The real lessons of Solyndra

Posted By Clyde Prestowitz Tuesday, September 27, 2011 - 4:45 PM Share

In the wake of August's bankruptcy filing by solar panel maker and federal green jobs grant recipient Solyndra, Republicans are calling the green jobs program a fraud and insisting that government can't "pick winners and losers" moving to end federal investment in alternative fuels and energy resources.

These are precisely the wrong conclusions to be drawn from the episode. As a former director of new product development at Scott Paper Company, I can tell you that any corporation or venture capitalist would be happy if as many as one in ten investments in new products and ventures paid off. The Solyndra loan guarantee of $535 million represents only about 2 percent of the Energy Department's $40 billion portfolio of loan guarantees whose recipients mostly seem to be doing pretty well. Indeed, the number of jobs in the U.S. solar industry has doubled to 100,000 since 2003.

The problem is not that the U.S. government is doing too much. Rather the problem is that it is doing too little. In Solyndra's case, decisions about  technology and the direction of raw materials prices proved to be based on faulty assumptions. But Solyndra is not the only U.S. solar cell maker that has shut down and/or moved to China. GE, BP, and other U.S. based makers also stopped U.S. based production and moved to China even after receiving loan and other financial grants from the state and federal governments.

The main reason has been that U.S. support programs are mere peanuts compared to what China, Japan, Germany, South Korea, and others are doing to foster solar and other green energy development.  In these cases, gas is heavily taxed and prices are double those in the United States. Utilities must pay substantial sums to buy solar and other energy into the grid from private producers, massive subsidies for commercial construction and distribution, and export incentives are available to encourage rapid scaling and the achievement of economies of scale that will lock slower moving producers out of world markets.

The problem is not that the U.S. government can't pick winners. It is that in lieu of a U.S. commitment similar to that of these countries, all U.S. efforts whether public or private are likely to prove to be losers.

Instead of trying to kill Obama it would be nice if the Republicans would try to at least match the foreign competition.

Paul Chinn-Pool/Getty Images

 

DEBANJAN

1:57 AM ET

September 28, 2011

I think Mr. Prestowitz is wrong here

China , Germany and South Korea are well within their rights to protect and give support to their industries.

The fact of the matter is that American industry can never ever compete with China on anything since the labor costs and manpower ability to work hard in China will always remain strong and fundamental factors that America can not hope to beat in short time.

Let us look at the fact that why should a budding entrepreneur with an interesting idea will opt for America and not China ?

In China , the labor costs are far less , no problems with Unions , the power and land costs are much lesser and government intervention is preity less and the taxes that are needed to pay is also lesser compared to the US.

So why should a budding entrepreneur think about Ameirca instead of China when he is thinking about starting his business ?

Economic sense works in this case and patriotism does not.

Take care
Debanjan

 

MITTAL

1:44 PM ET

September 28, 2011

Twisted logics make No sense,

“ As a former director of new product development at Scott Paper Company, I can tell you that any corporation or venture capitalist would be happy if as many as one in ten investments in new products and ventures paid off. “ so the only one real winner of whatever capitalistics bet/venture will have to make ten times return to compensate for other NINE LOSERS. Otherwise, somebody or likely all tax payers will still lose big time, and what is the US industry/Wall St betting average last decade or lately??

“The problem is not that the U.S. government can't pick winners”, who in the Government is entitled to pick whoever the winner is, some has better access, and others don’t, so someone might win, others all must lose. You are advocating subversion of the entire democratic process.

“Instead of trying to kill Obama it would be nice if the Republicans would try to at least match the foreign competition. “ is this a threat? I am calling Secret Service to investigate.

 

TOWNLEY89

6:30 PM ET

September 28, 2011

We've seen the bad apple; Now show us the bunch.

In the era of budgets (and deficits) measured in the trillions, I'll give the administration a slide of $500 million. Who's counting anyway?

The green energy program in general is going well: Americans like the idea of guys in Michigan who used to make gas guzzlers now make windmills and electric car parts. The thing that sours the public to manufacturing green energy is that we've only seen the bad apple, and Americans can't name a single company in the rest of the bunch. We won't feel great about green energy's prospects to win the future until we have a budweiser-drinking behemoth of a corporation that flings solar panels over to China while beating unemployment to a pulp with an American flag. Actually, three of those sounds even better.

 

Clyde Prestowitz is the president of the Economic Strategy Institute and writes on the global economy for FP.

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