Solyndra Precedent: Interview on Energy Subsidy Policies Got Me Thinking

I was just interviewed by a reporter from The Deal about my experience as a low level federal energy regulator back in the halcyon days of the Carter administration. She was wondering if the Solyndra mess could be likened to the Synthetic Fuels Corporation fiasco. Short answer: Yes.

Back in the day, I was a member of the regulatory team that oversaw the development of the Great Plains Coal Gasification Plant which was part of a "visionary" $20 billion ($60 billion today) plan to build 22 massive coal gasification plants to overcome the natural gas "shortage" our country was experiencing at the time. The GPCG plant cost $2 billion to build and was bolstered by $1.5 billion ($4 billion today) in Department of Energy loan guarantees to five private gas company "partners." 

The plant came online in 1984, but the natural gas shortage had dissipated because Jimmy Carter had lifted the federal price cap on natural gas. Lo and behold, there was no shortage of gas, only a shortage of price-controlled gas. The natural gas "partners" demanded that the DOE guarantee a higher than market price for the natural gas produced by the plant or they would walk away from the loan guarantees. DOE balked, and the companies left the agency with $1.5 billion in guarantees to paid by the taxpayers. Sound familiar? 

Of course, it does. Solyndra went bankrupt because its technology was supposed to address the silicon shortage for solar panels. When the shortage ended, there was no need for Solyndra's more expensive technology, thus the default on more than $500 million in federal loan guarantees. Other failed federally subsidized energy projects include corn bioethanol, various alternative energy-fueled auto initiatives, and arguably the nuclear power industry. At the end of the conversation, I observed: If one looks back over the decades, the U.S. energy landscape is littered with scores of costly federal energy production failures. Perhaps I exaggerated, but I don't think so. 

For more background, see my 2010 energy tour dispatch, Burning Money to Turn Coal into Gas.