Solyndra Revisited

Remember Solyndra?

Solyndra was a company that developed solar energy panels that used different technology than current, conventional solar panels. The Obama administration, through its Department of Energy’s Loan Programs Office, backed a credit line of $535 million to help the company further develop, manufacture, and market those panels. It didn’t work out and the company went belly-up.

Republicans made a huge fuss about Solyndra’s bankruptcy, impugning the integrity of the Obama administration officials who authorized the financial support and the people who ran Solyndra. Underlying that fuss was another, implicit criticism: that no one needs solar energy and that we’re all doing just fine with our energy needs being met by fossil fuels.

In the end Solyndra was a bad investment, but was federal investment in a company like Solyndra necessarily a bad idea? The Curmudgeon doesn’t think so.

The reality is that the federal government routinely provides financial support to individuals and ventures that the private sector will not. Sometimes it’s something as simple as backing student loans and FHA mortgages, both of which The Curmudgeon took advantage of to get started in adult life. But the federal government also backs home loans for low-income people (the mortgage backing The Curmudgeon received was for people with decent incomes but not enough savings to make a down payment), small business loans, medical research that’s grounded in basic science rather than directed at curing a specific disease, and much more. The idea is that government invests in things it believes are in the public’s interest – helping people through college, helping them buy their first homes, launching small businesses, pursuing technologies that the market has not yet recognized. These are all things that the much-ballyhooed “market” has no interest in supporting but that, at least in the view of some public officials, are worth pursuing but will never, ever happen without a helping hand from government.

So did all of the Department of Energy financial transactions turn out as disastrous as its support of Solyndra?

Nope.

Overall, in fact, the department’s Loan Programs Office, according to a recent article in Bloomberg Businessweek, has generated about $1.65 billion in interest payments from its various loans and is expected to bring in another $5 billion, at least, from its investments in emerging technologies – even after $535 million losses like Solyndra and others.

In other words, the federal government is turning a handsome profit helping enterprises like Solyndra get off the ground even after the occasional Solyndra-like failure.

Where else has the program invested money? So far, it has invested nearly $8 billion in advanced manufacturing, more than $8 billion in advanced nuclear energy, nearly $6 billion in solar power, nearly $5 billion in photovoltaic solar energy, and nearly $2 billion in wind energy.

Why? Because right now, all of those investments are considered too risky and too speculative even for those swashbuckling Wall Street and Silicon Valley venture capitalists and investment bankers. If government doesn’t invest in these enterprises nobody will, and as the returns on the Energy Department’s Loan Programs Office suggest, some of those ventures are definitely worth pursuing.

In the end, when you think about it, if some of those government investments don’t fail, a reasonable argument can be made that the federal government isn’t being bold enough in trying to support efforts to improve American technology and the U.S. economy. There’s no reason – none – for the government to invest in ventures that the private sector will invest, and you can be pretty sure that all of those investments that helped produce the income the loan program is generating are now receiving considerable attention from private sector investors.

Which was the point all along: help ventures that no one else will support and then, once they’ve proven their merit, let the private sector run with them. If the government doesn’t have a Solyndra-like failure once in a while it’s not trying hard enough, and having $535 million failures like that one while still generating significant returns on its investment proves that it’s achieving what it set out to do: make responsible investments in technology or activity that public officials believe is in the public’s interest but that, without government’s support, might never get off the ground. It also suggests that on the whole, the people choosing which investments to make really know what they’re doing.

 

 

 

 

 

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