Rosalea Barker: Flying Too Close to the Sun
Flying too close to the sun
September 25, 2011
As I write this on a gloomy autumn Sunday morning in the Bay Area, the President is winging his way westward from Washington, DC, to Seattle, WA, and from there will be Bay-bound later in the day. He’ll be attending a couple of Silicon Valley fundraisers this evening, and tomorrow will hold a town hall meeting at the Computer History Museum. That event is hosted by LinkedIn, an online social/job opportunity networking site for professionals.
Back in May of 2010, also, President Obama was visiting the Bay Area, that time on the east side of the Bay, down in Fremont, where he made some remarks at the building site of a second manufacturing facility for the greentech company Solyndra. The Department of Energy had given Solyndra a $535 million loan guarantee to fund the expansion so the company could keep up with orders. The California Governor at that time, Arnold Schwarzenegger, was also present, touting the tax breaks the state was giving to greentech companies.
The following paragraph comes from the press pool report of the President’s visit:
“What you are proving here all of you, collectively, is that as difficult as it's going to be, as long as it takes, we will recover,” Mr. Obama told about 250 workers assembled in the new structure. “The promise of clean energy isn't an article of faith, not any more," he added. "The future is here.”
I don’t regret never going down to pick up my media credential for that event—I had a baaaad feeling about it then, and I’m guessing the President has an even badder feeling about it now that the word “Solyndra” is synonymous with every anti-government and anti-incumbent angle his opponents might want to take.
I think the word itself is very clever, encompassing as it does the two key elements of the product—solar and cylinder. It is a unique solar technology, and was in demand in Europe until that continent’s financial woes clipped the company’s wings somewhat. The technology was developed by Chris Gronet, who earned his electrical engineering doctorate at Stanford University in 1988, then worked for chip-maker Advanced Materials. In 2005, he joined US Venture Partners as Entrepreneur-in-Residence while launching Gronet Technologies, which was renamed Solyndra In 2006.
This 2009 GigaOm article of fast facts from Solyndra’s Securities and Exchange Commission S1 filing—when it wanted to float an IPO—shows that the company had spent about $290 million on research and development and had raised close to a billion dollars in equity financing. At that time, the company had been issued five patents and had another 150 applications pending.
In other words, if Solyndra had succeeded instead of filing for bankruptcy a few weeks ago, it would have been a shining example of what is touted endlessly as the greatest virtue of American-style capitalism—the opportunity for an entrepreneur to take a risk on a great idea, get it funded, and proceed to create jobs and wealth. Conservatives would also, of course, argue that entrepreneurs are supposed to do that without taxpayers’ help.
The reality is that, even before the President announced the DOE loan, local papers were reporting that Solyndra was in financial trouble, and by November of 2010, the company had shelved its expansion plans. In February this year, Solyndra got a $75 million loan to enable a restructuring of its finances, and was also cut some slack by the DOE on the federal loan repayment terms. So, who or what was at fault?
Solyndra took a risk, that’s all.
And then it took a hit when the costs of traditional solar panels came down. Pure capitalism at work. Economic factors in Europe and China meant the turnaround from undercapacity to overcapacity was shockingly abrupt, but Solyndra is far from the first—nor will it be the last—manufacturing enterprise that stumbled in the beginning to get a balance between what it could produce and what it could sell.
Nor is it the first time that the US government has taken a risk. Various agencies annually hand out hundreds of millions of dollars to researchers in industry and academia to investigate ideas that may or may not produce usable results. Most of that research is done for the military.