Everybody now knows that the DOE blew it when it guaranteed roughly $530 million dollars of loans to the "green" solar firm Solyndra. But, we do not know what criteria the DOE used to judge whether this was (ex-ante) a good use of public funds. Read this letter --- SUBJECT: Lack of transparency in the DOE Loan Guarantee Program sent to Secretary Chu in 2010. Many people have wondered how the DOE evaluates potentially promising proposals. A for profit bank will use statistical models to try to predict the probability of default.
In the case of this loan, the DOE had more a complex objective. It wanted to spur new U.S green economy research and it wanted to stimulate the economy and it wanted to be paid back. What information did DOE officials receive that allowed them to make a decision? Did the company provide projections concerning job growth over the short run? How could DOE evaluate the merits of such claims? It is well known in the transportation literature that project boosters always overstate ex-ante the likely ridership of new subway lines to encourage politicians to invest in them.
- "The difference isn't the nature of the risks, rather the nature of the investor -- the federal government, straying far from its domain of demonstrated competence. This is the core issue I see in the Solyndra situation, but one that seems to be getting overlooked. The Title 17 loan guarantee program, in all of its various forms including a swath of more recent even larger plans to have a federal "Clean Energy Bank", is poorly structured to achieve success. It puts a handful of largely invisible bureaucrats and advisors in the position of making unprecedented wealth transfers to fund high risk private ventures."
- "Solyndra made a bad bet, investing heavily in a new type of solar array just as the price of silicon, the main ingredient in competitors’ solar cells, was dropping. Its demise should not spell the end of federal investment in the alternative fuels and energy sources that are critical to reducing greenhouse gas emissions, easing this country’s dependence on fossil fuels and keeping it competitive in the race for clean-energy jobs."
- It wasn’t just any factory. When it was completed at an estimated cost of $733 million, including proceeds from a $535 million U.S. loan guarantee, it covered 300,000 square feet, the equivalent of five football fields. It had robots that whistled Disney tunes, spa-like showers with liquid-crystal displays of the water temperature, and glass-walled conference rooms.
- The building, designed to make far more solar panels than Solyndra got orders for, is now shuttered, and U.S. taxpayers may be stuck with it. Solyndra filed for bankruptcy protection on Sept. 6, leaving in its wake investigations by Congress and the Federal Bureau of Investigation and a Republican-fueled political embarrassment for the Obama administration, which issued the loan guarantee. About 1,100 workers lost their jobs.
- In a company's press release on the groundbreaking for the plant, that it had a backlog of $2 billion in orders for its cylindrical solar modules for commercial rooftops, which it touted as cheaper to install and more efficient than competing flat panels. “Backlog” is a term sometimes used loosely in the industry and may not represent firm orders at all, he said.
- U.S. Energy Secretary Steven Chu and then-California Governor Arnold Schwarzenegger attended the 2009 groundbreaking for the plant. At the event, Chu said the U.S. solar-energy industry was losing out to countries like China and the loan guarantee, the first awarded by the department under President Barack Obama’s 2009 economic stimulus plan, would ensure the company’s orders would be filled by U.S. workers.
Solyndra executives rushed construction in a race to fill orders, putting some work on a 24-hour, seven-day schedule. The factory was up and ready for equipment installation in 10 months. The project employed more than 3,000 union construction workers, according to a Solyndra background sheet.
The plant features 19 loading docks, four electric car charging stations in the parking lot and landscaping of wild grass and a rock garden. An automated rail system moved parts through the assembly process.
The plant caught the attention of competitors. “Everybody I know in the solar industry would remark on it and say ‘Boy, that’s a really, really big factory,’” said Barry Cinnamon, chief executive officer at Westinghouse Solar Inc., a Campbell, California-based solar-panel company that manufactures in China.
About 11.4 percent, or 950,801 square feet, of industrial space was vacant in Fremont in September 2009, according to data from Colliers.
“There was available space that we talked about with them,” Bob Wasserman, Fremont’s mayor, said in an interview. “It was their decision that they needed a new building. Was that a good decision? It didn’t turn out to be.”
John Olenchalk, senior vice president at Kidder Mathews, a commercial real-estate firm in Redwood City, said Solyndra executives considered existing space, including a former Sun Microsystems Inc. facility in nearby Newark that had 218,000 square feet of production space. The company wanted more space and to be near its existing operations, he said.
“A significant percentage of the product we built went into a dumpster because it was defective,” said Craig Ewing, 55, a former maintenance technician. “It seemed like the company accepted that,” he said.
Workers noticed inventory piling up. “The drivers would tell us that the warehouses are getting full,” Santos said. “Sometimes, they’d stay there one or two days before the material was unloaded.”
About two weeks before the company closed, Solyndra CEO Brian Harrison gave an upbeat speech at the new factory, said Romie Sumera, 58, a former equipment-maintenance technician.
Workers noticed inventory piling up. “The drivers would tell us that the warehouses are getting full,” Santos said. “Sometimes, they’d stay there one or two days before the material was unloaded.”
About two weeks before the company closed, Solyndra CEO Brian Harrison gave an upbeat speech at the new factory, said Romie Sumera, 58, a former equipment-maintenance technician.
A final point. Could the availability of public sector capital actually hurt the company's long run prospects. If a Green CEO knows that he can rely on the government as his sugar daddy then this may create a moral hazard effect such that he invests less effort in building his prototype which he would have needed to convince Venture Capitalists that his firm is a profitable endeavor.
