Issues 2012 | Solyndra and the Perils of Green Industrial Policy
Diana Furchtgott-Roth, Senior Fellow, Manhattan Institute
Diana Furchtgott-Roth's book Regulating to Disaster: How Green Jobs Policies Are Damaging
America's Economy will be released next month by Encounter Books.
The Obama administration has made providing taxpayer dollars for so-called “green jobs” a top policy priority. In his 2011 State of the Union address, the president maintained that government subsidies for “clean energy technology…will strengthen our security, protect our planet, and create countless new jobs for our people.”[1] The financial failure of a number of specific firms which received Department of Energy loan guarantees, however, has raised the question of whether the policy itself is effective or sustainable.
The tangled tale of Solyndra, a startup company that thought it could make solar panels and sell them profitably, ably illustrates the perils of “industrial policy,” a shorthand phrase for government’s attempts to decide which new industries or startups to support with federal money, loan guarantees, or tax benefits. The Fremont, California-based solar company declared bankruptcy in September 2011 after receiving a total of $528 million in federal loans.
It’s not just Solyndra that has gone bankrupt. Abound Solar, a solar panel manufacturer based in Colorado that received funds from the federal government, filed for bankruptcy on July 2, citing aggressive pricing actions from Chinese solar panel companies as the principal cause. Abound received a $400 million loan guarantee, and spent about $70 million before the Department of Energy (DOE) halted its credit. The company plans to suspend operations and dismiss 125 employees.
In August 2010, Beacon Power Corporation received a $43 million loan guarantee from the DOE to build a $69 million, 20-megawatt flywheel energy storage plant in New York. After receiving $39 million of the loan, the company filed for bankruptcy in October 2011 and was subsequently bought by a private equity firm.
Nevada Geothermal, a struggling company heading into financial trouble, received a $98.5 million loan guarantee in September 2010.
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