Clean, Green and Bankrupt

by Mike Mulvihill

As a House Subcommittee probe into the collapse of Solyndra, Inc. widens (Solyndra received a $535 million federal loan guarantee), a second clean energy company with a $43 million Department of Energy loan guarantee has filed for bankruptcy. Beacon Power, which also received a $26 million in stimulus grant from DOE, was working on a new technology (fly-wheel based energy storage) that would allow the nation’s electricity grid to store wind and solar generated power, as demonstrated at a “a state of the art energy storage facility in Stephentown, New York.”

These bankruptcies are a travesty and also emblematic of what is essentially still a very embryonic alternative energy industry. In the case of Solyndra, the company’s business plan created expensive solar panels while the overall solar panel market saw a 40 percent price drop. These market conditions also were a harbinger of the collapse of two other solar companies – Evergreen Solar Inc. of Massachusetts and SpectraWatt of New York. Whether these conditions could and should have been anticipated is subject to debate.

While the reasons behind Beacon Powers collapse are not yet evident, (conjecture is that Beacon had product problems that were not addressed quickly thus resulting in lackluster investor interest) Republicans will waste little time adding fuel to a Solyndra probe designed to damage the Obama Administration. Meanwhile, the reality is that new technology companies fail all the time (more often than not) because they are risky start-ups. That is why government subsidies and incentives are needed in order to help an embryonic clean energy industry become a burgeoning one capable of attracting private investors. However, changing the rules of subsidies and incentives mid-stream has just the opposite effect on the risk profile for private investment. As stated in many prior blog posts, this is why a consistent, long-term U.S. energy policy strategy is badly needed.

And that is where these events become emblematic. Alternative energy is not ready for prime time and won’t be for another 20 to 30 years (if we invest in it NOW). Alternative is not the answer to energy needs short-term. For the next few decades, we need to harness all of our energy resources – traditional fossil fuel (coal and natural gas), nuclear, wind, solar, hydro and geothermal. Nuclear plants, as we know them today, are so large, complex and costly that one project gone awry can take down even the most financially stable investor-owned utility.( However, new technology smaller, “distributed” nuclear plants employing nuclear power plants similar to those used in the U.S. Navy for more than 50 years could be game changers for nuclear.) And solar and wind simply can’t address the technical issues of bringing energy to market at a price that is not two to three times what we pay per KW today. Notwithstanding the public process complexities of adopting wind and solar on a large scale, which will require addressing the realities of multi-jurisdictional permitting, zoning and public planning that could add decades to bringing any project onto the grid. The reality is that we need to update and replace the nation’s workhorse coal and natural gas power plants while we develop the next generation of clean energy generation, storage and transmission. Allowing Congressional subcommittees with political agendas to set this course, however, is the biggest mistake we could ever make.

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