Taxpayers Take Hit as Layoffs, Bankruptcies Plague Green Firms
Federal tax credits, loan and grant programs that expired at the end of last year have plugged the financial flow that made so-called “renewables” and electric vehicles viable, so they are now shedding employees and going bankrupt, illustrating that the “clean” industry owed its existence solely to government.
Even with the government money, they are failing. Yesterday Indiana-based Ener1, an energy storage company that received $118.5 million from DOE, filed for Chapter 11 bankruptcy. Despite plans to have 1,400 employees in Indiana by 2015, the company had downsized in the state from 380 to approximately 250 since March. Ener1’s stock price fell from more than $4 a share to under a dollar, and the company was booted from the NASDAQ stock exchange in October, when its stock was trading for less than 20 cents.
The Department of Energy seems to have no limit in its willingness to subsidize electric cars, electric trucks, electric school buses, electric delivery vans, batteries for electric vehicles, and charging stations for EVs. It’s safe to say that without taxpayer support, these companies – or at least the EV-related projects of larger companies like Nissan and GM – don’t exist.
For example, another DOE loan guarantee recipient ($43 million), Beacon Power, filed for bankruptcy in November. And a third DOE-supported battery company, A123 Systems, laid off 125 employees late last year. DOE gave A123 $249.1 million to help launch two battery-manufacturing plants in Michigan. The company also received grants and tax credits from the state that could total more than $135 million. In a separate federal grant as a subcontractor for another grantee, A123 received nearly $30 million for a wind energy storage project. But despite all the government help, through the end of September A123 had a net loss of $172.8 million, and is heavily in debt. It's stock now trades at around $2 per share, down from over $10 a share a year ago.
Other companies were stumbling before DOE came to the rescue. Tesla Motors, which appeared in disarray with layoffs and CEO turnover (four in 12 months), was blessed with a $465 million loan guarantee from DOE. And Kansas City-based Smith Electric Vehicles was a floundering British company that built electric trucks, losing 80 percent of its stock price (on the London Stock Exchange) in less than a day and losing more than 97 percent of its value in a year. But then the company set up shop in the U.S., received $32 million in seed money from DOE, and now is bailing out its U.K. counterpart.
Then there are the other segments of President Obama’s favored clean energy economy, the spotty, unreliable electricity generation racket. The Oregonian reported Wednesday that the North American operations of Spanish company Iberdrola Renewables will lay off about 5 percent of its U.S. workforce, with about half the cuts coming at its U.S. headquarters in Portland. Wind energy generators had been eligible for a 2.2 cent-per-kilowatt-hour production tax credit, plus a 30-percent cash grant via the Treasury Department’s 1603 program in lieu of another tax credit for new projects under development. The 1705 loan guarantee program under the Recovery Act also expired last year.
“Without the certainty of that extension,” said Portland Mayor Sam Adams to the newspaper, “project developers are not doing projects in the U.S., and manufacturers are not getting orders.”
Meanwhile two weeks ago Denmark-based Vestas Wind Systems – also with U.S. operations in Portland – also announced it would lay off 2,335 people worldwide (which included 182 in the U.S.). Associated Press reported the company threatened an additional 1,600 American jobs “if Congress doesn’t extend tax breaks for renewable energy.” Vestas received about $51 million in U.S. tax credits in 2010.
This follows recent cuts at First Solar, which announced in December it would eliminate 100 positions, despite having received at least $51 million in incentives from state and local government in Arizona. Other First Solar projects received more than $3 billion in loan guarantees from the Department of Energy.
Solyndra, the face of the Obama administration’s “Green” energy venture socialism politices, famously went bankrupt after taking $535 million in loans from DOE. San Jose-based SunPower, which benefited from a $1.2 billion loan to its partner NRG Energy for their California Valley Solar Ranch project, reported a $370 million loss last quarter and is laying off 85 employees. Other solar companies such as Evergreen Solar and Spectrawatt have gone bankrupt, and auctioneers see the failures as a new cottage industry.
“I’m kind of like a market maker in this sector, and it’s a good time to be an auctioneer,” said Ross Dove, managing partner of global auction and advisory firm Heritage Global Partners.
The recent developments included a decision in December by BP – which not so long ago promoted its alternative energy business as “Beyond Petroleum” – to exit the solar business entirely. After shutting its only U.S. manufacturing facility in Maryland, the company unloaded its equipment in a fire sale. “We’ve been doing more solar technology auctions lately,” said BP’s auctioneer.
“We’re in the process of shutting a number of products which haven’t had the impact we’d hoped for,” wrote Urs Hölzle, Senior Vice President of Operations, on the company’s blog.
In his State of the Union speech Tuesday night, President Obama said, “I will not walk away from the promise of clean energy… I will not cede the wind or solar or battery industry to China or Germany because we refuse to make the same commitment here.”
So far the only promise shown from DOE’s green energy “commitments” are job losses, business failures, and waste of taxpayer money. The president doesn’t need to walk away from renewables and battery companies – he needs to run.
Paul Chesser is an associate fellow for the National Legal and Policy Center.