November 24, 2011
The Solyndra Mess
NYTIMES, November 4, 2011
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The Republicans on the House Energy and Commerce Committee appear to have hit the pause button on their investigation into the failure of Solyndra, a solar panel maker that entered bankruptcy proceedings in September, defaulting on a $528 million federal loan.

What have we learned? Nobody comes out of this looking good. Not the Obama administration, which appears to have misread the market in its eagerness to proclaim that it was creating green jobs. Not the Republicans, either, as their partisanship turned a legitimate inquiry into a circus of broad accusations aimed more at tarnishing the administration than contributing to a serious discussion of energy policy.

The Republicans hoped to prove that the Solyndra loan was a political favor to wealthy investors with Democratic ties, chiefly George Kaiser, an Oklahoma billionaire. They have not made this case. There were plenty of other private investors, some of them Republicans. In sworn testimony to the committee, Steven Chu, the energy secretary, denied knowing who Mr. Kaiser was when he signed off on the loan in September 2009 and said it had been “made only on the merits.”

Nor have the Republicans succeeded in showing President Obama’s green energy strategy to be a flop. About 40 projects have received loans under a clean energy program authorized by Congress in 2005 and incorporated in the Obama administration’s 2009 stimulus package. Only two have failed, Solyndra and Beacon Power, a battery company in upstate New York that borrowed $39 million. These defaults represent just 1.3 percent of the $37.6 billion loan portfolio. The biggest bet to date is an $8.33 billion loan guarantee for a nuclear plant in Georgia.

Even so, the hearings have raised legitimate questions about the Solyndra deal. Solyndra was the first beneficiary of the loan program and seemed to be an ideal candidate — a company with a new technology and lots of venture capital — for an administration eager to show results. So eager, in fact, that the White House appeared willing to ignore warnings from its own experts about rising competition in the solar panel market. E-mail exchanges released by Republicans from August 2009, as the loan neared approval, show that some officials in the Office of Management and Budget were beginning to worry that Chinese companies could threaten Solyndra’s sales with cheaper units; one official asked that “the announcement be postponed.” But those worries were dismissed, and the loan announcement went ahead as planned.

Those fears were not unfounded. By May 2010, when President Obama visited the company to trumpet green energy, the market had weakened and Solyndra was showing cracks. Yet the White House remained deeply invested in Solyndra’s success; according to one e-mail from an investor quoted by the Republicans, it asked the company to delay announcing layoffs until after the November 2010 elections. Given Solyndra’s prominence, layoffs would obviously have been embarrassing.

One other issue involves Mr. Chu’s decision to subordinate Solyndra’s loan to a new round of private financing last February, allowing private investors to move ahead of taxpayers in the event of a default. Republicans say this was illegal, but Mr. Chu says he had been assured by the loan program’s chief counsel that it was proper because new financing was essential to keep the company solvent.

Last month, the White House asked Herbert Allison Jr., a former assistant Treasury secretary, to undertake a 60-day review of the loan program and assess the health of other companies that received loans. The Republican inquiry has raised valid questions, but it has also unfairly tried to exploit one bad bet to discredit public investments in renewable technologies. As the investigations continue, Congress must not lose sight of the bigger picture: the need to invest in promising alternatives to fossil fuels.

COMMENTS

Blinding Officials to a Solar Energy Company’s Condition

Solyndra, a California-based manufacturer of solar panels, filed for bankruptcy earlier this month, just a year after it received final approval from the Obama administration for a $535 million loan guarantee to help it build a new factory. The collapse of the company — the first to receive a clean energy loan guarantee under a program created in 2005 — is a major embarrassment to the Obama administration and has inspired a series of investigations, including one by the F.B.I. A review of government documents adds to evidence of a major lobbying campaign by a politically connected company that appears to have blinded government officials to Solyndra’s true financial condition

Solyndra

September 22, 2011
In Rush to Assist a Solar Company, U.S. Missed Signs
By ERIC LIPTON and JOHN M. BRODER, NY Times
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WASHINGTON — President Obama’s visit to the Solyndra solar panel factory in California last year was choreographed down to the last detail — the 20-by-30-foot American flags, the corporate banners hung just so, the special lighting, even coffee and doughnuts for the Secret Service detail.

“It’s here that companies like Solyndra are leading the way toward a brighter and more prosperous future,” the president declared in May 2010 to the assembled workers and executives. The start-up business had received a $535 million federal loan guarantee, offered in part to reassert American dominance in solar technology while generating thousands of jobs.

But behind the pomp and pageantry, Solyndra was rotting inside, hemorrhaging cash so quickly that within weeks of Mr. Obama’s visit, the company canceled plans to offer shares to the public. Barely a year later, Solyndra has become one of the administration’s most costly fumbles after the company declared bankruptcy, laid off 1,100 workers and was raided by F.B.I. agents seeking evidence of possible fraud.

Solyndra’s two top officers are to appear Friday before a House investigative committee where, their lawyers say, they will assert their Fifth Amendment right against self-incrimination.

The government’s backing of Solyndra, which could cost taxpayers more than a half-billion dollars, came as the politically well-connected business began an extensive lobbying campaign that appears to have blinded government officials to the company’s financial condition and the risks of the investment, according to a review of government documents and interviews with administration officials and industry analysts.

While no evidence has emerged that political favoritism played a role in what administration officials assert were merit-based decisions, Solyndra drew plenty of high-level attention. Its lobbyists corresponded frequently and met at least three times with an aide to a top White House official, Valerie B. Jarrett, to push for loans, tax breaks and other government assistance.

Administration officials lay the blame for Solyndra’s problems in part on the global collapse in the price of solar energy components, which forced the company to sell its innovative solar panels at less than it cost to make them. Some lawmakers on Capitol Hill question whether the firm’s executives may have engaged in a cover-up of their precarious financial condition, allegations the company denies.

But industry analysts and government auditors fault the Obama administration for failing to properly evaluate the business proposals or take note of troubling signs already evident in the solar energy marketplace.

“It was alarming,” said Frank Rusco, a program director at the Government Accountability Office, which found that Energy Department preliminary loan approvals — including the one for Solyndra — were granted at times before officials had completed mandatory evaluations of the financial and engineering viability of the projects. “They can’t really evaluate the risks without following the rules.”

The Energy Department’s senior staff has acknowledged in interviews the intense pressure from top Obama administration officials to rush stimulus spending out the door.

“We had to knock down some barriers standing in the way to get these projects funded,” Matthew C. Rogers, the Energy Department official overseeing the loan guarantee program, said in March 2009, just days before Solyndra got its provisional loan commitment. Mr. Rogers said Energy Secretary Steven Chu had been personally reviewing loan applications and urging faster action on them.

Two committees of Congress, the Department of Energy’s inspector general and the Department of Justice are now investigating what went wrong in the Solyndra case. In Washington, it has set in motion a highly partisan battle over the benefits or failings of Mr. Obama’s stimulus program.

Some Republican lawmakers have raised questions about political interference in the loan decision, pointing to the fact that George B. Kaiser, a billionaire from Tulsa, Okla., was a fund-raiser for Mr. Obama’s 2008 campaign and the backer of a foundation that is Solyndra’s leading investor. While he has met with top White House and administration officials multiple times, Mr. Kaiser and administration officials say they discussed issues related to his foundation, not Solyndra.

But during the period when Solyndra’s loan guarantee was under review and management by the Energy Department, the company spent nearly $1.8 million on Washington lobbyists, employing six firms with ties to members of Congress and officials of the Obama White House. None of the other three solar panel manufacturers that eventually got federal loan guarantees spent a dime on lobbyists.

Energy Department officials said the lobbying had no impact on their decisions. But Solyndra, which had been among 143 companies to express an interest in a loan guarantee and 16 that were asked to submit a formal application — ended up securing the first financial commitment. Solyndra’s loan guarantee was the highest of the four companies.

Tim Harris, the chief executive of Solopower, which got a $197 million loan guarantee last month to build solar panels in San Jose, Calif., said his company had never considered employing a Washington lobbyist to grease the application. “It was made clear to us early in the process that that was clearly verboten,” Mr. Harris said. “We were told that it was not only not helpful but it was not acceptable.”

If there was a single bet made by the Obama administration that would determine the success or failure of its investment in Solyndra, it centered on the global price its competitors pay for one of earth’s most common elements: silicon.

Solyndra’s unique tube-shaped solar panels — which harvest early morning and evening light for electricity instead of just midday sun — do not rely on silicon. But it assumed its competitors would continue to pay a relatively high price for silicon, allowing Solyndra to charge the premium required to turn a profit on its panels. It was an assumption Obama officials bought into. But industry experts outside the federal government, going back to 2008, were predicting silicon prices were headed for a steep fall.

Bush administration officials had started the review of the Solyndra application in May 2008. They were anxious to approve the deal, because members of Congress were complaining that the loan guarantee program, signed into law in 2005, still had not given out its first award. But in the final weeks of the administration, Energy Department officials put the brakes on any loan commitment to Solyndra, partly out of concern that its costs made the price of manufacturing power capacity significantly higher than its competitors.

The Obama administration, though, was determined to move ahead. “DOE is trying to deliver on the first loan guarantee within 60 days from inauguration,” one March 2009 e-mail from an Office of Management and Budget official said.

Damien LaVera, an Energy Department spokesman, said administration officials realized the Solyndra plan posed some certain risks. The loan program was designed to help finance cutting-edge projects that could not otherwise find enough private-sector investors.

“But we did not just take what this company was telling us,” Mr. LaVera said. “We did the analysis on our own and decided it was a good bet.”

But Shyam Mehta, a senior analyst at GTM Research who follows the solar energy industry, said that he questions just how careful this review was, given the obvious warning signs.

“There was just too much misplaced zeal at the Department of Energy for this company,” Mr. Mehta said.

Solyndra executives, seeking an edge in the competition for federal loan guarantees, began employing Washington lobbyists in 2008. The company stepped up its efforts in early 2009, retaining McBee Strategic Consulting. Five lobbyists employed by the McBee group eventually worked on Solyndra’s behalf, including Michael Sheehy, a former top aide to Representative Nancy Pelosi of California, the House Democratic leader. Solyndra has paid McBee Consulting $340,000 since 2009.

Steve McBee, the firm’s founder and a former Senate aide, did not return calls seeking comment, but in an April 2009 press release he said that his firm could help technology companies gain a chunk of the projected bonanza of $100 billion in federal money for clean-energy projects.

Mr. McBee said that lobbying was not allowed as part of the process. But in early 2009, the firm filed a disclosure form saying it was retained by Solyndra to lobby on stimulus act spending related to the Energy Department’s loan guarantee program. A critical piece of the stimulus bill removed a requirement that firms like Solyndra pay a substantial up-front fee to cover the risk of a loan, a provision that had slowed approvals of loan guarantees. Once that was removed, loans began to flow and Solyndra was the first to benefit.

Over the next three years, Solyndra retained two other lobbying firms, hired two in-house lobbyists and aggressively pushed for White House meetings to plead its case. Another lobbying and public relations firm with close ties to the White House — Glover Park Group — also worked on Solyndra’s behalf.

In January 2010, four months after the loan was finalized, Solyndra executives and lobbyists pressed Gregory S. Nelson, an aide to Ms. Jarrett, a senior adviser to Mr. Obama, for a meeting to boast about progress at the plant financed with federal money and to discuss a possible second loan, according to White House e-mails. That meeting occurred on Jan. 15, 2010, records show. White House scheduling officials later began talks that led to Mr. Obama’s visit in May.

But signs were increasing in 2010 that the company’s business plan was imploding. The dive in silicon prices, which had started in late 2008, accelerated by the end of 2010. Solyndra sales were growing, but so were its losses. It was forced to slash prices much lower than its costs in order to compete with conventional silicon panel producers. Trade publications began to question whether Solyndra would survive — even its own accountant in March 2010 said it had “substantial doubt about its ability to continue as a going concern.”

But Solyndra and its lobbyists continued to provide assurances to the White House and the Energy Department, which still could have stopped the flow of federal money that was being given out for construction of a new factory.

“We have no intention of going out of business,” David Miller, a Solyndra executive, wrote to Mr. Nelson, the White House aide, in July 2010. Mr. Miller, added in May 2011, as the cash crunch had severely worsened, that “we have good market momentum.”

Mr. Nelson wrote back encouraged. “Fantastic to hear that business is doing well,” he said, according to a May 2011 e-mail released by the White House. “Keep up the good work.”

Similar positive predictions were shared with members of Congress this year, after the company sought and received permission from the Obama administration to restructure its $535 million loan, which put private investors ahead of the government for some of the debt if the company was liquidated.

That disconnect has led some members of Congress to question if Solyndra was intentionally misleading officials in Washington.

“Even as late as this summer, Solyndra executives told us here in Washington that the company’s finances were improving,” said Representative Cliff Stearns, Republican of Florida, and the chairman of the panel leading the Solyndra inquiry. “Solyndra was never profitable, and it was obviously poorly managed and unviable in the global market.”

November 17, 2011
Panel Hears Defense of Loan to Solyndra
By MATTHEW L. WALD, NY TIMES
LINK

WASHINGTON — The bankruptcy of Solyndra, the solar power company that took $528 million in government loans, was “extremely unfortunate,” Steven Chu, the energy secretary, told lawmakers on Thursday. But he rejected a suggestion put forward by a Republican that he or his department should apologize.

Companies fail when “the bottom of the market falls out,” Dr. Chu testified before a subcommittee of the House Energy and Commerce Committee. That, he said, is what happened to the solar panel business, for two reasons that he maintained could not be foreseen.

“This company and several others got caught in a very, very bad tsunami,” he said. New plants to manufacture solar panels started up in China and elsewhere, while the market for the panels was softening because of economic troubles in Europe. Prices dropped 70 percent in two and a half years, he said.

But Republicans pursued the theme that the problem was incompetence and political influence. Clifford Stearns of Florida, chairman of the oversight and investigations subcommittee, which held the hearing, said, “it is readily apparent that senior officials in the administration put politics before the stewardship of taxpayer dollars.”

Dr. Chu said he had come into office in January 2009 trying to speed up a loan guarantee process that had been established by a 2005 law, but which had not at that point resulted in any actual loans. His goal, he said, was to create jobs in a faltering economy.

Dr. Chu also stressed that private investors had put more than half a billion dollars into Solyndra, which had a new design for lightweight solar modules.

“When it comes to the clean energy race, America faces a simple choice: compete or accept defeat,” he said. “I believe we can and must compete.”

His prepared testimony also made an indirect dig at some members of Congress. “We appreciate the support the loan programs have received from many members of Congress — including nearly 500 letters to the department — who have urged us to accelerate our efforts and to fund worthy projects in their states,” the statement said.

Mr. Stearns, though, complained that the policy was an effort to keep President Obama on a “green jobs pedestal.”

“Two of the first three deals approved under Secretary Chu’s acceleration policy have now blown up and filed for bankruptcy,” he said, referring as well to a Massachusetts energy storage company, Beacon Power. “No one has admitted any fault whatsoever, and the president and our Democrat colleagues just shrug and say, “Hey, sometimes things don’t work out.’ ”

Dr. Chu was the only witness.

The hearing has two focuses: the business judgment of the Energy Department and the White House, and the possibility of political influence. The chairman of the Energy and Commerce Committee, Fred Upton, Republican of Michigan, asked in an opening statement, “What did Secretary Chu know about the situation at Solyndra, and when did he know it, and how did he act on this information, if at all?”

The form of the question mirrors what was asked 35 years ago about President Richard Nixon’s involvement in the Watergate break-in.

“We have heard from President Obama, and even from you, Secretary Chu, that nobody had a crystal ball and no one could have predicted Solyndra’s demise,” he said. “But the truth is, the D.O.E. staff did predict this — one of the models reviewed by D.O.E. staff specifically showed that Solyndra would run out of cash in September 2011.”

And the company’s auditors said six months after the initial loan agreement was completed that Solyndra would have problems, he pointed out.

For the most part, Democrats are not defending the government’s judgment in making the loan.

But Representative John D. Dingell, also of Michigan, questioned in his opening statement the Republicans’ other contention, that the loan was rushed through because one of the investors, George Kaiser, an Oklahoma oil and gas billionaire, was a “bundler” for the Obama campaign.

“I have yet to be presented with a single piece of evidence that President Obama, Vice President Biden or any of their staffs used political pressure on D.O.E. to circumvent the normal vetting process, an assumption/presumption that my Republican colleagues continue to propagate for media attention,” he said.

Representative Joe Barton, Republican of Texas, said that political influence by Mr. Kaiser was inevitable.

“It’s the elephant in the room,” he said. “Everybody and their dog at D.O.E. knew who he was.”

Republican questioners were alternately respectful of Dr. Chu, who won a Nobel Prize in physics, and condescending.

Joe Barton of Texas praised Dr. Chu’s integrity but asked about a decision that Dr. Chu approved, to allow Solyndra to restructure its loan and take in new money, putting the government second in line for reimbursement in case of liquidation. He said the 2005 law that established the loan program that said that in case of liquidation, the government “shall be” first in line.

“Do you understand what the word ‘shall’ means?” he asked.

Mr. Stearns asked Dr. Chu whether the White House’s appointment of an outside expert to review the loan guarantee program reflected badly on the secretary. “Doesn’t this mean, simply, it does to me, that the president has lost confidence in you, your acumen, your financial acumen?” he asked.

Dr. Chu replied, “we welcome outside eyes.”

Mr. Stearns said, “you don’t take it as a personal affront on your integrity?”

“No,” said Dr. Chu.

Speaking to reporters at the end of about five hours of statements and testimony, all parties sounded feisty. Dr. Chu said: “We really have nothing to hide; we really have nothing to be ashamed about.”

He added that the government would have to help incubate new manufacturing industries, because this played to “the U.S. technological sweet spot,” which is the development of new technologies.

Mr. Stearns was later asked if he thought Dr. Chu should be fired. “My personal opinion is I think possibly he should be reassigned,” he said.

Mr. Barton was more charitable, but darker. “I think Secretary Chu is trying to be a team player,” he said. “I think probably he is taking the heat for some decisions out of his control.”

This article has been revised to reflect the following correction:

Correction: November 22, 2011
An article on Friday about Energy Secretary Steven Chu’s testimony to Congress about Solyndra, a failed solar panel maker, misstated the year that Dr. Chu assumed his cabinet post. It was January 2009, not 2008.

Solyndra Bankruptcy Timeline

November 17, 2011, 5:21 PM
Solyndra Has a Cousin in the Poorhouse
By MATTHEW L. WALD, Green Blog
LINK

At a hearing on Thursday that lasted five and half hours, Republicans on the House Energy and Commerce Committee grilled the energy secretary, Steven Chu, on the bankruptcy of the solar panel manufacturer Solyndra and asked what other loan recipients might be in financial trouble.

Dr. Chu named only one other company, Beacon Power, which borrowed $39 million and entered bankruptcy late last month.

In remarks to reporters after the hearing, Dr. Chu lumped the two companies together, although they were in different lines of business. Solyndra, based in Cupertino, Calif., built solar power modules for rooftops, and Beacon built an array of flywheels at a plant near Stephentown, N.Y. The flywheels are mechanical batteries designed to absorb power or give it back on signals from the New York power grid operator; they were capable of reversing direction every four seconds.

Their purpose is to help regulate the frequency on the grid so that the electrons dance back and forth precisely 60 times every second, which is the alternation in “alternating current,” or AC power.

Solyndra received a loan guarantee of $535 million and built just what it promised to build. But on the world market, the price of its products fell by 70 percent over two and a half years, Dr. Chu testified, because the Chinese government had subsidized so many manufacturers in that country and because the Europeans, struggling with money problems, had slowed their purchases.

Beacon was also a technical success, according to the company. But the price paid for the service it provided, frequency regulation, fell by about 70 percent in the last year.

The reason is that this price, too, is market-based. Gene Hunt, a spokesman for the company, said that Beacon was a victim of the recession, which has hurt demand for electricity among industries. “It’s kind of a perfect storm,” he said. The same cliché has been used to describe what happened to Solyndra.

Dr. Chu, speaking in a hallway outside the hearing room in a House of Representatives office building in Washington, said the “market changed very, very rapidly, just as the photovoltaic market changed very rapidly.” And among the approximately three dozen other loan recipients, “I can’t promise you there won’t be another’’ with the same problem, he said.

Analysts have noted that the Energy Department has made extensive loans and grants to companies that want to produce batteries and other components for electric cars or entire cars. If that market does not develop, batteries will be in oversupply and their price will crash, the analysts say. But backers of electric cars still have high hopes for a major market.

Solyndra is being liquidated. Beacon is still operating and has earned about $600,000 in revenue in the last year, Mr. Hunt said. The company has asked the bankruptcy court for access to an escrow fund that it placed with the Energy Department in exchange for its loan. A bankruptcy court in Delaware is scheduled to hold a hearing on Friday.