The Obama Green Failure Train Rolls on With Ecotality
Thirteen years ago a former executive chef/kitchen manager launched an environmentally friendly cleaning products company to compete with industry giant Ecolab, his former employer, where he had worked and achieved the position of district sales manager.
At the end of 2004 he gave up that money-losing business and turned it over to a partner, who in the first quarter of 2006 turned it into an electric vehicle charging company run by a former hotel chain executive – a self-described “political beast” – who would heavily depend on government subsidies for the revised company’s survival.
With this dysfunctional history, is it any wonder why Ecotality is on the verge of bankruptcy?
The San Francisco-based subsidy sucker had a bad August. It began under the pall of a Department of Energy Inspector General’s report which found that slow electric vehicle sales affected the worthiness of Ecotality’s $135 million taxpayer-funded charging network. Money was granted from DOE’s stimulus stash for purposes not relevant to Ecotality’s EV Project, which was intended to test the build-out of systems of chargers in five test cities to see how they might be used.
But, predictably, not enough cars were sold, nor were chargers adopted in enough public places, to get an idea of how the system might operate at high levels of use. Of course Ecotality and DOE weren’t about to admit failure and thu not use the stimulus money appropriated to them, so they expanded the study to ten cities, which further diluted the project and made it an even bigger waste of time and money. That’s what the Inspector General said.
Not coincidentally, Ecotality announced in mid-August it was in danger of declaring bankruptcy. A Securities and Exchange Commission filing showed that the company was unable to obtain additional financing and the DOE had ceased payments to it for the EV Project until the agency could investigate further. DOE also warned Ecotality to not incur any new costs or obligations under the EV Project.
Ecotality revealed it had other “material adverse developments” that it said would be difficult to overcome. Besides the borrowing challenges and DOE cutoff, Ecotality was hit with penalties by the Department of Labor for running afoul of the Fair Labor Standards Act and the Davis-Bacon Act. Those back wages, back payroll taxes and damages cost nearly $1 million.
And the transition from government dependency to free market viability has not gone well, either. Ecotality reported it had reorganized its sales force to support the transition, as well as form commercial relationships with independent dealers to further distribute its charging stations in the first half of 2013, with the idea of selling associated products (presumably software update subscriptions and other accessories) in “substantial volumes” for the second half of the year. That idea flopped too.
The company also said its new product offering – the “Minit Charger,” which it said was “critical to our growth” – would produce no revenues in 2013.
“The Minit Charger…product exhibited unacceptable performance shortfalls during prototype verification testing…,” Ecotality reported to the SEC.
And speaking of poor performance, another familiar problem with EVs and their recharging systems reappeared: heat. Ecotality reported that some connector plugs on its Blink Level 2 chargers, which attaches to the EVs as they re-power, had overheating problems, “and in certain rare cases (were) melting.”
PlugInCars.com reported that the problem occurs when vehicles charge at 30 amps or higher, which is what the newest lines of EVs are supposed to be able to tolerate in pursuit of semi-fast recharging. But rather than fix the flaw on its estimated 12,000 deployed stations, Ecotality said it reduced the amount of rate of power EV owners could access as they recharge – presumably because the company can’t afford to fix or replace the failed connector plugs. The adjustment means the most users can expect to add is 10 to 12 miles of range after an hour of charging – worthless.
The poor execution of the EV Project extended to the minimal adoption of EVs and chargers, despite the billions of dollars from the Recovery Act. If Ecotality fails, cities and states that have also heavily incentivized EVs – especially California – might be stuck with little-used equipment and no longer a business partner to keep it serviced and updated for new EVs. For example, San Diego has about 600 commercial and public-access chargers, mostly provided by Ecotality, according to the Times-Union.
“Under their Department of Energy grant contract, (ECOtality) has been maintaining, operating and billing for public usage,” said Mike Ferry, senior manager for transportation at the California Center for Sustainable Energy. “So there is a big question there.”
Then there is the puzzling deployment in Tennessee, an unlikely place to target for an EV project. Yet Ecotality set up at least 700 of their chargers across the state, with a number located at Cracker Barrel restaurants along the major interstates. Tennessee was chosen for the EV Project because Nissan retrofitted a plant in the greater Nashville area, to mass produce the all-electric Leaf – thanks to a $1.4 billion loan from the stimulus.
But just because EVs are built there doesn’t mean the demonstration project should be set up there too. In January 2012 NLPC reported how an EV enthusiast (and environmentalist) drove from Knoxville to Nashville during the holiday season to show how it was possible to drive the Leaf a long distance in a reasonable length of time. The trip, because of the need for four lengthy recharging stops, required six hours to travel 180 miles, thanks to cold weather and steep inclines draining the battery faster than expected.
Not surprisingly, on Friday the Shelbyville (Tenn.) Times-Gazette reported that the sole Blink unit that was installed at its city hall was rarely used.
“In the month of June, Shelbyville was only reimbursed for $5.50 worth of charges, according to city records,” the newspaper reported. “Personnel at city hall also say they can only remember two electric cars making a stop for a charge.”
So a unit was probably installed at a cost of $2,000 to taxpayers, for two users a month.
Then there are the “green jobs” that were supposed to materialize thanks to President Obama’s venture into the New Energy Economy. The Arizona Republic, citing Recovery.gov figures, said Ecotality had a total of 68 jobs as of June 30 – 29 of them full-timers. Uncomplicated math puts the $135 million “investment” at almost $2 million per job “created.”
But performance is never something that has mattered to DOE – at least not until after it has wasted millions of taxpayer dollars on losers like Solyndra, Abound Solar, Fisker, Vehicle Production Group, A123 Systems, Ecotality and others. DOE only acted to stop the flow of funds after it was too late. None of the above showed any reason – experience, success, compelling technology, etc. – why they should have received venture capital in the first place.
Except, in the case of Ecotality, the fact that the company boasted a leader who knew how to gain access to vital “resources” in the nation’s capitol.
“I’m a political beast,” then-CEO Jonathan Read told shareholders in a 2007 conference call. “Playing the political card is something that when the time is right we’re going to play very hard.”
As the Daily Caller noted recently, Ecotality was nearly bankrupt before it received its DOE grant in 2009. Maryland Republican Rep. Andy Harris explained in a House Science Committee hearing how Chinese investors promised to pay $1 million in executive bonuses if Ecotality was successful in obtaining a DOE grant.
“The company hired lobbyists to engage the White House on DOE projects, went on to be awarded $100 million in stimulus funding, and the Chinese-funded performance bonuses were awarded,” Harris said last year. “Within a few months of the award, the company’s president was an honored guest of the first lady at the 2010 State of the Union.”
And obviously Ecotality staked its future on the government, not on the viability of electric vehcles. With doom now impending, the company informed the SEC it had retained FTI Consulting, also known as the firm you call when you are thinking about bankruptcy. Meanwhile many of Ecotality’s investors are not amused, and law firms have lined up to represent them.
So there you have another Obama administration green energy failure, with thousands of Blink chargers soon to become glorified lamp posts. Maybe Cracker Barrel can uproot them and affix them to the walls with the rest of their antique décor.
Paul Chesser is an associate fellow for the National Legal and Policy Center and publishes CarolinaPlottHound.com, an aggregator of North Carolina news.