Green Industrial Policy Fail

This is like the third one in just a few weeks:

Solyndra, a major manufacturer of solar technology in Fremont, has shut its doors, according to employees at the campus.

"I was told by a security guard to get my [stuff] and leave," one employee said. The company employs a little more than 1,000 employees worldwide, according to its website....

Solyndra was touted by the Obama administration as a prime example of how green technology could deliver jobs. The President visited the facility in May of last year and said  "it is just a testament to American ingenuity and dynamism and the fact that we continue to have the best universities in the world, the best technology in the world, and most importantly the best workers in the world. And you guys all represent that. "

The federal government offered $535 million in low cost loan guarantees from the Department of Energy. NBC Bay Area has contacted the White House asking for a statement.

Beyond the whole green jobs boondoggle, trying to compete at low-cost manufacturing of a commodity product in California of all places is simply insane.

 

  • Smock Puppet, Shadenfreude Expert To The Stars

    Dog Bites Man:

    Green Industrial Policy Fail

    Man Bites Dog :

    Green Industrial Policy Success

    =====

    Glad I could help ya with that....
    :o D

  • Mark

    The Governator, was also heavily involved in hyping up this company to show it would produce green jobs for CA.

    In a state where it can take 2 years to open a fast food place due to over regulation, you would think that it would be the least cost effective place to do business. Texas might have a chance.

  • Sean

    Don't disagree about your conclusion regarding commodity manufacturing in the golden state but there is another dynamic that is more important. When governments go all in on new markets, they change those markets in predictable ways. The subsidies given to solar and wind simply created a boom bust cycle where new innovative technologies were suddenly pushed to scale up creating an opportunity for follow-on startups focusing on low cost mass production. The innovators were forced to put all their energy into low cost commodity manufacturing, something not in their DNA, leading to failure.

  • MikeinAppalachia

    Obama has already explained that Solyndra's failure is Germany's doing. Evidently, Germany is (unexpectedly)lowering the subsidy paid to German solar cell generation and this has depressed the (only?) market for Solyndra's products.

  • steve

    In these dark days you have to look for small wins, all I can think of is at least they let it fail rather then pouring more tax money into it.

  • Fred from Canuckistan

    Gawd Obama just sucks . . . he can't even do crony capitalism.

    He's gone from POTUS to DUFUS

  • Dan

    I decline to join all of you in celebrating the failure of a solar energy company.

    I support innovating in this field, and the government should provide incentives to companies that have good plans (Washington provides untold billions directly and indirectly to fossil fuel companies, so I'd like to see some acknowledgement of that on this site once in a while amid all the smug criticism of ethanol - which I don't support either - and green energy).

    The sun releases more energy in minutes than we use on earth in an entire year. If we ever figure out a way to harness even a tiny bit of the sun's energy, it would solve our energy problems forever. Not saying it's easy or we will, but America didn't become America by having a bunch of people say "It can't be done, let's just stick to what we're doing."

  • a_random_guy

    Dan, um, why? If the government actually does subsidize fossil fuels (and you'll have trouble justifying that statement), it shouldn't do that either. The government may, possibly, have a justifiable role in supporting basic research.

    Commercial enterprises should stand or fall on their own. Anything else is a waste of taxpayer money: it flows back to DC in the form of lobbiest, who arrange more subsidies, which go to pay more lobbiests - nothing useful is gained from this cycle.

  • caseyboy

    It won't be long before you won't be able to get a building permit without installing a solar system as part of the base spec. Shortly thereafter it will be a requirement that all homes be retrofitted with solar systems. Solyndra just wasn't able to hold out long enough.

  • Judge Fredd

    And we're surprised by this?

  • Allen

    "Obama has already explained that Solyndra’s failure is Germany’s doing. Evidently, Germany is (unexpectedly)lowering the subsidy paid to German solar cell generation and this has depressed the (only?) market for Solyndra’s products." --MikeinAppalachia

    Oh, the green "experts" are queueing up with a variety of reasons why this company failed and why it's unique and not a sign that anything it wrong with the whole BO jobs movement. If it's not the lack of German subsidies it's that Solyndra's products were too expensive or that the Chinese are making cheaper ones or that the Chinese are holding back on rare earth elements, et al.

    They all skirt around the the fundamental issue, solar is not and will not be cost-effective now nor within the next decade. And saying that "it's close" isn't proof that it will be. After all, Jimmy Carter said that as of a decade ago something like 20% of American __ENGERGY__ , not just electricity, would be coming from solar. A decade after he claimed it would happen and over 30 years since he made that claim the industry has improved but it's a far, far way off from anything concrete that could lead to that sort of shift.

  • Dan

    A Random Guy:

    I can easily cite an example of how the government supports the oil industry: Using our military to maintain shipping lanes through the strait of Hormuz, for one. This has to cost billions a year. An indirect subsidy to the oil industry, and one that I support, because we need a secure supply of oil. But let's not pretend that this isn't a huge boon for oil companies. How else would they get their product to market from that volatile part of the world?

    I'm glad you agree that there's a role for the government in basic scientific research. It's through this sort of role that the government has been able to provide a start for many of the industries we take for granted today (the Internet comes to mind, as it was developed by the government). Obviously, private industry needs to carry most of the weight in coming up with ideas and providing innovation to get them to market, but that doesn't mean there's no place for government in the initial process.

    Sometimes I feel like I'm an atheist at Oral Roberts University when I'm on this site. There's an almost religious economic conviction that prevents people here from acknowledging that government can play any sort of a positive role in anything.

  • Russ R.

    @ Dan:

    "Washington provides untold billions directly and indirectly to fossil fuel companies..."

    Really? I hope you've got some evidence to back up that statement. (And not just tax deferrals that apply equally to all industries.)

    In the meantime, allow me to introduce you to reality...

    Let's open up page 32 of ExxonMobil's most recent annual report and add up the total amounts the company paid to government vs. investors:

    Sales-based taxes: $28,547 million
    Other taxes and duties: $36,118 million
    Income taxes: $21,561 million
    Government Total: $86,226 million

    Interest expense: $ 259 million
    Net income: $31,398 million
    Investor Total: $31,657 million

    Conclusion: ExxonMobil pays 2.7x more to governments than it does to investors.

  • Dan

    Russ R,

    I'm glad to see Exxon is a good corporate citizen and pays its taxes. I'm not reflexively anti-oil company, as you seem to think. I just believe alternate energy deserves a look, and support government funds for research into this field.

    My answer to your question about indirect subsidies to oil companies is in my previous comment. And that doesn't even begin to cover all the tax breaks the oil industry receives that Republicans are so eager to keep around, no matter what their effect on the U.S. debt might be.

  • matt

    The large loan guarantee has other bad effects to. This company had a specific product design and business model that was horrible from the start. There are many articles from solar engineers who questioned their product design. By handing them a lot of money, it crowds out potentially better business models and product designs that were more viable. People who want green energy should want a free market to make sure that this stuff doesn't happen with a bad firm like solyndra.

  • Dale

    Dan,

    As I understand the economics of these things, be they windmills, solar power, bio-fuel, or whatever, if the government has to subsidize it, it’s NOT energy efficient. That is to say that you’re having to put more energy into making and maintaining these products then you will get out of them. Money is just an excellent indicator. In a free market economy as soon as the subsidizes dry up the business fail.

    The bottom line is these business fail when not being artificially propped up because of physical realities. You are having to expend more energy into them then you can get out of them and so they are not only economically not feasible but are also environmentally unsound.

  • Ted Rado

    If the government would get out of the way and let natural economic forces control, things would be much better. Ideas for new products, and improvements in old products and processes, together with competition, will get us the best products at the minimum price. All the USG does is distort these forces, with resultant chaos and waste. There should be NO subsidies for ANYTHING. If what you want to do is economically or technically unsound, it will fail, as it should. Don't have the USG prop it up.

    As to Dan's comment about things that the USG has done right, these are invariably a byproduct of defense efforts. Although DOD expenditures have mainly no economic benefit (who needs an aircraft carrier?), there is frequently technical fallout of benefit to society. The value of this is a tiny fraction of the DOD budget, so in itself is very cost ineffective. Private enterprise has always responded to observed needs.

    Most of the wonders around us came from private enterprise. Yes, the USG subsidized the transcontinental railroads. Note the the NP Railroad was built without subsidies and has done well. The others would have been built in due course also. Oil drilling would do better without subsidies or all the over-regulation and endless permitting processes imposed on the industry. Much of the regulatory apparatus seems to be for the sole purpose of dragging everything out ad infinitum and making lots of money for the lawyers. Does anyone think that the oil industry really wants to take short cuts that will destroy the company and result in multibillion in lawsuits? Anyone who has worked in industry knows tht no effort is spared to avoid such catastrophes. The USG should mess out.

    Industry has an excellent record of policing itself. There are all sorts of design and building codes (ASME, NEC, ASTM, etc.) that are followed religiously. All that preceeds any gov intervention. These were devised by various professional organizations when they saw the need.

    Let the gov stay with what they do best: screw evrything up while buying the vote with your money.

  • Ted Rado

    One other comment re government determining winners and losers, via subsidies or otherwise. This was the whole foundation of the USSR. The gov experts would plan everything rather than let competitive private enterprise do it. Does anyone nowdays believe that it was a successful idea?

  • the other coyote

    Dan, I don't know what oil company you're talking about, but I work for an oil and gas E&P that's 100% domestic and the government doesn't give us sh*t. We don't have one penny come in the door from anything other than selling our product.

  • steep

    I don't know why you're calling this a failure.
    I'm sure the money made it to where it was supposed to.

  • a_random_guy

    "Sometimes I feel like I’m an atheist at Oral Roberts University when I’m on this site. There’s an almost religious economic conviction that prevents people here from acknowledging that government can play any sort of a positive role in anything."

    Dan, speaking for myself, the problem is that the government is involved in so incredibly *many* things where it has no business. Hence, my priority is to see government whacked back. Yes, it does have a proper role in certain areas (supporting basic research, minimal regulation of the free market). However, it is so far beyond these basic functions that we must push in the opposite direction, however futile it currently seems.

    Regarding oil, and oil companies, I agree with the chemist who said that burning oil is a sin. Oil is a marvelous feedstock for manufacturing. Burning oil for heat is rather like buying finished lumber, only to chop it up for your fireplace.

  • Smock Puppet, Solar Panel Installer for Fools

    >> The sun releases more energy in minutes than we use on earth in an entire year.

    True, Dan, and totally irrelevant. Only a fraction of that strikes earth, and that's the only part you get to take in with earth-based solar tech. And the earth's surface is quite large, so the amount that strikes any part of it is actually fairly tiny -- the Solar Constant -- is only about 1.3 kw/sq-m. A remarkably low energy density. You cannot "cheat" that -- it is the actual amount of available power striking the earth at any point in time under absolutely ideal circumstances, which, let's face it, never really exist. Do all the various knock-offs from that which are inarguable -- 12 hrs in a day, solar cells are not better than 50% converters, storage inefficiencies for nighttime use, transmission losses, etc. -- the net effect is that you have to cover about 6 square meters in order to get a single kw of power to the plug, which is really what anyone cares about.

    I did a fairly well laid out and reasonably non-technical analysis of how that issue is relevant to the idea of power derivation here: Solar Power -- Flat Out Wrong For All Time

  • Smock Puppet, Solar Panel Installer for Fools

    >>> (the Internet comes to mind, as it was developed by the government).

    Not for anything even vaguely resembling the purpose for which it has become used for, nor with even the slightest idea in mind that it would have any use outside the military.

    The internet, rather than being an example of "developed by" the government, is an example of exactly WHY the government largely SUCKS when it comes to development. The pieces that create the modern Internet come from a wide variety of sources, and they formed through a natural and unpredictable synergy process which cobbled itself together from nothing. It's a hell of a lot better example of "evolution in action" than it is of a paean to "central planning".

    "Governments get money the same way that individuals do... Primary
    Production, Secondary Production, Forced Redistribution, and Voluntary
    Redistribution - make, trade, steal, and beg. There are no other ways.
    The difference is that Governments are inefficient at making, trading and
    begging (except from other governments), so they have to steal."
    - Alexis A. Gilliland -

    If you actually understood how the Internet came about, you'd know how utterly, laughably, ludicrous Al Gore's oft-misquoted claim of being a significant part of the development of the Internet was, even as he actually said it, as opposed to the even more foolish-sounding misquotes.

    Jon Postel, CERN, and Netscape had as much to do with the creation of the modern Internet as the DoD did. Postel came up with the concept of DNS in the early 80s. CERN is responsible for the whole concept of the World Wide Web and using http as the underlanguage, and it took Netscape to make the whole thing approachable by the average citizen.

  • Smock Puppet, Solar Panel Installer for Fools

    >> There’s an almost religious economic conviction that prevents people here from acknowledging that government can play any sort of a positive role in anything.

    Except it's based on facts and experience, rather than faith. Faith is closer to what YOU use to justify your belief that governments actually contribute much to anything when they attempt to act in a promotional manner.

    The government is a necessary evil, not a force for good. It does what it does -- everything!! -- by THE THREAT OF FATAL FORCE.

    It says, "Do 'x'".
    If I don't do 'x', it sends someone out to make me do it.
    If I resist, it sends out still more people, usually with guns, to make me do it.
    If I continue to resist, those people have been granted the authority to shoot and kill me without someone sending agents of the government out to arrest them.

    Think "Branch Davidian".

    Don't get me wrong, I'm not saying ALL government is BAD. I'm saying that it should always be recognized that everything the government does is, in one manner or another, done by putting a loaded gun to someone's head and saying 'DO IT!'. That we use weasel-words and lots of nice alternative names and acronyms to hide that from our daily consciousness does not change what is happening at its heart. A rose is a rose.

    “How many legs does a dog have, if you call his tail a leg? The answer is four, because calling a tail a leg doesn't make it a leg.”
    - Abraham Lincoln -

    P.J. O'Rourke has a nice bit about this in 1990's 'Parliament of Whores':
    ===================================================================
    "One secret to balancing the budget is to remember that all tax revenue is
    the result of holding a gun to somebody's head. Not paying taxes is against
    the law. If you don't pay your taxes, you'll be fined. If you don't pay the
    fine, you'll be jailed. If you try to escape from jail, you'll be shot. Thus
    I -- in my role as citizen and voter -- am going to shoot you -- in your role
    as taxpayer and ripe suck -- if you don't pay your share of the national tab.

    Therefore, every time the government spends money on anything, you have to
    ask yourself, 'Would I kill my kindly, gray-haired mother for this?'

    In the case of defense spending, the argument is simple: 'Come on, Gramma,
    everybody's in this together. If those Canadian hordes come down over the
    border, we'll all be dead meat. Pony Up.'

    In the case of helping cripples, orphans, and blind people, the argument
    is almost as persuasive: 'Granny, I know you don't know these people
    from Adam, but we've got five thousand years of Judeo-Christian-Muslim-
    Buddhist-Hindu-Confucian-animist-jungle-God morality going here. Fork
    over the dough.'

    But Day care doesn't fly: 'You're paying for the next-door neighbor's
    baby-sitter, or it's curtains for you, Lady."

    ===================================================================

    My point isn't that governments can't or should not do anything -- it's that they aren't the solution to most things.

    Picking and choosing who should be given largess from the public trough for the purpose of developing an idea is one which is fraught with opportunity for corruption and misuse.

    If anything, the solution to things like this isn't to give them money directly, it's to offer a guaranteed contract from the Fed for 'x' units if someone is the first one to produce them in quantity according to such-and-such specs. THEN you at least get competition and business models involved.

  • Smock Puppet, Solar Panel Installer for Fools

    >>> Does anyone nowadays believe that it was a successful idea?

    Oh, Ted, Ted, Ted....

    Don't you know it just wasn't DONE right? That's all. Just a bit of tweaking is all that is required. Then it'll work.

    Get with the program, pal!

    :D

  • Russ R.

    Dan:

    Your example of a "subsidy to oil companies":

    "I can easily cite an example of how the government supports the oil industry: Using our military to maintain shipping lanes through the strait of Hormuz, for one. This has to cost billions a year. An indirect subsidy to the oil industry, and one that I support, because we need a secure supply of oil. But let’s not pretend that this isn’t a huge boon for oil companies. How else would they get their product to market from that volatile part of the world?"

    Let's look a bit more closely at that one.

    The oil producers who gain are primarily the national oil companies (NOCs) of Saudi Arabia, UAE, Iran, Iraq, Qatar, Kuwait and Bahrain.

    The IOCs (International Oil Companies) has almost no reserves in the Persian Gulf... whatever they once had was long ago nationalized. The only instances where an IOC gets to participate on a Persian Gulf project is when an NOC wants a partner to bring them the technology and expertise.

    Since the vast majority of the oil industry's reserves are located outside the Middle East, I'd argue that they'd actually benefit if the Persian Gulf supply was shut off, since the resulting supply/demand imbalance would improve their profits tremendously.

    Simple economics.

  • Smock Puppet, Promoter of Government Scams

    Russ: Nice point. Glad I stopped back in looking for something else. Have to file that one away.