Solyndra could serve as a textbook case for the dangers of government trying to turn investor, mixing ideology, economics and the appearance of favoritism. The Department of Energy’s $535 million loan guarantee also seems to echo Massachusetts’ own failed investment in luring Evergreen Solar to Devens.
As The Wall Street Journal reported, Solyndra, which manufactured solar panels and was a poster child for President Barack Obama’s green jobs push, is now being investigated by the Federal Bureau of Investigation over allegations that executives knowingly misled the government to secure the loan guarantee.
These are currently just allegations and Solyndra executives are innocent until proven guilty, but the matter is further complicated by the fact that the company had financial ties with the White House, even as the Department of Energy cut corners in its grant program to more quickly fund Solyndra.
No one has suggested that Evergreen Solar was funding Governor Deval Patrick’s campaign, but going through hundreds of pages of e-mails, reports and other documents released by MassDevelopment suggests a similar eagerness to make the deal work, one way or another.
For example, in a memo to MassDevelopment’s Board of Directors, concerns were raised about spending funds directly on the Evergreen site. The decision was made to use those particular funds should be used for the off-site infrastructure upgrades needed to support the Devens factory, and then to reimburse Evergreen for the loss of those grant funds through special Investment Tax Credits:
As the details of the design of Evergreen’s manufacturing facility became known, certain concerns were raised about the application of some of the above funding sources to the project. Following a meeting initiated by MassDevelopment to discuss sources and uses of public funds, the program coordinators for the CDAG and PWED programs suggested that those funds should be used for infrastructure work off of the Evergreen site rather than on it. As a result, it was decided that those grants should be given to MassDevelopment directly for off-site infrastructure work, and that Evergreenwould be “compensated” for the loss of the grant funds by receiving redeemable investment tax credits (“ITC”) through legislation, similar to what Bristol-Myers Squibb received for its manufacturing facility at Devens, albeit on a far smaller scale. The Massachusetts Office of Business Development (“MOBD”) decided to cap the “redeemable” portion of the ITC at $2,500,000.
This sort of attention and care is paid again and again to ensuring that, no matter the hurdles, Evergreen Solar gets the grants, but surprisingly little attention is paid to the financial health and viability of the company. Almost lost within the hundreds of pages is a Standard & Poor’s report on Evergreen, which rates the qualitative risk of the company as “High,” reflecting the “highly competitive nature of Evergreen’s business, the relatively early stages of the business cycle for alternative energy sources, and a high degree of execution risk in the major expansion of the EverQ partnership and in plans to build a second U.S. plant” (Emphasis added).
Hindsight is 20/20, but this was written in 2007, years in advance of Evergreen’s collapse. The brief marks on MassDevelopment’s printed report cherry pick its few highlights: A note that Evergreen believes regulation and fossil fuel supply constraints will demand new sources of energy, and that Evergreen has a “polysilicon supply pact which stretched into period when we see polysilicon more available.”
“The promise of clean energy isn’t just an article of faith,” President Obama said when he visited the ill-fated Solyndra plant. Unfortunately, for both Solyndra and Evergreen, it is hard to see what beyond blind faith prompted these ill-fated investments of millions of taxpayer dollars.