Tuesday, November 1, 2011

More Green Failures to Come?

In just how much trouble are highly-subsidized US green energy firms these days?  Well, if recent news and a new report by the Congressional Research Service are any indication, a whole heckuva lot.  Yesterday we learned that another DOE subsidy recipient, Beacon Power, has joined the much-maligned Solyndra in bankruptcy court:
A Massachusetts energy-storage company that received a $43 million Department of Energy loan guarantee has become the second green tech company backed by U.S. government financing to file for bankruptcy court protection in two months.

Beacon Power's filing for Chapter 11 late Sunday comes in the shadow of the collapse of Solyndra, a $535 million DOE loan guarantee winner that left the Obama administration's clean-energy policy vulnerable to Republican criticism. GOP lawmakers have pointed to Solyndra's bankruptcy and dissolution as evidence that the Obama administration's $35.9 billion program to boost investment in green technology was misguided.

News of Beacon, which makes flywheels that manage energy moving through a power grid, follows the White House announcement last week that it was enlisting Herbert Allison, a former Treasury Department official who has worked in Democratic and Republican administrations, to audit the entire loan program.
National Review's Drew Thornley also directs us to a Politico story, noting that another subsidized green company could be next:
An advanced battery manufacturer that was awarded millions in federal stimulus dollars is now in financial hot water and is being closely monitored by the Energy Department.

New York-based Ener1 received a $118.5 million grant to expand its manufacturing operations in Indianapolis, Ind., run by a subsidiary EnerDel, which received a visit from Vice President Joe Biden earlier this year.

But NASDAQ pulled the firm from trading Friday for failing to file its most recent quarterly report on time. Ener1 also let go of its chairman, Charles Gassenheimer, late last month.

Now DOE says it’s watching the company.

“The department is closely monitoring the status of the company,” DOE spokesman Damien LaVera said in an email Monday.
If we're to believe DOE and the Obama administration, all of these awful developments are shockingly unexpected.  Yet according to a new CRS report on solar projects and the DOE Section 1705 loan guarantees program, a more failures could be ahead because, quite simply, solar manufacturing and generation is really risky business (shocking, I know).  Here's BNA (no link, sorry) with a good summary of the report:
Solar panel manufacturers that have received loan guarantees from the Department of Energy will have to contend with the same market risks that contributed to the bankruptcy of California solar panel maker Solyndra LLC, according to an Oct. 25 Congressional Research Service report.

Those risks include declining solar module prices, competition from new and established solar panel manufacturers, and reductions in subsidies and incentives in European and other international markets, the report said.

“The success or failure of each respective project will likely be determined by the ability of each solar manufacturing project to differentiate its product in the solar marketplace, deliver expected cost and performance objectives, and convince buyers to accept some degree of new technology risk,” the report said.

The Department of Energy has awarded loan guarantees totaling $1.28 billion to solar panel manufacturers under a renewable energy loan guarantee program known as the Section 1705 program, according to Solar Projects: DOE Section 1705 Loan Guarantees.

Eighty-two percent of the approximately $16.15 billion in loans guaranteed under the 1705 program have been for solar projects, including nearly$12 billion for solar generation projects, the report said....

According to the report, solar manufacturing projects might be considered more risky than solar generation projects because the latter often include contractual mechanisms, such as power purchase agreements and service agreements, that allow these projects to weather financial risks.

Only one solar power manufacturing project, SoloPower, which received a $197 million loan guarantee, “might” be considered similar to Solyndra, because it uses the same material—copper indium gallium selenide, a semiconductor composed of copper, indium, gallium, and selenium—in its solar panel manufacturing process.
The report ominously concludes, "Whether or not Section 1705 solar projects will succeed is beyond the scope of this report.  However, each Section 1705 solar manufacturing project will have to address the same market dynamics that may have contributed to Solyndra’s bankruptcy."

I dunno about you, but that makes me feel all warm and fuzzy about the future of these companies and the mountains of taxpayer money lavished upon them.


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