Solyndra Saga: The Kaiser Connection

In my post Wednesday on Solyndra's bankruptcy I alluded to the fact that some people are questioning why the government took such a strong interest in backing this particular company with an expensive, risky technology. 

I wrote then that I'd leave it to the pundits.  However, Thursday morning's reported FBI raid of the company begs comment.

According to the Washington Post, "a House investigation is looking at possible White House involvement in Solyndra winning the loan, and said it has found evidence that White House officials were monitoring Solyndra’s status in the application process.  The Department of Energy has asserted that it chose Solyndra through a competitive, non-political process."

One of Solyndra's leading investors, The George Kaiser Family Foundation, is the foundation of Obama fundraiser and supporter George Kaiser. 

As reported by Bloomberg this afternoon, the foundation, "a charitable organization based in Tulsa, Oklahoma, and backed by donations from Kaiser, holds about 35.7 percent of Solyndra, according to a company filing with the Securities and Exchange Commission."

"A Government Accountability Office audit last year found Solyndra was among a handful of companies that the agency awarded billions in loan guarantees before completing required reviews of their applications," reports the Post.

Bruce Krasting of iStockAnalyst explored some of the Kaiser connection in a post Wednesday afternoon.

At the very least, this situation doesn't pass the sniff test.  What more will the FBI shine a light on?  And what impact will this have on other cleantech companies?  Stay tuned.

The Market Sorted, Solyndra Lost

President Obama Visiting Solyndra, May 2010 (Solyndra)

The sun has set on Solyndra. The solar panel manufacturer, once the darling of the US Department of Energy, which bestowed its blessings in the form of a $535 million loan guarantee, is shuttered.

Despite this guarantee, which some sources say was almost completely drawn down, and hundreds of millions of private capital from such stalwarts as Madrone Capital, RockPort Capital, the George Kaiser Family Foundation, CMEA Capital, Redpoint Ventures, US Venture Partners, and Virgin Green Fund, Solyndra has filed for bankruptcy and laid off over 1,000 workers.

A gleaming, spotless new factory, a revolutionary new type of solar panel, and a government handout was not enough to keep Solyndra alive. Neither was more capital infusion by some of the initial investors last spring.

Monday morning quarterbacks are second-guessing this investment in a company with an expensive new technology that was built on two big bets: that the commodity used to manufacturer its competition's solar panels – silicon -- would soar and stay high, and that their first-mover advantage in flat-roof installation would cover roofs all over the country with their technology.

Both bets were lost.

Silicon prices have fallen, causing the price of traditional photovoltaic panels to fall. This was good for consumers, if not manufacturers, and it certainly wasn't good for a company like Solyndra with a more expensive technology solving a problem that had just gone away. Oh, and the other problem they were solving? That was being met by cheaper solutions from competitors.

Over the years, I've talked to many investors who shy away from companies with big, new technology risks. Risks are risky. They can also be expensive – and the more cutting edge the technology, the more capital-intensive it can be. It's very hard to pick the winning horse in such a race.

Such bets are even harder to make if the technology has unique manufacturing requirements, raw materials, or R&D needs.

In the case of Solyndra, apparently, they had all three.

And some are questioning why the government took such a strong interest in backing this particular company. I'll leave that to the pundits

I'm not saying the government should have seen this perfect storm coming with a company like Solyndra. After all, the private investors don't seem to have seen it either.

But the skeptic in me can't help questioning whether the government should even be in the business of picking winners or anointing companies. Rather, shouldn't they just make it easier for the market to sort them out?

This, by the way, is exactly what happened with Solyndra.

The market sorted. It did its job. Solyndra lost. Its investors did too. That's their job. They make bets and lose more often than they win. But what a shame that taxpayers have to lose along with them.

There will be a lot of lessons learned from the Solyndra failure. I hope one of them – for government and entrepreneurs alike – is that government sticks to making the playing field open for business and getting out of the way.

That seems a lot better than throwing a lot of our tax money away on a horse race.

Green Jobs, Gore's Gaff & Government Getting Out of the Way: The Green Skeptic on FOX

This morning I talked with Stuart Varney about green jobs, Al Gore's bizarre statement equating climate skeptics with racists, and getting the government out of the way of private sector job creation.

Here's the video:




And here's a link in case the player doesn't work in your browser: The Green Skeptic on FOX

Pennsylvania Can Clean Up in Clean Tech

Kevin Brown, my co-founder of Cleantech Alliance Mid-Atlantic, says, "Pennsylvania can clean up in clean tech," in the Philadelphia Inquirer this weekend:

 Philadelphia identifies with underdogs: Rocky, the Eagles, and now energy.

When business people or policymakers think of Philly, they naturally jump to the Big Five: pharmaceuticals, higher education, legal, finance, and technology. Clean tech, or renewable energy, rarely makes the list. But that's about to change. We have the potential to be a full-fledged front-runner in one of the hottest growth industries.

Read the full story here.

When Too Much (Solar) Success Is a Bad Thing

New Jersey is known as the "Garden State," but drive through it these days and you see a different kind of harvest: solar energy.

You'll find solar panels on large suburban homes and apartment complexes, solar panels on many of the light poles, solar panels on large warehouse facilities, and box stores.

There's even a 7,000-panel, 1.4-megawatt (MW) solar installation on the Livingston, NJ, Campus of Rutgers University. And last fall one of the largest solar developments in the country -- a 20 MW solar farm – sprouted up on former farmland in Pilesgrove.

In April, the state's Board of Public Utilities announced it had exceeded 300 MW of installed capacity and over 8,000 projects statewide.

New Jersey became a solar leader – second in the nation to California -- through an aggressive Solar Renewable Energy Certificate (SREC) program. To meet state Renewable Portfolio Standards (RPS) utilities purchase SRECs -- tradable certificates equal to 1000 kilowatt-hours (kWh) of electricity -- from producers.

But after several years of high, stable SREC prices – the NJ SREC spot market price increased from September 2008 to March 2009 – those prices have plummeted over the past few months.

Chart by EnterSolar

According to EnterSolar, a leading provider of solar photovoltaic systems for corporate customers in the Northeast, the price dropped from over $600 in May to almost $200 currently.

"The New Jersey solar market is coming out of a short-term installation boom," Peyton Boswell, managing director of EnterSolar, wrote in an email to me. "That was unsustainable in the sense that the solar MW capacity developed and installed was far in excess of what is required under the state's RPS."

Boswell remains optimistic about the long-term prospects for New Jersey's solar market. "It will remain vibrant over the long-haul -- over the next 10 years, but we are very concerned that the next 1-2 years could be extremely tough going."

As New Jersey State Senator Bob Smith (D) told the Philadelphia Inquirer recently, "We've done such a good job at stimulating solar that the market is now crashing."

Smith has sponsored a bill that will accelerate by one year requirements for how much renewable energy must be produced, which in turn will force power companies to buy more SRECs.

The question remains whether the government propping up the solar market further will have the desired effect when it is facing what is a fairly typical supply and demand problem.

"The basic SREC market structure in New Jersey is sound," says EnterSolar's Boswell. "Like many markets, there is a propensity for over-reaction and we think we are seeing that play out right now with SREC pricing."

What is needed, in Boswell's opinion, is for solar system owners to be able to sell long-term SREC contracts, exchanging lower SREC pricing for longer-term stability.

Another flaw in the New Jersey program, according to Boswell, is that all SRECs are treated equally, including those for both large-scale wholesale solar farms and distributed solar net-metered projects.

Boswell suggests it "would be better if these two types of solar installations were treated differently from an SREC standpoint as the project costs and related Internal Rates of Return (IRR) are dramatically different -- a 10-MW solar farm installed at $3/W can generate a far higher IRR given the same SREC price than a 1-MW rooftop net-metered system at same SREC price."

Sometimes too much success is too much of a good thing. For New Jersey's solar market, it sounds like some basic structural fixes may have more positive impact than accelerating an already flawed system.

"Once More to the Lake": Unplugged and Recharged

Calvin on the dock at Sixth Lake.

Apparently, the Fulton Chain of Lakes region in the Adirondacks is "AVZ": an anti-Verizon zone.
  
Sure, wireless reception could be had if absolutely needed, but that required me to stand in one spot on the deck extending my arms out over Sixth Lake and performing all sorts of gymnastics that strained my abilities.   

There is also one spot in the town of Inlet, along the beach at Fourth Lake, where one can get reception.  A Verizon-user convention gathered there on Saturday night, attendees identifiable by the curious practice of holding phones aloft as torch-bearers entering a cave.

Surprisingly, I didn't mind the limited cell phone coverage and no access to the Internet; it didn't take long for me to realize that almost everything could wait until my return.

Kayaking, swimming, reading, eating, drinking, and hanging with my kids, my dog, and our friends proved more than enough to keep me occupied.  Several lasting memories sustain me: my teenage son's first experiences water-skiing; my younger son's intricate gnome house built of stones, bark, moss and sticks; my daughter's delight at receiving a pair of cowgirl boots for her birthday; and my dog Calvin's first ride in a kayak.

Now I'm back and the world is still here, emails await response, phone calls need to be returned, the garden needs tending -- and it's probably best I ignored the markets last week.  I am refreshed, recharged, rejuvenated, and I even grew back my beard.
 
I took along one of my favorite books, the ESSAYS of E. B. WHITE, a slim, elegant volume including some of his best essays from The New Yorker and elsewhere.  White is a great lakeside companion, for he understood the lure of a lake in summer, as he so eloquently articulated in "Once More to the Lake," from Harper's Magazine in 1941:

"Summertime, oh, summertime, pattern of life indelible, the fade-proof lake, the woods unshatterable, the pasture with the sweetfern and the juniper forever and ever, summer without end; this was the background, and the life along the shore was the design, the cottagers with their innocent and tranquil design, their tiny docks with the flagpole and the American flag floating against the white clouds in the blue sky, the little paths over the roots of the trees leading from camp to camp and the paths leading back to the outhouses and the can of lime for sprinkling, and at the souvenir counters at the store the miniature birch-bark canoes and the postcards that showed things looking a little better than they looked."

Summer is not without end, and in its waning, I get one more trip away before the routines of life set anchor again.  The balance of the year, with its inevitable changes and schedules and business may be made easier by this brief respite to the fade-proof lake in the Adirondack woods.

At least, that's what I tell myself now that my phone keeps blinking and buzzing, calling me back.