Solyndra Controversy

President Barack Obama and Solyndra founder Chris Gronet on a plant tour.

Let’s start at the beginning. On August 8, 2005, George W. Bush signed into law the Energy Policy Act of 2005. Among many other things, the law gave the Department of Energy the ability to help companies and projects with promising research or products. The Energy Department would do this by giving them loan guarantees. Basically, the companies would be able to get loans from banks that they otherwise would not have been able to, based on risk, profit, etc., because the federal government was giving the banks the guarantee of being paid back. Of the 134 applications the Department of Energy recieved, one was from the Solyndra Corporation for a new manufacturing plant for solar panel technology. The Solyndra Corp. made it through the first round of filtering applications. They then submitted another application, along with 15 other companies, in May 2008. The Energy Department committee reviewing the applications wrote in a report that although the application “appears to have merit, there are several areas where the information presented did not thoroughly support a finding that the project is ready to be approved at this time…for further development of information.” Basically, it seemed as though Solyndra was still too big of a risk. In March, 2009, despite the original review, the Energy Department decided they should guarantee a load of 535 million dollars. In August 2011 Solyndra announced it would be filling Chapter 11 bankruptcy. This is after the company restructured their loans and received an additional 69 million dollars from two private investment sources.

Solyndra Execs testifying before D.o.E. during Congressional investigation.

There was much controversy after Solyndra filed for bankruptcy, and accusations of corruption. There were reports that Solyndra spent millions of dollars on lobbying to help them secure the loan guarantee. The founder of Solyndra, Chris Gronet, also made campaign contributions to President Obama, as well as other politicians (Democrats and Republicans). These accusations are basically saying that the ‘government’ was more inclined to award the loan guarantee to Solyndra over perhaps more well deserving companies, because of these contributions. Some would make the argument that Solyndra ‘bought’ their way in. Others would argue that it is more of a coincidence. One of the private investment groups that invested towards the end of Solyndra (that $69 mil.) was also basically owned/funded/heavily involved with founder of Solyndra Chris Gronet. So if there was some relationship between Obama and Gronet, perhaps Obama would be more inclined to encourage the D.o.E. to help Solyndra, to protect his friend/campaign donor?

Personally, I think, as with most things, the truth lies somewhere in the middle. Perhaps Solyndra was given some sort of special treatment by the D.o.E. committee as a response to their lobbying. After all, there were 134 applications and Solyndra received the first guarantee. On the other hand, I do not think President Obama would risk his entire clean energy investment platform just to help out a friend or donor. I also don’t think that the President just calls Steven Chu and tells him which company to back for half a billion dollars. These investments take years to process and approve. What is most likely, I think, is that failure of Solyndra had to do with two elements. The first is the emergence of much cheaper Chinese produced solar panels. The profits that Solyndra expected to be making were grossly over-estimated due to the new availability of cheaper panels and other calculation mistakes. Also, there were reports in the company of incredibly sloppy decision making. Basically, they got a loan for over $500 million and they can’t imagine it will ever run out. They order expensive equipment they don’t need or use, they overpay their employees. The employees are not held accountable for mistakes because there is just so much money going around. So the Obama administration and the D.o.E. got carried away with this company that was a much bigger risk than they acknowledged. They wanted to hit a home-run on the first investment. Instead, the company failed and the whole clean technology initiative was severely damaged. Who is to blame? I blame just about everyone involved. The President. Steven Chu. The D.o.E. application review committee. The Solyndra management. The employees. and China. In all probability, though, nobody will receive any punishment other than an order to appear before Congress, and perhaps some public humiliation.

http://republicans.energycommerce.house.gov/Media/file/Hearings/Oversight/091411/DocumentsEnteredIntoRecord.pdf

http://www.nytimes.com/2011/09/24/opinion/the-phony-solyndra-scandal.html?_r=1

http://www.npr.org/blogs/thetwo-way/2011/10/03/141014707/white-house-knew-solyndra-might-be-in-trouble-emails-indicate

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