2012: The Year of Taxpayer ‘Green’ Waste

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Obama InvescoThe past year was a dismal one for the passé idea that government would use taxpayer dollars responsibly, and that was nowhere more evident than with President Obama’s initiatives to promote “clean” energy technology companies and projects with so-called “stimulus” funds and other public money. NLPC reported extensively on some of the most egregious examples.

Solar Favors Don’t Stop Fizzle

Solyndra went bankrupt in 2011, and the reverberations over $535 million in lost taxpayer money were felt throughout 2012. Money still flowed out from the Department of Energy and its stimulus stash, but Congressional Republicans’ scrutiny of big projects – especially in the Loan Program Office –paralyzed some new projects.

The year began with BP, which not long ago downplayed fossil fuels in favor of a “Beyond Petroleum” motto, exiting the solar business despite having received a $7.5 million grant from the U.S. government just four years earlier to promote alternative energy. As recently as 2010 the company sent production of solar photovoltaic panels to China and India, with CEO Tony Hayward saying it was “moving to where we can manufacture cheaply.”

So much for the excuse that U.S. solar companies “can’t compete” because of the cheap, heavily subsidized production of panels in China and India. BP sent its manufacturing to those places, which would presumably make solar viable, and it still shut down – even with its own U.S. grants. BP Solar CEO Mike Petrucci told staff, “The continuing global economic challenges have significantly impacted the solar industry, making it difficult to sustain long-term returns for the company.”

BP’s decision was close on the heels of another by Google, which dumped its “Renewable Energy Cheaper Than Coal” program, in which it had dedicated an engineering team to research and try to improve solar technology. Another rent-seeking corporate giant that is big into taxpayer-funded alternative energy schemes, General Electric, backed away (calling it a “delay” due to the high cost of modules) from a planned solar manufacturing plant in Colorado. This was despite the fact the company had just wrapped up a project in which it received $1.18 million in federal stimulus funds to research the enhancement of efficiency for solar photovoltaic modules, make them “lower cost,” and increase U.S.-based module manufacturing. 

One of the biggest recipients from DOE’s loan program, First Solar, began the year by laying off half its employees at its Antelope Valley Solar Ranch One project in the Southern California desert. The facility was the recipient of a $646 million guarantee from DOE, and was to create 350 construction and 20 permanent jobs. The cutbacks followed the December 2011 announcement that First Solar would eliminate 100 positions, including 60 at a research and development center in Santa Clara, Calif.

The company, like the entire solar industry, has survived on government grants and guarantees. Besides Antelope Valley, the DOE partially guaranteed $1.46 billion in borrowing for First Solar’s Desert Sunlight Solar Farm west of Blythe, Calif. And $967 million in DOE loans covered First Solar’s Agua Caliente Solar project in Yuma County, Ariz. Also, the U.S. Export-Import Bank backed $455.7 million in loans to First Solar for projects in Canada.

Nevertheless another round of layoffs came in April, as the company announced it would slash global payroll by 2,000 workers in Malaysia, Europe and the U.S.

Despite all the taxpayer help, First Solar was identified by some analysts as one of “the 13 worst big stock stories of 2011,” dropping from $175 per share earlier in the year to about $33. Today its value remains slightly below $30. A class action lawsuit was filed against the company in March over its alleged failure to disclose the massive costs it was incurring due to defects in its solar panels, leading investors to believe the company’s stock was worth more than its actual value.

Elsewhere in the sector, 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 for the 4th quarter of 2011 and laid off 85 employees. The situation became so dismal that 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.

Auctioneers were blessed with more business from Abound Solar, the Solyndra replica of solar failure for 2012, which declared liquidation bankruptcy (Chapter 7) in June. The signs of its collapse accumulated throughout the first six months of the year, as the recipient of a $400-million DOE loan guarantee laid off 70 percent of its workforce in February. News Web site The Complete Colorado revealed “fingerprints” of a “pay-to-play agenda” when Abound received its conditional loan approval in September 2010. Wealthy philanthropist Pat Stryker, whose Bohemian Companies had significant investment in Abound, was a generous donor to Democratic candidates and President Obama.

Reports later in the year revealed DOE to be withholding records about Abound’s defective solar panels, and that emails showed the White House exerted pressure for the DOE loan to the Loveland, Colo.-based company.

In nearly every case of U.S. solar failure, blame was placed – especially by DOE – upon the anti-competitive practices of China. But a London Telegraph report in late August showed that without enormous subsidies from the Communist government, solar can’t survive there either.

“China’s big five firms are all reporting disastrous trading and heavily indebted balance sheets,” the newspaper reported. “At the end of the first quarter, JA Solar listed debt and liabilities of $1.5 billion, Trina Solar had debts of $1.08 billion, and Yingli had debts of $3.44 billion.”

Such was the “race” to compete in solar energy – to the bottom.

Electric Vehicles

NLPC’s reporting on the consistent failure of beneficiaries from DOE’s loan program and Recovery Act grants for electric cars focused on both large vehicle companies (Ford, Nissan) which had no need for taxpayer backing, as well as smaller companies with no track record of success in the industry (Fisker, Tesla). Also under scrutiny were several battery companies that received millions of dollars in grants, many of which had no customer base to buy their products.

After highlighting some dismal experiences by drivers of the all-electric Nissan Leaf in 2011, NLPC recounted the amusing trip by EV enthusiast Stephen Smith, executive director of the Southern Alliance for Clean Energy. Over the holidays last year he charted a 180-mile trek with his wife and son from Knoxville, Tenn. to Nashville to visit family – with something to prove about the viability and practicality of the vehicles. The plan was to follow Interstate 40 where so-called “fast” charging stations (30 minutes to re-power!) located at Cracker Barrel restaurants would be easily accessible. Hilly terrain and the need to use the Leaf’s heater made the normally less-than-three-hour trip a six-hour slog.

The demonstrated real-life un-usefulness of the Leaf was on full display (and completely foreknown), yet the Obama administration granted Nissan a $1.4 billon loan guarantee to remodel a Smyrna, Tenn. plant to produce 150,000 Leafs and 200,000 batteries per year. CEO Carlos Ghosn predicted that Leaf sales (9,674 units in 2011) in the U.S. would double in 2012, adding that he believed electric cars would make up 10 percent of all vehicles sold by 2020.

Ghosn’s goal is certain to be unfulfilled in 2012, with only 8,330 Leafs sold through November. Nissan now admits that it was “arrogant” in its marketing and sales approach for the Leaf, but in reality – as Ghosn has stated in the past – the goal was to get their hands on all the government subsidies they could. And Nissan and other automakers are revealing that the only reason they are building electric cars – in minimal amounts – is to comply with the new, stricter Corporate Average Fuel Economy (CAFÉ) standards. At the end of 2012, after a huge build-up and constant promotion of the new Leaf facility throughout the year, Nissan cancelled the grand opening of the plant due to “scheduling conflicts.”

Government Motors’ ‘Green’ Car 

As 2011 closed the president’s media sycophants had fawned over the Chevy Volt for a year despite battery fires and poor sales, which led to at least two separate factory shutdowns during 2012. Both Motor Trend and Consumer Reports offered favorable reviews, but NLPC associate fellow Mark Modica noted a “more deserved distinction” from Yahoo Finance's 24/7 Wall Street site: the No. 3 “worst product flop” of the year. In June NLPC learned that GM would close a Canadian manufacturing plant and move production of Impalas and Malibus to its underutilized Volt plant in Michigan.

Meanwhile causes of garage fires that occurred in Connecticut and North Carolina where Volts were located were never determined. Modica was critical of the delay by the National Highway Transportation Safety Administration in its investigation and release of information about the fires.

Considering the administration and Government Motors were joined at the hip throughout the election campaign, the Volt was heavily hyped throughout the year, including during the Super Bowl. In another development, Modica discovered that GM dealerships were allowed to take the $7,500 tax credit for Volts sold to governments. Those who leased the Volts, typically for only 36 months, were also allowed to take the tax credits. In other Volt subsidy news, Modica found that some local governments received as much as $33,000 to recover the costs they paid for each Volt. Another report in August showed how military purchases of Volts helped goose their sales.

In perhaps the most sickening example of government support for the Volt, NLPC reported in October that the State Department purchased the electric cars at a time when consulate security was obviously lacking.

Other Stimulus Failures

Other recipients of stimulus funding in the electric vehicle and related sectors were marred by blunders and bankruptcies. In January Indiana-based battery maker Ener1, which received $118.5 million from the Department of Energy, declared bankruptcy. NLPC reported shortly afterward that taxpayer cash for Ener1 helped its top customer, a thrice-failed foreign EV company Think Global.

Perhaps most of NLPC’s stories about Obama’s failed green initiatives this year were about politically connected Fisker Automotive and its battery supplier, A123 Systems, which declared bankruptcy in October. Fisker began the year with layoffs and then burned through millions of dollars, and ultimately drew a stockholder lawsuit over the tactics of its chief fundraiser, Advanced Equities, which was subject to a SEC investigation and is now defunct. DOE cut off Fisker’s loan at $193 million (it would have been $529 million) because it failed to reach milestones for its first vehicle, the luxury Karma. The company suffered recalls of the $102,000 extended-range electric sedan, as the result of technology flaws and failed batteries, which resulted in fires. The crowning blow was a wicked review of the Karma by Consumer Reports, which called it the worst luxury sedan on the market.

Sens. Charles Grassley and John Thune, Republicans from Iowa and South Dakota respectively, pushed for answers from DOE about the questionable loans to Fisker and A123. The Massachusetts-based battery manufacturer, which received more than $279 million to refurbish two Michigan plants plus other various projects, caused big headaches for Fisker and its other few customers. As its stock price spiraled downward, the company’s board awarded its undeserving executives big raises and parachutes in the event the company changed ownership, which is now happening through the bankruptcy process. Raising concern for the senators and others was a deal the company made to be sold to China’s Wanxiang Group, which temporarily fell through when A123 declared bankruptcy, but then revived again and appears will go through.

A123 was also a supplier for truck maker Smith Electric Vehicles, which received $32 million from the Recovery Act despite no track record in the U.S. to speak of. In fact, the company existed in a similar form in the United Kingdom, where it was failing until the company transformed itself and re-established in Kansas City. One of A123’s battery recalls affected Smith as well. The company had considered an initial public offering to raise some desperately needed cash, but abruptly cancelled it in September.

Other battery makers that received government stimulus money included LG Chem, which was discovered in October to be paying its employees not to play games and read magazines. The Detroit Free Press reported in April how the Obama administration had “over-stimulated” the battery industry to the point where there was far too much supply for minimal electric vehicle demand.

In August NLPC called attention to an unimpressive “investigation” of DOE’s loan program by former Wall Street executive Herbert Allison, Jr., who turned out to be a big donor to President Obama.

Paul Chesser is an associate fellow for the National Legal and Policy Center and publishes CarolinaPlottHound.com, an aggregator of North Carolina news.