According to conventional wisdom, Solyndra, Inc. failed because of recent, unforeseen competition from Chinese solar companies with vast government subsidies.
Or because Solyndra misrepresented its financial position to the feds.
These explanations may be entirely true or partly true. Whatever.
But there’s an even more important and frightening explanation not being reported at all. That is the incompetence of the Obama administration. The Obama administration’s incredible, mind-bending incompetence.
Someone should go to jail. Maybe Energy Secretary Chu.
Never mind whether the Obama administration rushed the approval process, only allowing bureaucrats about 60 days to get it done. It should have taken about 60 seconds for anyone with a smidgen of common sense to just say “no” to the subsidy. To say: “No, no, a thousand times no.”
The New York Times Thursday published a retrospective on the company’s pick by the administration. As the Times reported, in Obama’s May 2010 appearance at the company, he said, “Companies like Solyndra are leading the way toward a brighter and more prosperous future.” Even at that moment, the Times accurately reported:
Behind the pomp and pageantry, Solyndra was rotting inside, hemorrhaging cash so quickly that within weeks of Mr. Obama’s visit, the company canceled plans to offer shares to the public. Barely a year later, Solyndra has become one of the administration’s most costly fumbles after the company declared bankruptcy, laid off 1,100 workers and was raided by F.B.I. agents seeking evidence of possible fraud.
Solyndra’s two top officers are to appear Friday before a House investigative committee where, their lawyers say, they will assert their Fifth Amendment right against self-incrimination.
The government’s backing of Solyndra, which could cost taxpayers more than a half-billion dollars, came as the politically well-connected business began an extensive lobbying campaign that appears to have blinded government officials to the company’s financial condition and the risks of the investment, according to a review of government documents and interviews with administration officials and industry analysts.
While no evidence has emerged that political favoritism played a role in what administration officials assert were merit-based decisions, Solyndra drew plenty of high-level attention. Its lobbyists corresponded frequently and met at least three times with an aide to a top White House official, Valerie B. Jarrett, to push for loans, tax breaks and other government assistance.
Administration officials lay the blame for Solyndra’s problems in part on the global collapse in the price of solar energy components, which forced the company to sell its innovative solar panels at less than it cost to make them. Some lawmakers on Capitol Hill question whether the firm’s executives may have engaged in a cover-up of their precarious financial condition, allegations the company denies.”
Actually, it’s much worse than the New York Times or anyone else is reporting right now. Keep in mind – none of this was ever a secret. It was on Google, all along.
Solyndra sells round solar ray capture tubes for installation on the flat rooftops on large commercial/industrial buildings. Solyndra’s product was never aimed at the residential market in which homeowners can make emotional “green” decisions to power their homes with solar energy, even if solar power is more costly than regular electricity. But businesses decisions have to be cost-justified.
Solyndra has always acknowledged its round tubes cost much more to manufacture than flat panels, whether the panels are made in China or the U.S.A. And it’s been known for years the price of silicon has been dropping. But Solyndra’s systems supposedly have functional advantages that save money on electric bills in the long run.
There’s a popular quote associated with Solyndra. According to ABC News, which has been on top of the Solyndra meltdown for months before it happened, Peter Lynch, a longtime solar industry analyst, said the company’s fate was obvious from the start:
It costs them $6 to make a unit. They’re selling it for $3. In order to be competitive today, they have to sell it for between $1.5 and $2. That’s not a business plan.
True, but not the whole story.
Solyndra systems cost millions of dollars to purchase. One sale in Belgium to one customer alone totaled $10.3 million, financed by the Export-Import Bank. And most of Solyndra’s sales were made to customers who bought on credit. That meant Solyndra had to borrow money to lend to its customers. So any income Solyndra had was offset by debt financing that income.
I’m not a financial wizard. But with this Solyndra marketing plan in mind, think back to the first few months of 2009, the very time when the Solyndra deal was approved by the Obama administration.
The Troubled Asset Relief Program had just been signed by President Bush. President Obama had just been inaugurated. The final stimulus bill had just been passed, on February 14, 2009, with funds for Solyndra and other green projects in it. On March 20, 2009, Solyndra was offered loan guarantee approval.
So at the very time the Obama administration approved the $535 million federal loan guarantee, jobs were vanishing; businesses couldn’t borrow money, particularly not for massive commercial plant expansions with their roof-tops equipped with trendy, multi-million dollar solar panels; and big box stores were hurting because consumers weren’t spending money at them. Who cared if such stores were topped with rooftop solar panels? Not only that, Solyndra had lost money ever since its inception and didn’t expect to be profitable anytime soon. Not a surprise.
And then there was the political side of Solyndra’s business plan.
In order to succeed, Solyndra needed a confluence of political events to occur, which aligned with the Obama agenda. Again, the need for this political agenda to succeed in order for Solyndra to succeed was no secret:
- The price of conventionally-supplied electricity had to “skyrocket” (which President Obama, of course, had promised to arrange).
- Numerous fossil-fueled electrical power plants had to be shut down. This, too, has been arranged by the Obama administration’s EPA, but it’s taking years.
- Expansion of conventionally-fueled electrical power plants had to be blocked by the government. Again, this is being arranged but it’s taking years.
- Commercial power consumers had to be forced by government mandates into buying electricity from alternative energy sources. This is happening in some states, but not right away.
- And – most importantly, cap-and-trade legislation had to be passed.
Solyndra’s chances for success thus were inextricably tied to the Obama administration’s political agenda. If that agenda failed – and, at best, its success was highly uncertain – then Solyndra would fail.
Even if this agenda did succeed, it was never certain Solyndra would make money. In December 2009, Solyndra told the public: “We expect to continue to incur significant operating and net losses and negative cash flow from operations for the foreseeable future.”
The Energy Policy Act bars granting loan guarantees unless Secretary Chu “determines that there is reasonable prospect of repayment of the principal and interest on the obligation by the borrower.”
Anyone who approved the Solyndra loan should be in jail. Including Secretary Chu.