As you know, the California solar energy company Solyndra received a $525 million loan from the U.S. Department of Energy, made some bad bets about the direction of raw materials prices and technology, forcing it to file for bankruptcy protection. This has produced a House investigation, with Solyndra executives taking the Fifth. If they were investment bankers, this would be another day at the office, but never mind that.
To the critics that say the Obama administration’s effort to seed a renewable energy sector with $22 billion in loan guarantees, former Reagan administration trade and commerce official Clyde Prestowitz says:
These are precisely the wrong conclusions to be drawn from the episode. As a former director of new product development at Scott Paper Company, I can tell you that any corporation or venture capitalist would be happy if as many as one in ten investments in new products and ventures paid off. The Solyndra loan guarantee of $535 million represents only about 2 percent of the Energy Department’s $40 billion portfolio of loan guarantees whose recipients mostly seem to be doing pretty well. Indeed, the number of jobs in the U.S. solar industry has doubled to 100,000 since 2003.
Prestowitz argues the problem is not that the United States is doing too much, but too little compared with its global rivals. I can tell you that the solar sector was born in Arizona in the 1950s, yet the state and the United States let it wither and move overseas. We were living in a moment of history with cheap oil and when climate change — and its huge costs — was little imagined. We couldn’t imagine the discontinuity that lay ahead. We still can’t. Experts argue over when peak oil will happen without us understanding that even if it’s 2030, that’s a blink of the eye in the time needed to make a huge transition.
It’s true that many green technologies are over-sold. Many require more fossil fuel “inputs” than the energy “outputs” that they eventually produce. Many will never produce much energy while creating big environmental consequences (huge solar and wind farms destroying natural habitat). More than loan guarantees, investment in research is essential. But the real need is to tax carbon at its true cost, from gasoline taxes to taxes on coal plants and removing the corporate welfare for oil giants. In addition, we need far more money spent on transit and trains (forget “roads and bridges” — we can’t maintain the network we have). Put these investments and incentives in place, and the market will help us. Otherwise, we’re going to be a 21st century beggar to China and other countries that are doing so.
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Today’s Econ Haiku:
Lose more than Seattle’s past
Blue-collar jobs sail