The partisan slap-fighting about Solyndra continues, as members of Congress try to determine how and why the bankrupt solar panel maker failed, and how much of its failure can and should be blamed on the Obama administration. The situation has reached the realm in which all Washington scandals must reside until definitive proof of wrongdoing arises: disputes about context.
After days of increasingly negative leaks about the rosy predictions made by Solyndra executives even as the company was sinking, the Department of Energy has joined the fray, alleging that many of the supposed warning signs on which the Obama administration failed to act have been taken out of context. Talking Points Memo reports that DOE spokesmen now say that projections of sinking cash flow were referring to a subsidiary of Solyndra, not the company itself, in which the administration invested via a $500 million loan guarantee.
It’s hard to look at the totality of this analysis and conclude, as some have implied, that the projections prove that the company would go under. In fact, the analysis projected that the project would have tens of millions of dollars in cash by the end of January of 2012.
Whatever the verdict on Solyndra and the Obama administration in the final resolution of Congressional investigations (or presidential elections), in the short term the scandal is costing other solar firms dearly. Take SolarCity, a firm that seems to have negotiated a conditional loan guarantee with the feds at a profoundly unlucky time. Bloomberg reports that the company's deal appears to have been sunk by the Solyndra debacle and subsequent political pressure to tighten the strings of the government's green jobs program.
SolarCity, a Foster City, California-based developer of residential rooftop solar systems, said yesterday that the U.S. Energy Department won’t complete the $275 million conditional guarantee that was offered a day after Solyndra sought protection from creditors.
The Energy Department loan guarantee program has come under political fire since Solyndra, a Fremont, California-based solar company that received $535 million in guarantees, filed for bankruptcy Sept. 6. SolarCity said the scrutiny prompted the agency to request additional information.
“Because of the Solyndra bankruptcy, additional documentation and reviews were required that we couldn’t get done in the next five days,” SolarCity Chief Executive Officer Lyndon Rive said in an interview yesterday. “Everyone has been very supportive of this project and if we had a little more time we could get it done.”
A similar drop was felt by First Solar, which had its shares plummet but then bounce back. (There's a notable optimism at the end of that story, though not necessarily a defense of the administration's loan program; the company is going to get the capital needs in the end, the piece suggests, but through the private market, not the government.)
But what about Solyndra itself? The company is now destined to serve as shorthand for ineptitude, if not criminality, for critics of the Obama administration. That's the argument in this editorial from The Wall Street Journal. Solyndra's status as a beneficiary of green jobs loan program is sufficient rationale to cut the program.
But the collective outrage has triggered a hard shove in the opposite direction from The New York Times' Joe Nocera, who writes that the company's executives have done nothing criminal, and that the point of having government loan programs in the first place is to take risks on valuable but unproven investment sectors that would otherwise not receive the financing they need to develop and grow.
But if we could just stop playing gotcha for a second, we might realize that federal loan programs — especially loans for innovative energy technologies — virtually require the government to take risks the private sector won’t take. Indeed, risk-taking is what these programs are all about. Sometimes, the risks pay off. Other times, they don’t. It’s not a taxpayer ripoff if you don’t bat 1.000; on the contrary, a zero failure rate likely means that the program is too risk-averse. Thus, the real question the Solyndra case poses is this: Are the potential successes significant enough to negate the inevitable failures?
I have a hard time answering “no.” Most electricity today is generated by coal-fired power plants, operated by monopoly, state-regulated utilities. Because they’ve been around so long, and because coal is cheap, these plants have built-in cost advantages that no new technology can overcome without help. The federal guarantees help lower the cost of capital for technologies like solar; they help spur innovation; and they help encourage private investment. These are all worthy goals.
In the absence of U.S. investment, the future of the industry will only be where it's been for the past few years: in the hands of an aggressive China. Still, Nocera's argument gives others pause. If the private sector's not willing to invest in Solyndra, wonders blogger Paul Kedrosky, shouldn't that tell us something?