The real lessons of Solyndra

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 ...

Paul Chinn-Pool/Getty Images
Paul Chinn-Pool/Getty Images
Paul Chinn-Pool/Getty Images

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.

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.

Clyde Prestowitz is the founder and president of the Economic Strategy Institute, a former counselor to the secretary of commerce in the Reagan administration, and the author of The World Turned Upside Down: America, China, and the Struggle for Global Leadership. Twitter: @clydeprestowitz

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