The Solyndra story began with the reality that the US needs to be competitive in the green energy industry, and with the government’s push to fuel a start-up solar power company out of California.
To that end, in 2009 Solyndra got a $535 million loan from the Treasury Department’s Federal Financing Bank. And two years later, the company was out of money. On August 31st, having never made a profit, the company shut down, taking that $535 million in taxpayer money with it.
The $535 million was part of the governments rush to encourage green energy spending. And the urgency was based, in part, on the fact that China spent $30 billion in the solar panel market (with few constraints on spending public money on private investments).
While green energy is a great idea, Solyndra wasn’t. It was a risky bet… and taxpayers lost.
Solyndra was granted a loan based “on the merits”, according to President Obama. But in reality, it was a speculative investment.
Solyndra had a technology that allowed it to make solar panels without silicon, which gave it a competitive advantage over other firms. That advantage was completely dependant silicon prices remaining high.
That didn’t happen. Silicon prices plummeted, and so did Solyndra’s chances of survival.
Solyndra’s plan was based on a transitory market condition. That made the company a pretty edgy bet. And what smacks to critics is that lending to Solyndra looked as much like a venture capital investment as it did government stimulus. And venture capitalism is best left to the private sector. Venture capitalists make loans in order to make money. They know how to price capital, and they don’t give low interest loans to risky companies without evaluating the market. Government, on the other hand, is willing to take unprofitable risks in the name of spending on green energy.
The government is great at picking favorites. The private sector is great at sorting out which companies and technologies have the strength to make it.
The FBI is investigating Solyndra, looking for possible accounting fraud and misrepresentation on financial statements. But it’s entirely possible that this isn’t a case of corruption…rather just a case of really bad judgment.
It could be said that the road to failure is paved with good intentions. And Solyndra was simply one of the failures we have to accept in the quest for a competitive edge in green technology. But it could also be said that the government shouldn’t treat taxpayer money like a Christmas bonus and use it to blindly chase an unbending ideology.