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The Solyndra Standard: On Loan Guarantees, Military Spending, And Clean Energy Politics

Stephen Lacey, Climate Progress
August 17, 2012  |  13 Comments

Earlier this week the Air Force announced that its X-51 Scramjet Engine Demonstrator called the WaveRider — a hypersonic jet designed to travel up to 3,600 miles per hour — crashed into the Pacific Ocean 15 seconds into a test flight.

This is the second failed test in a row for the WaveRider — an aircraft technology that the military has already spent between close to $300 million on developing. And that’s just on one program. We’ve been working on hypersonic flight programs since the 1960′s.

But even with more than a quarter billion dollars worth of hardware now sitting in the Pacific Ocean (chump change for the Pentagon), we haven’t heard a peep from anyone in Washington on the crash. No calls for a Congressional investigation, no outrage about hundreds of millions of dollars sinking in 15 seconds, no public flogging of Defense Department leaders.

But hell, when a few cutting-edge clean energy companies crash after getting support from the federal government, they’re used by the national Republican party as a tool to question the very idea of making strategic investments in cleantech.

It’s been almost a year since Solyndra, the solar manufacturer that received a $527 million loan guarantee, went bankrupt. Since then, House lawmakers have held 12 hearings and official meetings, acquired more than 300,000 documents, issued two subpenas, and likely spent more than a million dollars on the investigation.

What have they found?

“No evidence of wrongdoing,” reported Bloomberg Businessweek.

The Washington Post went further in a recent investigation: “The records do not establish that anyone pressured the Energy Department to approve the Solyndra loan to benefit political contributors.”

This is not to say we should shrug off the bankruptcy of Solyndra and other clean energy companies. It’s Congress’ job to determine whether taxpayer dollars are being spent wisely — and taking a look into the causes and consequences of these types of incidents is important for transparency.

But as we predicted when the Solyndra story first broke, these investigations have turned into a political sideshow. One year later, GOP lawmakers failed to prove their theory that decisions to offer loan guarantees to clean energy companies were based on political insider deals. Yet theycontinue to call for more documents and potentially more hearings, hoping to extend the Solyndra “crony capitalism” meme until after the election.

Representative Jim Jordan (R-OH) was the most blunt about the GOP’s plan for Solyndra: Push the manufactured scandal until November and then drop it after the election.

E&E News reported on Jordan’s comments in March:

For all the talk over possible “smoking guns” that might show some wrongdoing on the part of the Obama administration on Solyndra or another Department of Energy loan, one House Republican acknowledged yesterday that multiple GOP probes on the subject are in some ways a play for votes on Election Day.

"Ultimately, we’ll stop it on Election Day, hopefully. And bringing attention to these things helps the voters and citizens of the country make the kind of decision that I hope helps them as they evaluate who they are going to vote for in November."

That’s exactly how it’s playing out. The politically-manufactured outrage over Solyndra has turned into an all-out campaign — with tens of millions of dollars being spent this election season specifically targeting federal renewable energy investments. Mitt Romney has jumped on the bandwagon, using Solyndra as a central piece of his campaign.

And here’s the really astonishing disconnect: While supporting tens of thousands of jobs, the loan guarantee program is expected to cost $2 billion less than Congress budgeted for, according to an analysis from Herb Allison, John McCain’s former National Finance Chairman.

Meanwhile, amidst the Solyndra saga, we casually accept a $300 million aircraft failure without batting an eye. No outrage. No sustained political campaign. It’s just another day testing our military toys.

Why? Because we don’t often see programs like this as a “failure” in the political arena. We would never use one failure as an excuse to abandon investment in new technologies. Most politicians accept losses in military R&D expenditures because the long-term gains are potentially so important for national defense and for eventually developing technologies for civilian use.

We should always strive to make programs as efficient and cost-effective as possible. But a few bankrupt clean energy companies representing a fraction of the program’s budgeted cost is no excuse for abandoning federal investments in clean energy — a strategically important sector that is becoming one of the largest drivers of business this century.

Alas, don’t expect anyone to publicly admit this. As the campaign season unfolds, political leaders are all too willing to practice the Solyndra standard.

Lead image: Man scratching head via shutterstock. 

This article was originally published on Climate Progress and was republished with permission.

13 Comments

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Lawrence Carroll
Lawrence Carroll
September 5, 2012
Personally, I like the article because it points to the hypocricy of those who often tout "free markets" but who exempt from "free market discipline" their many favorite receipients of governement handouts. There are so many of this bizarre persuasion that I won't even begin to enumerate examples . . .

But insofar as becoming a platform for championing corporate welfare because "great things happen" as dennis heidner believes . . . well, I can't think of anything more reprehensible!

My own arguments for justifying the subsidies for wind, solar etc. is only in regard to their need to compete against long-term receipients, like oil, nuclear, coal, natural gas - and is/was never meant as some sort of absolute. Getting rid of all subsidies, including subtle, hidden ones, like building highways, should be the ultimate goal, not glorifying them.
Ron Peterson
Ron Peterson
August 21, 2012
The US needs to invest in all kinds of technologies.
There are other ways to win the hearts and minds of people outside of the US other than military superiority.
ROBERT WHITE
ROBERT WHITE
August 21, 2012
Thank you dennis-heidner!!!
Dennis Heidner
Dennis Heidner
August 21, 2012
Since the beginning of the US, the government has often funded private ventures - (and lost money). We remember most of the major success stories and forget the little ones. Likewise we remember companies that are "major" players and fail.

The constitution gave the federal government the right to manage interstate commerce - and they did. Helping with harbors, canals, providing FREE land to rail companies in exchange for a rail across the US. After railroads - when the auto's first became popular - we built out roads (so the cars would not be stuck in mud) and later during the Eisenhower era we build a large national highway system. Without the highway system the automakers would have had slower sales. The highway system promoted growth and made it possible for major retailers and grocers to grow to become national chains.

For the 1890 census the US needed a better way to tabulate the responses - they turned to a small company (IBM) and funded/bought large quantities of equipment. Those investments and loads have changed history.

The Wright brothers sold planes to the military at a time when planes were mostly considered a toy.

Western Electric, Marconi and Bell were all speculative and the government either bought their products and/or gave them the exclusive rights (patents and more) in some cases imminent domain was used to obtain the necessary right of ways.

American Indians were moved multiple times from their native lands to reservations -- so farm lands, hydro resources, or oil fields would become available.

At the turn of the 1800's Jefferson bought the Lousiana purchase and it was a large risk. Stewart bought Alaska - and it was called a big FOLLEY by many of the politicians of the day.

When a country has a vision and is able to build policy supporting it -- and spending to support it. Great things happen.

Real progress stops -- when risks (even with public funds) are avoided.
Penelope Gray
Penelope Gray
August 21, 2012
When the government is put in charge of picking winners and losers in the energy field or any other field, we all lose.
ANONYMOUS
August 21, 2012
Simply put, the government has no business subsidizing/funding the development of technology for any commercial (corporate) venture. This includes providing loans to renewable energy - wind, solar, etc, companies, loan guarantees to utilities to construct nuclear (or any other type)power plants, funding the development of electric cars and on and on and on. If these technologies were low risk and had the slimmest of chance of being commercially viable and profitable products, private investors and corporate shareholders would be crawling over themselves to invest in them. However, unlike our government (politicians), the nation's private investors and corporate shareholders are savvy enough to see these technologies for what they are – high risk/big dollar investments that have little or no chance of earning a reasonable return on investment for the foreseeable future.
Louis Shaffer
Louis Shaffer
August 21, 2012
The article seemed quite clear to me. We need to invest in many technologies for various reasons. The value is not that each one succeeds, but that we succeed in the overall area. Renewable energy IS national defense, and if this was not a political talking point (Mitt Romney standing in front of Solyndra), there would be much less bother. Solyndra failed because the price of boring crystaline solar came down much faster than anyone expected. Who knows, maybe if they had had one more year, they could have kept up. First Solar has with their thin film technology.

If we want to say their is waste in governemtn spending, then we all agree. If we want to say that this is the price we pay to lead and not follow, then we all agree. If some think Renewable energy is not important, then I disagree. But the nice thing in America is that we all are entitled to our opinions...

August 18, 2012
Solyndra unfortunately was a case of getting financial rewards to Obama financial supporters and bundlers, several of whom were identified on the board and in advisory positions in DOE. Republicans (and Dems) have done this in the past for the oil and coal interests, of course. The egregious part of Solyndra was the very rare subordination of the interest of the taxpayer to the investors on the last financing, particularly in the face of a predictable failure with the obviously falling price of solar panels. That was unconscionable. My pain is that renewables are being used for the political payoffs here in the same way unnecessary tax breaks for fossil fuels have in the past, sullying green energy with the public and weakening support for something that requires public support and is the right thing for us all going forward. Perhaps this is the only way that Washington works today, but major change that should happen before calamity forces it is difficult enough without these shenanigans. It should be bipartisan, but this behavior makes that difficult.
ANONYMOUS
August 18, 2012
Perhaps the most distressing thing about the Solyndra debacle was not the initial granting of the loan guarantee (this certainly indicated DOE didn't have any great skill at identifying investment-grade ideas, but mistakes with modest cash amounts are common in government) but the subsequent loan restructuring. In doubling down on a failing investment the government allowed private investors to move ahead of the government for repayment in the event of bankruptcy. This was, if not outrightly illegal, clearly outside the congressional intent when the program was authorized and it virtually guaranteed the taxpayers would recoup nothing from their investment. No private investor would have been so foolish. When government officials wager large sums of taxpayer assets for the small chance of averting an embarrassing failure they are clearly placing administration interests ahead of the people's interests and that is the essence of corruption.
Steven
Delroy Leslie
Delroy Leslie
August 17, 2012
Whether the war took 1 day or 5 years, it had nothing to do with national defense. It is just a ploy to use our young men and women to protect corporate interest and our greed for fossil fuel. If our overpriced weapons and equipment are so superior why do we need to spend 23% of our budget on national defense each year? Most of it is to support the military industrial complex and corporate greed. There are many successful companies that got financed through the loan guarantee program, but one company develop a technology that was not only ahead of its time, but was unable to compete against cheap imports, and they become political football by political hipocrites.
Kurt Grossman
Kurt Grossman
August 17, 2012
How long did the first Gulf war take to win...12 days? This is not political hypocrisy this is national defense. We need to get some form of accountability into the DoD but we do NOT need to enable the DOE to waste billions of dollars on commercial projects that are destined to fail. The loan guarantees were to prop up companies that can never succeed. The Scramjet could be flying in a few years. But, whether if flies or not it was not for the purpose of creating a new business it was for the purpose of maintaining military supremacy.
I do not know your background but I was on the local Marine base the other day. Our men and women and their guns win against any military power on the planet - HANDS DOWN!
You might have some insider knowledge that I don't have but our weapons are superior! Our planes are incredible! (and EXPENSIVE!)
Delroy Leslie
Delroy Leslie
August 17, 2012
This is more political hypocrisy by the Republican party that is only patriotic to the party and not the country. What the author is commenting about is the double standard by political party when technology fails. Since they are so conservative and is concern about waste, they should be commenting about the constant waste by the defense department. Most of these are not for national security, but to protect corporate interest.
Kurt Grossman
Kurt Grossman
August 17, 2012
Is your point that advanced technology that enables the USA to go to any region and win a war with the lowest amount of human casualties is a bad defense strategy? Or is your point that providing loan guarantees to companies that have a business plan that predicts they will never be able to repay the debt is a good strategy? Solyndra is one of several billion dollars of loan guarantees that have failed. I know that in the current environment everyone can throw around millions and billions like they understand what that means but I don't think it is responsible. The $300,000,000 may or may not be a wise technology but most likely it is or the competitor's technology would have knocked it out of the running after a failure. The DoD never said that the Scramjet would be able to repay a loan: just defeat the enemy. $2,000,000,000 in failed loan guarantees like Solyndra is enough money to pay 800 people $25 per hour for 50 years and ended up benefiting a few wealthy investors and the Chinese government. The Pentagon and Defense companies are not efficient any more. So, if your point is to say that we should get rid of defense R&D or that because DoD might mismanage R&D funds we should let the DOE do so also then I think that you have made a good point. I want people who spend our tax dollars to stop!

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Stephen Lacey

Stephen Lacey

I am a reporter with ClimateProgress.org, a blog published by the Center for American Progress. I am former editor and producer for RenewableEnergyWorld.com, where I contributed stories and hosted the Inside Renewable Energy Podcast. Keep...
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