don't want to buy, it becomes a moral imperative to support these voters by either

a) forcing us to buy shit we don't want to buy, or

b) heavily subsidize these businesses to make up for the losses they incur in making shit we don't want to buy. 

They subsidize these poor performers by taxing those industries that make shit we DO want to buy... in other words using money taken from others by threat of imprisonment.  In the end, though, unsustainable is unsustainable. Once everyone is making shit no one wants to buy, the whole structure collapses. This whole process  is an exercise in the destruction of wealth and capital.

I hope Solyndra makes it, just so we, as taxpayers, can see a return on our investment. But I don't think we should spend another nickle of taxpayer money to prop these ventures up. That should be up to the VC gamblers that do it for a living. For God's sake, if the stock market and mutual funds are too volatile and insecure for our retirement dollars, the infinitely riskier world of venture capital and mezz finance should be off limits to tax dollars.

As far as I can tell, I am in the most sustainable energy business. Unless the next round of taxes make it not.  Today what is known as "Sustainable Energy" is "Unsustainable Economically". Perhaps that will change.  It better.

By. OPEN CHOKE


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Leave a comment
  • Anonymous on June 14 2010 said:
    Id have a helluva lot more respect for this line of thinking if those who employed it were intellectually honest about how deeply the risks of securing and delivering oil are socialized. Open Choke lives in a world with no negative externalities at all I guess.
  • Anonymous on June 14 2010 said:
    Ponzi Scheme,I have been following the Solyndra story for a while now and being part of PV industry and studying all data about the company, I see no way they can survive.I consider Solyndra a Ponzi scheme and they will not survive unless the cash keep coming in from VC's, government or wall street.

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