Snap Fact #212 - The True Story About Presidents Bush’s and Obama’s Solyndra Initiative!
Post date: Jun 06, 2012 8:40:31 PM
Snap Fact #212
The True Story About Presidents Bush’s and Obama’s Solyndra Initiative!
Let’s face it; we are living in a topsy-turvy time. Perhaps Justin Hayward, lyricist of the Moody Blues “Nights in White Satin”, put it best in their 1967 tour-de-force Days of Future Past LP.
“Cold hearted orb that rules the night,
Removes the colors from our sight.
Red is grey and yellow white,
But we decide which is right.
And which is an illusion?”
Today, it is the “Right” that decides that illusion trumps facts in their reality.
It’s baffling that Facts have become either irrelevant, or worse, they are flipped like a cheap coin so the heads is tails and tails is heads. The Solyndra saga is just one of the many sad examples of the illusionary tactics of the right wing.
The word about Solyndra is out and about as though this is President Obama’s biggest flub and is the single thing that should drive him from office. Surely the President has some culpability in this mis-adventure, but there is more to the song than the discordant tune that is being played these days.
The true story is much more interesting than the made up one we are hearing. Let’s examine the facts:
Solyndra was a solar energy company that designed and manufactured solar panels for the commercial rooftop market. Solyndra systems were designed to provide the lowest cost of electricity and the highest kilowatt hour production. After a very promising start they declared bankruptcy in 2011. The main reasons for the failure were that the average cost per kilowatt hour, which was the basis of the company’s marketing advantage, dropped precipitously from $3.30 to $1.00. Another main contributor was the aggressive “dumping of illegally subsidized Chinese product on the market. Both of these factors were unforeseen and out of the company’s control.
The company was widely regarded as an innovative and well respected business. Some of their many accolades included:
Solyndra was named one of the world’s “50 Most Innovative Companies” in 2010 by MIT’s Technology Review and included in the Wall Street Journal’s “The Next Big Thing: Top 50 Venture Backed Companies.”
Private investors, after conducting their own careful review of Solyndra, put $1 billion of their own private capital behind the company. Solyndra reported sales growth of 40% from 2009 to 2010, from $100 to $140 million.
• This loan guarantee was pursued by both the Bush and Obama Administrations.
• The Solyndra loan underwent 3-1/2 years of rigorous internal and external review before being approved. It attracted venture capital support and was thoroughly vetted by objective, independent validators who believed this project was worthy of investment.
Although you wouldn’t know it from today’s headlines, the Solyndra story started in 2005 under the Department of Energy loan guarantee program devised under the Bush administration. Solyndra was a startup company at that time. The Solyndra loan application was submitted in December of 2006 and by 2007 congressional Republican Senators began to push for the 2 year program to get going. This push was still on in 2010 as witnessed below.
July 2010 Budget Hearing – Representative Mike Simpson (R-ID) Complains that Just 6% of Loans Closed. "As you know, I am a big supporter of the loan guarantee program and believe it is an important tool to enable energy projects to access credit markets during a time when credit is extremely hard to obtain.” Rep. Mike Simpson [Hearing before the House Committee on the Budget, by Congressman Mike Simpson.]
Congressional Pressure to Accelerate Loan Program
The fact that the Republicans are now criticizing the very thing that they pushed for more than a half decade is only the beginning of their attempt to turn reality on its head.
A detailed timeline — verified by Department of Energy officials —shows how the loan guarantees came together under both administrations. In fact, rather than rushing the loan for Solyndra through, the Obama Administration restructured the original Bush-era deal to further protect the taxpayers’ investment. Click here for the full timeline.
May 2005: Just as a global silicon shortage begins driving up prices of solar photovoltaics [PV], Solyndra is founded to provide a cost-competitive alternative to silicon-based panels.
July 2005: The Bush Administration signs the Energy Policy Act of 2005 into law, creating the 1703 loan guarantee program.
February 2006 – October 2006: In February, Solyndra raises its first round of venture financing worth $10.6 million from CMEA Capital, Redpoint Ventures, and U.S. Venture Partners. In October, Argonaut Venture Capital, an investment arm of George Kaiser, invests $17 million into Solyndra. Madrone Capital Partners, an investment arm of the Walton family, invests $7 million. Those investments are part of a $78.2 million fund.
December 2006: Solyndra Applies for a Loan Guarantee under the 1703 program.
Late 2007: Loan guarantee program is funded. Solyndra was one of 16 clean-tech companies deemed ready to move forward in the due diligence process. The Bush Administration DOE moves forward to develop a conditional commitment.
October 2008: Then Solyndra CEO Chris Gronet touted reasons for building in Silicon Valley and noted that the “company’s second factory also will be built in Fremont, since a Department of Energy loan guarantee mandates a U.S. location.”
November 2008: Silicon prices remain very high on the spot market, making non-silicon based thin film technologies like Solyndra’s very attractive to investors. Solyndra also benefits from having very low installation costs. The company raises $144 million from ten different venture investors, including the Walton-family run Madrone Capital Partners. This brings total private investment to more than $450 million to date.
January 2009: In an effort to show it has done something to support renewable energy, the Bush Administration tries to take Solyndra before a DOE credit review committee before President Obama is inaugurated. The committee, consisting of career civil servants with financial expertise, remands the loan back to DOE “without prejudice” because it wasn’t ready for conditional commitment.
March 2009: The same credit committee approves the strengthened loan application. The deal passes on to DOE’s credit review board. Career staff (not political appointees) within the DOE issue a conditional commitment setting out terms for a guarantee.
June 2009: As more silicon production facilities come online while demand for PV wavers due to the economic slowdown, silicon prices start to drop. Meanwhile, the Chinese begin rapidly scaling domestic manufacturing and set a path toward dramatic, unforeseen cost reductions in PV. Between June of 2009 and August of 2011, PV prices drop more than 50%.
September 2009: Solyndra raises an additional $219 million. Shortly after, the DOE closes a $535 million loan guarantee after six months of due diligence. This is the first loan guarantee issued under the 1703 program. From application to closing, the process took three years – not the 41 days that is sometimes reported. OMB did raise some concerns in August not about the loan itself but how the loan should be “scored.” OMB testified …that they were comfortable with the final scoring.
January – June 2010: As the price of conventional silicon-based PV continues to fall due to low silicon prices and a glut of solar modules, investors and analysts start questioning Solyndra’s ability to compete in the marketplace. Despite pulling its IPO (as dozens of companies did in 2010), Solyndra raises an additional $175 million from investors.
November 2010: Solyndra closes an older manufacturing facility and concentrates operations at Fab 2, the plant funded by the $535 million loan guarantee. The Fab 2 plant is completed that same month — on time and on budget — employing around 3,000 construction workers during the build-out, just as the DOE projected.
February 2011: Due to a liquidity crisis, investors provide $75 million to help restructure the loan guarantee. The DOE rightly assumed it was better to give Solyndra a fighting chance rather than liquidate the company – which was a going concern – for market value, which would have guaranteed significant losses.
March 2011: Republican Representatives complain that DOE funds are not being spent quickly enough.
House Energy and Commerce Committee Chairman Fred Upton (R-MI): “despite the Administration’s urgency and haste to pass the bill [the American Recovery and Reinvestment Act] … billions of dollars have yet to be spent.”
And House Oversight and Investigations Subcommittee Chairman Cliff Stearns (R-FL): “The whole point of the Democrat’s stimulus bill was to spend billions of dollars … most of the money still hasn’t been spent.”
June 2011: Average selling prices for solar modules drop to $1.50 a watt and continue on a pathway to $1 a watt. Solyndra says it has cut costs by 50%, but analysts worry how the company will compete with the dramatic changes in conventional PV.
August 2011: DOE refuses to restructure the loan a second time.
September 2011: Solyndra closes its manufacturing facility, lays off 1,100 workers and files for bankruptcy. The news is touted as a failure of the Obama Administration and the loan guarantee office. However, as of September 12, the DOE loan programs office closed or issued conditional commitments of $37.8 billion to projects around the country. The $535 million loan is only 1.3% of DOE’s loan portfolio. To date, Solyndra is the only loan that’s known to be troubled.
Meanwhile, after complaining about stimulus funds moving too slowly, Congressmen Fred Upton and Cliff Stearns are now claiming that the Administration was pushing funds out the door too quickly: “In the rush to get stimulus cash out the door, despite repeated claims by the Administration to the contrary, some bets were bad from the beginning.”
What critics fail to mention is that the Solyndra deal started under the Bush Administration, which tried to conditionally approve the loan right before Obama took office. Rather than “pushing funds out the door too quickly,” the Obama Administration restructured the original loan when it came into office to further protect the taxpayers’ investment.
If you have read the timeline you will note that the approval of the strengthened loan guarantee by the independent credit committee came in March of 2009 while the audit did not come until 2010 when the market had fallen off a cliff due to lower kilowatt hour prices and the massive Chinese subsidies we discussed previously in a recent SNAP-CAP.
Also, Solyndra raised another quarter billion dollars from private investors even after the negative report on the company came out. This would bolster the high regard that the company had and the optimism that it would make it.
The company’s early backers included private investors who had diverse political interests. The fact of the matter is that because one of the Solyndra investors is funded by George Kaiser — a man who donated money to the Obama campaign — the loan guarantee has been attacked as being political in nature. What critics don’t mention is that one of the earliest and largest investors is funded by the Wal-Mart Walton family, who are huge Republican donors.
Knowing all of these facts, candidate Romney, congressional Republicans, and the media keep beating their drums to the same tune. For example:
AP Headline: “Republican presidential candidate, former Massachusetts Gov. Mitt Romney holds a news conference outside the Solyndra manufacturing facility in Fremont, Calif. Mitt Romney mischaracterized an Energy Department Inspector General investigation when he claimed it found the Obama administration had steered federal contracts to friends and family at Solyndra, the California solar company that went bankrupt.”
It is crucial that we are armed with the true facts to combat the myths created by thoughtless sound bites of this ilk. The future of our nation is at stake. Solar manufacturing will be a huge market in the coming years. The International Energy Agency projects that solar power will grow steadily, producing nearly a quarter of the world’s electricity within four decades. That adds up to a $3 trillion market. Who will the producers be?
Without our government’s help the answer will certainly be China and others. We have dropped from producing 40% of the world’s solar panels in 1995 to 5% while China has gone from 6% to over 60% in just the last 6 years.
The Department of energy sums it up succinctly. “When it comes to clean energy, we have a choice to make. We can compete in the global marketplace – creating American jobs and selling American products – or we can buy the technologies of tomorrow from abroad”.
The quote continues. “Our loan programs are today supporting a diverse portfolio of more than 40 projects that plan to employ 60,000 Americans and give us a chance to compete and succeed in the global clean energy race. These include the largest wind farm in the world, the first new nuclear power plant in the United States in three decades, and the largest solar generating stations in the world”.
“Historically, our government has supported emerging industries -- from transcontinental railroads to aviation to the microchip. These investments strengthened our Nation and leveraged the private investments that drove our prosperity. Now is not the time to stop investing in our Nation’s future”.
Solyndra is only one of the investments that the Obama administration has made in the clean energy field. By September of 2011 the Department of Energy had an investment portfolio that reached $37.8 billion. Given that Solyndra was their only failure to date, that would account for 1.3% of the budget being written off to bad debts – an enviable record by any standards.
The fact that the opposition has singled out this one case and has ignored the overall record is just shameful demagoguery and it will be exposed once the public knows the truth as you do now. Share this information with everyone you are in contact with so we can have an informed electorate going to the polls this November.
Today, it is the “Right” that decides that illusion trumps facts in their reality. It’s high time for the rational majority in this country to inform ourselves and GET OUT THE TRUTH!