Thursday, September 29, 2011

The Real Solyndra Scandal: Government Throwing Billions at Loser Technology

Everyone is focusing on how Solyndra wasn’t overseen properly or was an example of government corruption or business mismanagement. That’s not the big point. The real issue is that the federal government is a terrible platform for funding new technology.

First, the reason Solyndra failed was because Chinese production has radically driven down the price of photovoltaic cell solar systems (PV). Solyndra’s projected savings from their innovative cell design weren’t enough to keep up, so they went bankrupt.

Second, the entire solar industry knows that the PV price drop is vital, which is why they are all abandoning the much more costly “solar-thermal” approach (ST) which uses mirror systems to concentrate light on water storage of heat. At current rates, ST systems can generate energy at 27 cents per kilowatt hour versus just 17 cents for PV systems.

That’s why in the past two months, two of the largest loan guarantees offered by the Department of Energy have been abandoned or declined. Solar Millenium AG (Germany) walked away from a $2.1 billion guarantee because they wanted to pursue PV instead of ST, and Solar Trust declined to accept another $2.1 billion guarantee because the CEO (Uwe T. Schmidt) knew that accepting it would require him to keep working on ST at a time when he saw the future for that technology imploding. So he sought private financing instead to preserve the flexibility to switch to PV.

Then, just yesterday, the Department of Energy announced it is giving $737 million (Solyndra was only $535) in guarantees to Tonopah Solar (subsidiary of Solar Reserve) to develop a solar-thermal field in Nevada! Bloomberg even went so far as to say it’s like they’re having a solar Betamax moment, supporting a potentially superior technology that the market is abandoning.

In part, this is because the tiny DoE is overwhelmed with processing these applications. In part it’s because government is not nimble enough to adapt to shifting market situations, especially since the approval process takes a long time. And largely this is because their $40 billion funding mandate expires Sept 30 and they’re rushing like crazy to get the funds out the door before they go away.

So the big story here is how incompetent and wasteful big government funding of new technology looks. The Solyndra thing is a drop in the bucket compared to everything the DoE is hurriedly doing right now.


Bloomberg 09/20/11: “Obama $8 Billion Solar ‘Betamax’ Undercut as China Backs Rival Technology.”

Washington Post 09/26/11: “Some clean-energy firms found US loan-guarantee program a bad bet.” My headline…The Solyndra that wasn’t…

The Hill 09/28/11: “Energy Department approves $1 billion in solar energy loan guarantees” …to solar-thermal companies.

Business Week 09/22/11: “Real Solyndra scandal is US approach to energy subsidies.” 09/29/11: “DoE hands out $1 Bn in loan guarantees, as Solyndra scandal rumbles on.”

Tuesday, September 27, 2011

If Only He Were A "Do-Nothing" President!

According to the New York Times, one part of President Obama’s new jobs proposal will make it illegal to discriminate against people on the basis of them being currently unemployed. This is perhaps the epitome of Obama’s liberalism: A heartfelt kindness that can only produce disastrous results.

Imagining that this absurd rule actually passes Congress, what would it look like in the real world? When unemployment status becomes a protected category, how would a company which failed to hire an unemployed person disprove a claim they discriminated against him on that basis? Typically, when something is a protected status, the way you defend yourself against lawsuits is by making questions about that topic forbidden in any format. But how would that flesh itself out in the application process?

Would resumes now become impossible because they tell the history of a candidate’s employment? Would all application forms need to be revised to avoid requiring work history or current work status? Would interviewers no longer be allowed to ask any question in this direction? Will failure to get a job as an unemployed person become prima facie grounds to file a lawsuit?

The real boon to jobs from this requirement wouldn’t be all the new jobs for the unemployed, but all the new jobs for unemployed lawyers which the flood of lawsuits generated will inevitably create. In fact, given the dangers, this looks to be one of the most counterproductive laws imaginable as firms which might be teetering between hiring or not will opt against it simply because of the legal dangers involved. Just ask yourself whether this new rule increases or decreases the risks and costs involved in choosing to hire a new person. If it increases them, what effect on new hiring will it actually have?

This is a classic example of a well-intended idea that cannot possibly work in the real world of actual employment. That’s why in politics there are always at least four basic questions a federal legislator must ask:

1. Do we have a legitimate and decent goal?

2. Is it Constitutionally permitted?

3. Do we have a practically feasible way to make progress toward it in a way that won’t cost more than it’s worth?

4. Will our particular solution be politically viable with the electorate?

And if the answer to any of these questions comes out wrong, you don’t do it. But again, we see this President’s unbelievably arrogant approach to the economy which says that the biggest problem with it is a lack of sufficient tinkering by him, when in fact the one major economic problem right now is precisely the neverending tinkering which Mr. Obama just can’t seem to stop himself from doing.

Every new twist only compounds the already skittish mood of businesses who don’t know what unexpected wrinkle to expect next, and hence, in reaction to Obama’s overactivity, they remain static. If he would just sit still and do absolutely nothing for about six months, they might come out of their shell and start taking some risks again rather than being driven even farther into them by yet another terrifying risk for choosing to expand with new hires.

Please, Mr. President, won’t you seriously consider simply doing nothing...absolutely nothing…for at least half a year? It’s the only approach to this economy which you have been unwilling to actually try yet. And as such, it may be the most radical proposal you could embrace.