I was back in my native Bay Area last summer, driving north on I-880, the first time I saw it. Shortly after passing the Dixon Landing Road exit, I noticed on my right a huge building that hadn’t previously caught my attention. It was a spectacular site at night — its sharp white walls accented with dark blue, dramatically lit by the floodlights of the round-the-clock construction effort. Huge glass windows revealed its clean, metallic infrastructure. Though not yet completed, the building already conveyed a sense of modernity and grandeur. I wasn’t yet sure what the purpose of the building was, but I distinctly remember thinking: “This is what the future looks like.”
As it turns out, I wasn’t exactly right. The building belonged to a company by the name of Solyndra, a solar technology manufacturer that produced arrays comprised of cylindrical (as opposed to flat) solar panels. And while that building may have been the factory of the future, it certainly won’t be the factory of their future. On Aug. 31, less than a year after opening the plant, Solyndra ceased all operations, laid off all 1,100 workers and filed for Chapter 11 bankruptcy. That same stunning factory now lies dormant.
The sudden downfall of any sizeable company is likely to make the news cycle, but Solyndra’s descent was particularly noteworthy. Here’s why: In addition to nearly $1 billion in private equity, Solyndra’s growth was aided by a $535 million loan guarantee from the Department of Energy — the first of its kind. The Obama administration had staked a significant amount of political capital on Solyndra’s success. Vice President Biden was present at the company’s groundbreaking ceremony, and President Obama also delivered a speech there about Solyndra’s growth potential. In many ways, Solyndra had been the poster child of the administration’s efforts to create green jobs.
The company’s rapid death therefore amounted to a bit more than a large omelet’s worth of proverbial egg-in-face (green eggs?) for the Obama administration. What’s more, investigations into what’s now been dubbed the “Solyndra Scandal” revealed that members of the administration ignored warnings of the company’s pending insolvency, which resulted from internal mismanagement as well as a rapid decline in the price of silicon, a key ingredient in the products of their competitors.
Solyndra wasn’t just unprofitable; it was hemorrhaging money. While the price of Solyndra’s panels was hovering at more than $3/watt, a number of competitors (particularly Chinese companies, who were more heavily subsidized by the their government) were able to produce conventional or thin-film solar arrays for significantly less. But Solyndra’s underperforming sales didn’t stop its extravagant spending. Remember that factory that so strongly captured my attention? It cost an equally stunning $733 million to build. So while Solyndra’s failure was breaking news for some, others had predicted it for some time.
If Solyndra had gone under with only private investments at stake, its presence in the media spotlight may have been short. But the federal government’s involvement in its funding has turned Solyndra into yet another talking point in the ideological battle over the role of government in the American economy. Hardly anyone — left or right — disagrees that the decision to fund Solyndra was a poor one; hindsight is 20/20, after all. But many conservatives have taken the argument a step further, concluding that Solyndra’s outcome provides clear evidence that the government should never use taxpayer dollars to take sides in the market.
Fine — but let’s take this argument to its logical extension. If Solyndra’s failure is indeed evidence for why the government should resist investing in particular companies or industries — let’s even say just energy companies — I would hope that this standard be applied equally. Unfortunately, it very clearly is not.
A little perspective can be helpful here. The $535 million lost in Solyndra is no chump change, to be sure. But it’s hardly a drop in the bucket relative to the money injected into oil, gas and coal companies annually in the form of special tax and regulatory exemptions — exemptions, bear in mind, that Republicans recently unequivocally refused to repeal. This sort of special dispensation, which occurs on a far grander scale than the whole Solyndra debacle, has kept prices for “dirty” energy artificially low, making it even more difficult for alternative energy companies to enter the market organically and remain competitive. How ironic, then, that government payments to one industry almost necessitate government payments to another.
And could there possibly be a more heinous example of industry cronyism than that enjoyed by oil, gas and coal companies? How curious that the same folks who are most vociferous with respect to the Solyndra scandal seem to be awfully quiet about the nearly non-existent oversight for conventional energy corporations. If we are really to be critical of energy companies gaining insider relationships with the bodies that should theoretically be governing them, why is there not more outcry over the well-documented rampant corruption of the Mineral Management Service, the entity responsible for regulating oil extraction on public lands? And this is to say nothing of the tens of millions collectively spent by the oil, gas and coal industries in lobbying the federal government to maintain their sacred cow status. In short, if the government is wrong in taking a position in the energy markets, solar is hardly the largest beneficiary.
Solyndra’s bankruptcy clearly demands that the government re-examine its approach to investing in clean energy. But to those who would use this example to conclude that the government shouldn’t take sides in energy policy, I say this: Get real, or at least be consistent.
David Murdter is a senior in the College of Arts and Sciences. He may be reached at email@example.com. Murphy’s Lawyer appears alternate Tuesdays this semester.
Original Author: David Murdter