The Washington Post has a splendid op/ed in today's paper about the fiscal and business idiocy of government loan guarantees. Here are a few select passages:
…the review process behind the Solyndra loan was not quite as diligent as Mr. Chu insists. The secretary claimed Thursday that the solar panel maker failed due to an unforeseen, and unforeseeable, "tsunami" of subsidized Chinese competition and low prices for its competitors' raw materials. In fact, the administration knew, or should have known, of these threats to Solyndra's business model before the loan closed in September 2009. The Office of Management and Budget warned about them in an Aug. 31, 2009, e-mail to President Obama's staff.
But the real scandal is the loan guarantee program itself (emphasis added). The United States needs alternatives to oil, for reasons ranging from climate change to national security. Shoveling taxpayer dollars into profit-seeking manufacturing companies is not the way to develop them.
You can call it crony capitalism or venture socialism — but by whatever name, the Energy Department's loan guarantee program privatizes profits and socializes losses (emphasis added). It's an especially risky approach in the alternative-energy space, where solar energy is many years from being cost-competitive with fossil fuels for most uses — and history is littered with failed government attempts to back the next big thing.
In his testimony yesterday, Energy Secretary Stephen Chu went on at length about Chinese competition in making solar panels, highlighting "the choice America faces when it comes to competing in the clean energy race and why we can and must play to win." The Post pointedly asks, Win what?
Mr. Chu raised the specter of Chinese dominance in photovoltaics, a market he estimated at $80 billion globally and growing by leaps and bounds. Of course, Solyndra's inability to survive without government funding casts doubt on this. Mr. Chu contradictorily noted that Solyndra failed in part because photovoltaic "demand has softened due to the global economic downturn and a decline in subsidies in countries including Spain, Italy and Germany." Given their current financial woes, we'd be surprised if Spain and Italy could afford to restore solar-electricity subsidies anytime soon. The U.S. Energy Information Agency, an office in Mr. Chu's department, noted in its most recent International Energy Outlook that, until 2035, "most renewable technologies other than hydroelectricity are not able to compete economically with fossil fuels .?.?. except in a few regions or in niche markets."
… we're also worried by the description of the department's loan portfolio in a 2010 internal OMB e-mail. "What's terrifying," one staffer wrote, "is that after looking at some of the ones that came next, this one [Solyndra] started to look better. Bad days are coming."
It takes government subsidies to build solar panels that then it takes more goverment subsides to install and operate them. It's losses all the say down. I guess Secretary Chu thinks we'll make up the losses on volume.
Never mind the fiscal and commercial realities, Secretary Stephen Chu is flying off today to visit yet another solar panel manufacturing facility. This one is General Electric's plant in Arvada, Colorado.