Days before a recent deadline, the Department of Energy brazenly approved two additional loans for more than $1 billion for solar energy projects in the Obama Administration’s green jobs program. The latest ill-fated ventures include a $737 million loan guarantee to Solar Reserve for a 110-megawatt solar tower on federal land in Nevada and a $337 million guarantee for Mesquite Solar 1 to develop a 150-megawatt solar plant in Arizona.
Loan guarantees like these are destined to fail, because they are either granted to companies that could not remain viable without them or because the loan was supported by political connections; or both. This round of loans includes the latter—just as it appears Solyndra was aided.
For example, Solar Reserve lists PCG Clean Energy and Technology Fund (East) LLC as an investment partner. Ronald Pelosi, brother-in-law of the House Minority Leader Nancy Pelosi, is an executive with PCG. Another investment partner: Argonaut Private Equity, the employer of Steve Mitchell, who served on the Solyndra LLC Board of Directors.
As for Solyndra, the story continues to unravel as the political connections and foolish moves come to light. As reported in The Washington Post:
The Energy Department pushed for the restructuring despite preliminary warnings from OMB [Office of Mangement and Budget] staff members that restructuring Solyndra could cost taxpayers $168 million more than liquidation.
What’s more, after the loan was out the door, Solyndra reportedly violated the terms of its loan agreement, according to The Wall Street Journal. Layered within all of this are big-time Obama donors like George Kaiser, a Solyndra investor, who visited the White House several times in the days leading up to the loan approval. There’s no good explanation for this mess, and taxpayers are taking the fall for it.
For a variety of reasons, the Department of Energy should have considered sitting these two latest loan guarantees out. Energy Secretary Steven Chu is on the hot seat now, as much responsibility for overseeing the program overall falls on him. But Obama bears the ultimate responsibility.
President Obama was reportedly advised by Treasury Secretary Timothy Geithner and then-economic advisor Larry Summers that the loan guarantees were being hastily approved and were too risky. But Obama pressed forward on the countering advice of Chu, then-energy advisor Carol Browner and Ron Klain, then chief of staff to Vice President Joe Biden.
Weeks later, President Obama and Vice President Biden were enthusiastically promoting Solyndra. Solyndra was the first renewable-energy company to receive a loan guarantee covered by the 2009 stimulus package. Obama stood behind the loan last year, saying Solyndra was “leading the way toward a brighter and more prosperous future.”
There’s an important lesson behind Solyndra’s failure, demonstrating that the government can’t simply create demand. There is a proven way to tell if new technologies will work: You let the chips falls to the market. A good idea will grow its own legs and take off. A bad one is destined to die no matter how much someone else wants it to succeed. As Heritage’s David Kreutzer testified:
When the savings of new, more energy-efficient technologies exceed the costs of adopting those technologies, markets have the incentive to adopt them. But it is the voluntary participants in these market transactions that best know the full spectrum of the costs and benefits that matter most to them.
The government often backs questionable ventures, but throwing taxpayer dollars at risky projects without regard for proven market truth is counterproductive. The new loans are the latest offense for the Department of Energy and the Obama Administration—and they are heading straight for another deep failure that promises another expensive lesson for taxpayers.
As a country deep in debt, America does not need to waste money on President Obama’s political favors and errant energy subsidies.
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