Deconstructing Solyndra
To understand the importance of the Solyndra saga, it’s important to understand what’s not important. Here’s a breakdown of what doesn’t matter—and what does.
WHAT DOESN’T MATTER
George Kaiser. The involvement of Oklahoma oil billionaire George Kaiser, who was a major political donor to Barack Obama and whose venture-capital firm is the major investor in Solyndra, looks bad, but the perception of crony capitalism is disconnected from the facts. Any signs that Kaiser actually lobbied the White House are so far lacking. E-mails show that Kaiser faced pressure from Steve Mitchell, managing director of Kaiser’s firm Argonaut Private Equity and a member of Solyndra’s board of directors, to lobby White House officials to get more federal support for Solyndra when it was financially flailing in late 2010. Those same e-mails show Kaiser repeatedly said he would not do so.
Republicans who touted clean-energy projects in their districts. The Obama administration has pointed out that GOP lawmakers who are attacking the White House over Solyndra have lobbied for clean-energy projects in their districts. But so what? “If someone is looking for logic and consistency from Congress, they might want to start looking somewhere else,” quipped Tom Wolf, executive director of the energy council at the Illinois Chamber of Commerce.
Global market conditions in 2008 and 2009. Some market analysts predicted the precipitous drop in silicon-solar-panel prices (which was a big contributing factor to Solyndra’s failure since its panels did not use silicon) as early as 2009. But many analysts did not. For this reason, Energy Secretary Steven Chu and his department could be pardoned for not foreseeing that drop when it gave a conditional loan to Solyndra in March 2009 and finalized it that September. “If you look at the range of predictions that were being made by financial analysts from the last quarter of 2008, 2009—the average—there were some outliers, but the average of those were not expecting these prices to plummet,” Chu told lawmakers at a congressional hearing last week. The drop in prices didn’t become more apparent until 2010.
Solyndra was initially a Bush-era loan-guarantee applicant. This is another talking point Democrats are pushing. Solyndra did come through the pipeline toward the end of the George W. Bush administration. But most of the red flags about Solyndra and the loan-guarantee program itself weren’t raised until 2009 and later.
WHAT DOES MATTER
The stimulus and the loan-guarantee program. The pressure the White House was putting on the Energy Department to ensure Solyndra, its first recipient of a stimulus-backed loan guarantee, would quickly succeed was intense and unrelenting. Obama, Vice President Joe Biden, and Chu made public statements about how Solyndra was the prototype for both stimulus jobs and clean-energy innovation in 2010 when the company’s finances were going south. The stimulus-backed program that awarded Solyndra its loan was given just two years to push out billions of dollars’ worth of renewable-energy loan guarantees. That truncated time frame created a series of implementation problems within the program that an internal West Wing memo sent to Obama in 2010 and several independent government reports highlighted. In response to Solyndra’s demise, the White House is reviewing the program and is expected to issue a report in late December.
Global market conditions in 2010 and 2011. The global price of silicon solar panels dropped by more than 70 percent in two and a half years. “That was totally unexpected, not only by us,” Chu told Congress last week. The Energy Department was increasingly aware of these market conditions and Solyndra’s worsening finances throughout 2010 when Obama visited the company’s California headquarters in March of that year and touted it as the “true engine of economic growth.” An independent audit report issued shortly before Obama’s visit raised red flags about Solyndra’s finances, and one clean-energy investor who supports Obama even urged the president not to visit Solyndra because of these concerns. Chu seemed to indicate last week he didn’t know at the time about the audit report: “I’m aware of it now.”
The Energy Department’s decision to restructure the loan. Chu told lawmakers that his department decided to restructure Solyndra’s loan in early 2011 despite its grim finances because the factory the company received the loan for wasn’t finished, and pulling the plug then meant certain bankruptcy and a useless, half-built factory. E-mails show that even Argonaut’s investors were ready to throw in the towel, and DOE had to convince Argonaut to invest more. Chu said the only workable deal required new private investment, and Argonaut’s investors were willing to go along with restructuring only if their new investment was first in line if Solyndra defaulted. Many legal experts say subordinating the government’s interest violates the Energy Policy Act of 2005. Chu’s testimony last week didn’t answer many questions about DOE’s legal reasoning for doing this.
The FBI investigation. The FBI raided Solyndra’s California headquarters in early September a week after it announced its bankruptcy. The nature of this investigation is not yet public, and it’s not known when it will be—but reports have said it could focus on accounting fraud and misleading federal officials about the finances of the company. The Energy Department’s inspector general is a partner in that investigation.
