- Jim: Your experience is very interesting. You make a good point that new technologies often fail in the commercialization process, whether backed byMessage 1 of 6 , Sep 19, 2011View Source
Your experience is very interesting. You make a good point that new technologies often fail in the commercialization process, whether backed by government or the private sector. Commercialization is not an easy process. DOE is not the only government agency that supports new market entrants, USAID and others also share that role. (DARPA really did invent the Internet.) Comments made by ex-leaders of USAID and others at the BBI bio-refining conference last week were that USAID does a better job of assuming and managing technology and commercial risk on behalf of the public interest than does DOE. In fact some of the mechanisms used by USAID are being deployed in the private sector; insurance companies adopting USAID practices to cover the burden of commercial failure.
Nevertheless, DOE is subject to political pressure and Solyndra’s failure was exacerbated by a lending process that was politicized. There was a failure of business due diligence in DOE lending to Solyndra. E-mails from members of government clearly indicate that due diligence was not complete. The Administration rushed the process to declare a green manufacturing victory. The amount of the loan guarantee, $500 Million was too high. Commercialization has many stages. Initial lab success may not translate into critical manufacturing success. Smaller loans that could have progressed studies through manufacturing feasibility would have been much more prudent than the large amounts given.
I know individuals in Houston who were also leaders of the Clinton/Richardson DOE. They frequently comment that the technology money lending process of the US Government has become horribly politicized. When politics gets in the way of sound business and technology due diligence, the inherent risk of commercialization becomes higher.
From: firstname.lastname@example.org [mailto: email@example.com ] On Behalf Of jcargas@...
Sent: Saturday, September 17, 2011 4:23 PM
Subject: Re: [hreg] Re: The Solyndra Hearing: Squabbling, Accusations And Four Big Questions
As a former Clinton appointee to the US Department of Energy, I can affirm that commercialization of technologies developed with US taxpayer funds is a great challenge, but not for the reasons stated. DOE is very sophisticated -- it contains our national labs after all. If a technology offers low risk and high return, then the private sector commercializes it and makes a profit. However, if the technology is high risk or presents a marginal return on investment (but has some non-monetary environmental benefit), the private investors (i.e. banks, angels, hedge funds, multi-national energy companies, etc.) will not touch it. When Bill Richardson was Secretary of Energy, we coined the term "bleeding edge technology" due to the significant potential for financial loss. The private sector, and the insurance companies that they can shift their risk to, stay away from the bleeding edge.
The role of government is to assume the risk the private sector will not with loan guarantees. The Office of Fossil Energy, where I served, calculated that if 4 out of 10 commercializations succeed, the overall program would be a financial success. It is in the public interest to take that first step onto the bleeding edge -- especially if a more enviornmentally benign technology is involved. Once the first instance becomes a proven success due to a government sponsored pilot program, the private sector, and its investors, will step in and embrace the new technology. Only then does it get the label "cutting edge" and become commercialized.
During my tenure at DOE, I had the privileged of learning from research managers at DARPA who conduct the most risky government research in the world. Their failure rate is very high, but the payoffs, like airplane and submarine stealth and smart bombs that minimize civilian damage, pay huge dividends for the Defense Department. They are also very strict about de-funding a project if the probability of success gets too low. Perhaps, the only thing the current DOE may have been guilty of was not pulling the plug sooner.
Government is not the private sector, and should not be compared to it. The American public needs to accept some failure to gain its long term goals. Let's hear about all the billions of successful loans made by DOE and how they far outweigh the disappointment of Solyndra.
- Jim Cargas
From: Tyra Rankin < tyra@... >
To: hreg < firstname.lastname@example.org >
Sent: Sat, Sep 17, 2011 11:31 am
Subject: RE: [hreg] Re: The Solyndra Hearing: Squabbling, Accusations And Four Big Questions
Really good comment. The Pasadena ISD project administered by HARC and installed by Houston ’s Ignite Solar utilized some Solyndra cylinders. I’ve seen the cylinders and they do offer a great tool for special installations. http://ses21usa.wordpress.com/2011/04/01/solyndra-30kw-installation-pasadena-independent-school-district-texas/
Politicization of government money processes is a real danger and hurts us all. I attended this week’s BBI BioRefining conference. Biofuels policy and regulation is administered by 2 government agencies, DOE and USAID because of the agricultural basis, while solar/wind/geo tend to be administered by DOE alone. There is some overlap – USAID can involve solar/wind projects for rural development for example. But comments among presenters knowledgeable about both DOE and USAID were that USAID is much smarter. DOE lacks specialists knowledgeable about the technologies and industries they cover. Whereas USAID has specialists with extensive experience in the technologies, industries, markets and policies. USAID has more defined tranches of expertise, DOE lumps all renewables and efficiency in a single pool.
The specific comments about Solyndra were that DOE did not understand Solyndra’s technology, its capabilities and limitations, stage of development or market. DOE doesn’t understand the commercialization process – what it takes to move a technology from conception to full manufacturing. Clearly from e-mails that have surfaced, solid business due diligence was not done for Solyndra’s loans.
I’ve noticed DOE’s politicization locally. DOE appointments were made for solar positions in our area to gas experts with no experience whatsoever with solar technology or solar industry, but because of ties to DOE developed from a history of positions with companies like ExxonMobil, were awarded development roles that frankly did nothing to help a build a local solar market. This kind of politically motivated appointment hurts fledgling renewable industries.
Overall, considering the money blown on the Banks, the various corporations, and even bailouts for McDonalds . . . the money loss is pretty trivial.
The loss in this is that the design had some good special application sites -- like high wind areas, along the coast. These tubes had much less flat surface area to catch the wind than traditional flat panels, and we would pay premium for that in small quantities for certain sites.
If they had not tried to inflate it beyond its practical demand, it would have been fine. In general, most of .gov programs should probably be focused towards the Greatest Good for Greatest Number of People. Whole mess reminds me of Bling-Bling thinking. Gotta get away from various .gov and Ivory Tower idiots who think that new glamour toys are always the best.
--- On Fri, 9/16/11, Jay Ring <public@...> wrote:
I have no special knowledge about 2, 3, or 4. I don't find it particularly surprising that the Obama Administration and the DoE are denying any wrong doing. Their denial is certainly not evidence of innocence any more than the accusation is evidence of guilt.
However, on the topic of "1. Why did Solyndra fail?" I believe the answer is pretty good.
There was a temporary spike in silicon prices right around the time Solyndra started.
The whole enterprise was based on the assumption that the price of silicon would stay high forever. That assumption was really just a form of commodity speculation.
Now that prices are low again, their process is no longer cost effective. There is no reason to think the prices will spike again, so the long-term prospects are very poor.
We should probably keep the technology around "just in case", but it makes no sense to continue production. The money would be better spent on silicon technologies.
Those are the facts as I see them. Purely objective.
As for the more subjective lessons, one I would draw is not to subsidize producers. If you are going to subsidize, subsidize the consumers. I think the loan guarantee program is a bad idea and should be discontinued. The money should be reallocated into consumer subsidies.
That way the government isn't picking which type of panel technology to persue, they are leaving that decision to consumers (and specifiers/installers). They will work together to get the best system for the lowest price.
That leaves which technology to persue to venture capitalists and engineers, who are probably going to do a better job than bureaucrats. It also keeps companies from buying off politicians. Even if everyone involved is innocent, it's easy to see why people think there was wrong-doing. This is not creating a good incentive structure, and it's just a matter of time before someone takes advantage of it.
If politicians would be a little less "reflexively attack" and "reflexively defend", I think both sides would agree the loan guarantees are inferior to simple consumer subsidies.
Republicans should agree because reclassifying the money is budget neutral, and Democrats should agree because it spends the same money more wisely. However, I am probably giving them both too much credit. Rewarding campaign contributors is pretty much what politicians do.
--- In email@example.com , "ralph parrott" <ralph.parrott@...> wrote:
> The political firestorm continues for bankrupt PV module manufacturer
> Solyndra and its infamous $535 million loan guarantee from the
> Department of Energy (DOE).w:st="on"> California
> On the heels of the FBI's arrival last week at the company's
> headquarters for an unspecified search, the U.S. House of Representativesloan
> has begun an investigation into whether Solyndra - and the Obama
> administration - engaged in wrongdoing when the company was offered its
> guarantee in 2009.of
> At a Wednesday hearing on Capitol Hill, representatives from both sides
> the aisle interrogated Jonathan Silver, executive director of the DOE'sLoan
> Programs Office, and Jeffrey Zients, deputy director of the Office oftestify
> Management and Budget (OMB). (Solyndra executives are expected to
> next week.)Guarantee
> The four-hour-plus probe - titled "Solyndra and the DOE Loan
> Program" - revealed no groundbreaking revelations and frequentlydevolved
> into partisan sniping. However, it zeroed in on a few crucial questionsthat
> will likely dominate ongoing discussion of the Solyndra scandal.could
> Most importantly for the solar sector, the answers to these questions
> determine the course of the federal government's future support - orlack of
> support - for solar and other forms of renewable energy.simply
> 1. Why did Solyndra fail?
> During his opening testimony and the question-and-answer session, Silver
> maintained that Solyndra's proprietary cylindrical-module technology
> fell victim to poor timing. As solar professionals are well aware, thethe
> market in 2006 and 2007 was vastly different from today's market.
> When loan-guarantee application due diligence was starting, Silver said,
> combination of high polysilicon prices and expensive balance-of-systemand rocky conditions in several critical European solar
> components made Solyndra's technology compelling - despite its higher
> production costs.
> But plummeting polysilicon prices, an influx of low-priced crystalline
> modules from China
> markets over the past couple of years hit across the PV industry.added.
> "These changes were particularly damaging to Solyndra," Silver
> Of course, as several members of Congress mentioned during the hearing,
> diligence should include the evaluation of future risks and thoroughthe
> industry analysis.
> Accepting Solyndra's failure as a consequence of market forces raises
> question of whether DOE staffers were fully aware of Solyndra'sso,
> vulnerabilities at the time of the loan guarantee's approval - and, if
> whether they and their counterparts in other governmental departmentsadministration?
> responded appropriately to this knowledge.
> 2. Did Solyndra get preferential treatment from the Obama
> Much of the hearing focused on a critical three-week period in January2009,
> during which President Bush left office and President Obama took over.At
> this point, the DOE's judgment of Solyndra's loan-guarantee applicationwritten
> changed from critical to favorable - an abrupt change of heart that has
> raised red flags.
> "One of our witnesses today, Mr. Silver, attempts to claim in his
> testimony that the Bush administration is equally at fault for approvingChairman
> Solyndra and that Solyndra was a train ready to leave the station when
> President Obama took office," said Oversight and Investigations
> 91411/Stearns.pdf> statement.administration -
> "In reality, on January 9, 2009 - at the end of the Bush
> the DOE Credit Committee voted against offering a conditional commitmentto
> Solyndra, saying that the deal was premature and questioning itsunderlying
> financial support," he continued. "Only after the Obamaadministration took
> control, and the stimulus passed, was the Solyndra deal pushedthrough."
> While acknowledging that the timeline was correct, Silver pointed out
> the DOE committee (which comprises career public servants, not political"remanded" it,
> appointees) did not "reject" the loan under Bush, but rather,
> requesting additional information.that
> What type of information was provided that suddenly convinced the DOE
> Solyndra's application had become sound? Silver mentioned "duediligence"
> and "market research" but did not reveal any specifics.it," he told
> Like many of his fellow Republicans at the hearing, Rep. Joe Barton,
> R-Texas, remained unconvinced. "'Due diligence' doesn't cut
> Silver. "We know that one thing changed: The presidentchanged."
> The George Kaiser Family Foundation owns approximately a 35.7% stake in
> Solyndra, according to Securities and Exchange Commission filings cited
> -raided-by-fbi-agency-spokeswoman-says.html> Bloomberg, and Kaiserhas
> visited Obama's aides 16 times since 2009.donations
> The foundation's owner, George Kaiser, reportedly made substantial
> to Obama's election campaign, possibly indicating a conflict ofinterest.
> Silver and Zients denied ever having personal interaction with Kaiser,
> both insisted that they and their staffers were never pressured byanyone at
> the White House to give a green light to the Solyndra deal. Silver saidhe
> had "no reason to believe" that Kaiser's donations played anyrole in the
> 3. Do internal emails reveal that DOE staffers skipped or rushed
> due diligence?fast-tracked
> Stearns produced transcripts of emails from DOE personnel regarding the
> timing of the highly publicized loan-guarantee approval, which he said
> contained "disturbing revelations." The approval was allegedly
> in order to coincide with Vice President Joe Biden's and DOE Secretaryassertion.
> Steven Chu's appearances at Solyndra's ground-breaking ceremony.
> Portions of emails distributed by Stearns appear to support this
> "We would prefer to have sufficient time to do our due diligencereviews and
> have the approval set the date for the announcement rather than theother
> way around," an unidentified DOE staffer wrote in one of the messages.wrongdoing," he
> But Rep. John Dingell, D-Mich., urged his colleagues not to jump to
> conclusions. "I am still waiting to see something that shows
> said. "I don't want us to proceed just on suspicions ormisinterpretations
> of emails."loan-guarantee
> Zients, whose department assigns credit subsidy scores to DOE
> applicants, insisted that the OMB reviewed Solyndra strictly accordingto
> procedure and, in fact, increased its credit subsidy score to make itmore
> conservative in the final approval stages.impact
> "I want to be crystal clear . these scheduling requests had no
> whatsoever on the credit subsidy score that was given to theproject," he
> said.government continue to invest in solar power?
> 4.Should the U.S.
> As to whether Solyndra's failure should cause the federal government totake
> a hard look at investing in any solar manufacturing projects orcolleagues
> installations, the members of Congress largely took their stances along
> party lines.
> "I disagree vehemently with the policy conclusions my Republican
> have already drawn," said Rep. Henry Waxman, D-Calif. "Theysay Solyndra
> shows the failure of solar investments."its
> "If you live in reality, you know that the world cannot continue
> reliance on fossil fuels," he added, stating that ceasing federalsupport
> would be an "economic death sentence for fledgling renewable energyfossil-fuel
> companies that have to compete against both heavily subsidized
> firms and low-cost overseas companies."China-based PV cell and
> Those "low-cost overseas companies" include numerous
> module manufacturers, whose dominance in the marketplace was discussedthan
> numerous times during the hearing.
> According to Silver, the Chinese government has already committed more
> $30 billion to several large manufacturers, in addition to providingother
> incentives. The U.S. 'investments pale in comparison.
>w:st="on"> U.S. to
> Silver reiterated that the DOE loan-guarantee program allows the
> begin to compete in what is projected to be a lucrative market. "Ican't
> imagine a scenario under which we, as a country, will walk away from anidea
> industry that will be one of the biggest in the world," he said.
> Stearns, however, indicated that walking away from - or, at least,
> intensively questioning involvement in - the solar sector may be a good
> for the government.realize that
> "Go back and look at all the solar energy projects, and you'll
> this industry is truly dependent on subsidies," he said. "Whenyou look at
> all this and do the analysis, even at $140 per barrel [for oil], theidea
> that solar panels are going to break even is questionable."have
> Zients stressed that aside from Solyndra, other solar energy firms that
> received loan guarantees are likely to deliver on their promises to thetaxpayers and the country has a whole.
> solar sector, U.S.
> "The program is relatively new, so loans have recently closed, for
> part," he said. "We have every reason to believe that theportfolio, as a
> whole, will perform."