Solyndra Bankruptcy May Blunt Obama’s Renewable Energy Drive
Solyndra LLC’s bankruptcy threatens to curb government incentives championed by the Obama administration to build a renewable energy industry in the U.S.
Solyndra, a solar-panel manufacturer that received about $527 million in federal loan guarantees, shut down on Aug. 31, then filed for bankruptcy protection on Sept. 6. The House Energy and Commerce Committee has scheduled a hearing tomorrow on the award and the Federal Bureau of Investigation raided the company’s Fremont, California, offices two days after the bankruptcy court filing.
The failure will probably diminish support in Washington for the Energy Department’s loan guarantees and for a renewable-energy grant program run by the Treasury Department said Stephen Munro, an analyst at Bloomberg New Energy Finance in Washington. The guarantee program will end this month and the Treasury grants are to expire at yearend. There’s little interest now in extending them, Munro said in an interview.
“Solyndra has become a bit of a poster child for what can go wrong with government funding for renewable energy,” Munro said in an interview. Its troubles could result in a “hiatus in federal support for clean energy.”
Representative Cliff Stearns, a Florida Republican and chairman of the Energy and Commerce Committee panel investigating the Solyndra award, said in an e-mailed statement he hasn’t seen any “evidence to support continuing” the loan-guarantee program.
Stearns and House Energy and Commerce Committee Chairman Fred Upton, a Michigan Republican, said in a Sept. 8 statement that Solyndra executives “misrepresented the company’s financial situation” in meetings with lawmakers in July.
CEO Testimony Delayed
Republicans on the committee said today that Jeffrey Zients, deputy director for the White House Office of Management and Budget, and Jonathan Silver, executive director of the Energy Department Loan Programs Office, will appear at tomorrow’s hearing in Washington.
Solyndra Chief Executive Officer Brian Harrison and Chief Financial Officer Bill Stover, who were invited to tomorrow’s hearing, may testify next week, according to the committee.
Evergreen Solar Inc. of Marlboro, Massachusetts, and SpectraWatt Inc. of Hopewell Junction, New York, filed separately for bankruptcy reorganization last month, blaming price declines and competition from solar-panel makers in China. Neither company received a U.S. loan guarantee.
The Energy Department has awarded $8.36 billion in loan guarantees to 17 developers and manufacturers, including First Solar Inc. (FSLR) in California, and made conditional commitments to an additional 15, such as LS Power Associates LP in Nevada, worth $10.4 billion.
The program, funded by the 2009 economic stimulus, is designed to support innovation and make the U.S. renewable-energy industry more competitive, Damien LaVera, an agency spokesman, said in an interview. Recipients must meet certain targets to continue getting U.S. backing, he said.
Selecting the companies to receive backing are “merit-based decisions” and every project “goes through a rigorous financial, legal and technical review process,” Eric Schultz, a White House spokesman, said in an e-mailed statement Sept. 1.
The department is working to close pending conditional guarantees before this month’s deadline, LaVera said.
Salo Zelermyer, a former Energy Department counsel who helped craft the loan-guarantee initiative under President George W. Bush, said Solyndra’s collapse may “cast a pall” over renewable-energy development.
“This is a program that has the capacity to support significant upgrades in innovative technologies,” Zelermyer, who is now an attorney at Bracewell & Giuliani LLP whose clients have pursued guarantees, said in an interview. “It’s in our interest to have this program succeed.”
The Treasury Department has provided at least $8.47 billion to renewable energy developers, according to data on its website. The grants also were established by the economic stimulus program.
The funds have fueled demand for solar projects in the U.S., and are a “leading priority for the solar industry,” the Solar Energy Industries Association, a Washington-based trade group said on its website.
The grant program, which was set to expire last year, received a one-year extension in December. A similar continuation is unlikely, Bill Wicker, a spokesman for the Senate Energy and Natural Resources Committee, said in an e-mail. “Given the considerable fiscal challenges confronting Congress, renewing this program seems to be a steep hill to climb.”
Wind-energy developers are less concerned about the end of the loan-guarantee program because few wind projects have been funded, said Rob Gramlich, senior vice president of public policy at Washington-based American Wind Energy Association. About 74 percent of the loan guarantees awarded by the Energy Department companies were for solar projects.
The trade group is pushing instead for renewal of a tax credit for wind energy production that expires at the end of next year.
Ethan Zindler, head of North American research at Bloomberg New Energy Finance, said the loan-guarantee program has to deal with the conflicting missions of funding innovative and sometimes risky projects while protecting tax dollars.
“Having some of these not work out is inevitable,” Zindler said in an interview. “The government is making technology bets and when you make technology bets, sometimes you win and sometimes you lose.”
Solyndra shut down a day after the Energy Department refused to restructure its loan deal and investors decided not to extend it an additional $75 million, according to a House Energy Committee memo issued yesterday.
By then, the company had drawn $527 million from its $535 million in federal loan guarantees.
PricewaterhouseCoopers LLP warned Solyndra had financial troubles deep enough to “raise substantial doubt about its ability to continue as a going concern” in an audit released in March 2010.
Two months later, President Barack Obama visited its Fremont plant and told workers the factory shows “the promise of clean energy isn’t just an article of faith.”