Solyndra Scandal

Furthering the production of green energy has become the interest of many people in recent years. With growing concerns over the greenhouse effect and the use of fossil fuels, alternative energy has rapidly developed in ways of the technology used, the application of that technology, and the people interested in it. It is no question that the green energy industry has established itself as “having the foot in the door” and from here there is potential for improvement and production.

But what happens when the push for green energy goes sour, as in the case of the Solyndra company. What does it mean when a supposedly promising company is backed by the government and then suddenly files for bankruptcy, costing the tax payers millions of dollars? They said they were worth investing in and the government was willing enough to ensure their loans, hoping that the company’s production of high-grade solar panels will both stimulate the green energy industry and provide thousands of jobs for Americans. Yet despite what was said, they lost everything. People think this means green energy is a waste of money, others suspect foul-play, and then there’s always China to blame. But when we step away from the scandal and try not to get to caught up in what happened, we can see that this event, or “scandal” as some refer to it, while it does have its bad parts, does not ruin clean energy subsidies as a whole. 

Background and Bankruptcy

It all began with the Energy Policy Act of 2005. Passed by Congress and signed by George W. Bush, the bill allows the Department of Energy to offer loan guarentees so that promising energy companies can become funded. This method is meant to give the green energy companies the funds they need to produce their product by guaranteeing that the government will ensure any loan given to the company. This makes investing in such companies less of a gamble and, providing that the company shows promise, ends up being the needed incentive for companies to grow.

134 applications were submitted for preliminary review, and among those applications was Solyndra, a company founded to produce an alternative solar panel to silicon-based panels due to worldwide shortage.  In 2007 the Department of Energy narrowed the applicants down to 16, which included Solyndra, and required a more extensive application be submitted to be admitted into the program. In January 2009 the decision was reached and Solyndra was rejected, the review claiming that the company was not ready for approval and they will wait for further development of information.

After President Obama took office the loan was brought back under question. In March 2009 the committee that stopped the loan three months prior re-examined and made a conditional agreement with a final approval scheduled for later that year. In 2010, Obama promoted Solyndra as a prime example of the government’s investment in green technology on a visit to Solyndra’s newly constructed factory in California, which was also visited by Energy Secretary Steven Chu. In August 2011, Solyndra filed Chapter 11 bankruptcy. The company had failed to repay its loans even after government permission to restructuring them, which may have been illegally done. The failure of a government-backed energy company has been deemed a scandal due to two main points. The first point is that Solyndra was irresponsible with its funds, wasting money through buying unused equipment that was resold at a large loss, and throwing away millions of dollars worth of equipment without an adequate attempt at re-selling. The company took the money and effectively did nothing with it but spend it carelessly. The second point for controversy, and the more prominent one, is the involvement of the Obama Administration. There are those who claim that the Obama Administration inappropriately pushed for the approval of Solyndra’s admittance into the program, whether for political or economic reasons, and Obama is to blame for the $535 million cost to taxpayers. Whatever the reason, the scandal has cast a dark shadow on government funding of green energy companies and the potential of solar energy.

Arguments

As it turns out there is reason to believe that something not fully legal happened and Congress and the FBI are currently reviewing the company. However, I am not here to speak of the politics of the scandal or the legal issues. Let the political and legal implications be set aside and instead lets focus on the industry implications. The Solyndra scandal has resulted in three main arguments concerning the green energy industry. The first argument claims that government-backed loans are a bad idea. The second argues that the government should not get involved with the Research and Development of new technologies. The final argument states that solar energy is doomed to fail.

As for the first argument, it fails to see the bigger picture of the Department of Energy’s program. The program sponsors around 40 programs across the country and has backed close to $38 billion in loans. Solyndra represents a very small portion of the Department’s program, only 1.3%, and is the only loan to have backfired. Solyndra isn’t even the only solar energy company invested in, and the majority of the program is invested in a Georgie nuclear plant. The potential abuse of political power in the case of Solyndra is an exceptional event and in no way represents the program as a whole.

The second and third arguments are also grossly misinformed. Evidence shows that private funding for the research and development of new energy technologies is drastically under invested and argues for energy innovation to become a higher national priority. In 2009 only $3 billion was spent on energy innovation as opposed to the $36.5 billion invested in Health and the $77 billion invested in defense research. Energy is a core element to our daily lives and the need for greener technology and innovation in the energy industry should be a top priority. As for the potential of solar energy, the evidence suggests exactly the opposite of what’s being argued. As the technology becomes more advanced and our understanding of it improves, solar energy is projected to become a reliable competitor to fossil fuels and its practical use will become applicable to main grids. As fossil fuels are rising in cost solar energy is decreasing. It’s only a matter of time and further investment before solar energy can become a viable replacement for fossil fuels.

Conclusion

So while the Solyndra scandal may cast a dark shadow, it is in no way representative of the larger whole. The arguments that have arisen concerning the effectiveness of energy investment are based on this small event and are directly opposed by the evidence of the bigger picture. Solyndra is a concern, but not when it comes to green energy and the investment in the industry.

Sources

http://en.wikipedia.org/wiki/Solyndra_loan_controversy

http://www.washingtonpost.com/blogs/ezra-klein/post/five-myths-about-the-solyndra-collapse/2011/09/14/gIQAfkyvRK_blog.html

http://online.wsj.com/article/SB10001424053111904836104576558763644374614.html

 

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