Learning from Solyndra

July 31, 2012

Free Market Foundation

Solyndra’s declaration last month that it intended to shut down manufacturing operations and declare bankruptcy has set off a political firestorm in Washington. And no wonder. The California-based solar panel manufacturer was the poster child of the Obama administration’s much-ballyhooed green jobs campaign and was the recipient of a staggering half billion dollars’ worth of taxpayer guaranteed loans, say Jerry Taylor and Peter Van Doren, senior fellows at the Cato Institute.

Unfortunately, the bigger issues surrounding Solyndra and the president’s green jobs campaign are not getting the attention they deserve. And those issues go to the heart of why the president’s green jobs program is almost certainly doomed to fail no matter what one thinks of green energy or green jobs.

The fact that federal loan guarantees were even necessary for Solyndra tells us that few, if any, lenders thought that giving the firm money was a very good idea.

Are we to believe that President Obama knows more than all of these profit-hungry capitalists about Solyndra’s real prospects in global solar energy markets?

There are three standard rejoinders.

First, we’re told that the feds are right to stock up on a portfolio of high-risk high-reward investments because those are precisely the kind of investments that the market is likely to pass by. Perhaps. But there’s a good reason they are passed by; the odds are that they will all fail.

Second, we’re confronted repeatedly with anecdotes of successful government investments that would seem to put a lie to the contention that government doesn’t know what it’s doing when it comes to technology. But while anecdotes abound, systematic evaluations of federal programs find no evidence that 60 years of federal energy tech spending have produced more benefits than costs.

Of course, these defences of the loan program pale before the deafening hue and cry surrounding the need to keep up with China. In theory, subsidies to attract early entrants can lead, later, to excess profits. But there is no certainty that there will eventually be a viable market.

Source: Jerry Taylor and Peter Van Doren, A Teachable Moment Courtesy of Solyndra, Forbes, September 13, 2011.

For text: http://www.forbes.com/sites/powerlunch/2011/09/13/a-teachable-moment-courtesy-of-solyndra/

For more on Environment Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=31

First published by the National Center for Policy Analysis, United States

FMF Policy Bulletin/ 28 September 2011