President Obama praised the company, Solyndra, for its advanced technology during a visit last year. But in a statement on Wednesday, Solyndra said its business had run into trouble because of difficult global business conditions, including slowing demand for solar panels, and stiff competition.
The Energy Department, which approved the funding, said China’s subsidies to its solar industry were threatening the ability of Solyndra and other American manufacturers to compete. The price of a solar array, measured by cost per watt of capacity, has fallen 42 percent since December 2010, the agency said.
Two other American solar companies, Evergreen Solar and SpectraWatt, also sought bankruptcy protection in August, and both said competition from Chinese companies had contributed to their financial problems.
In the case of Solyndra, some experts said that regardless of the competition, the company’s unique designs, which were expensive to manufacture, were to blame for its failure.
Solyndra was promised loans of up to $535 million under a guarantee program authorized by Congress as part of the 2009 stimulus package. The Energy Department has made more than 40 promises of guarantees, of which Solyndra was the first. It has committed $18 billion in guarantees and expects to allocate several billion dollars more by the time the program finishes at the end of September.
The government calculates premiums for the guarantees, essentially a loan fee based on the risk of default, but it picks up the cost of the premiums for the companies in the subsidy program. By that yardstick, it has spent $2.4 billion in credit subsidies for the program.
Solyndra’s troubles have been growing for some time. Republican budget-cutters in Congress have viewed it as a model of poor government investment.
“In an apparent rush to push stimulus dollars out the door, the Obama administration wasted $535 million in taxpayer funds in guaranteeing a loan to a firm that has proven to be unviable in the global market,” said Representative Cliff Stearns, the Florida Republican who is chairman of an investigative subcommittee of the House Energy and Commerce Committee.
He said the Energy Department might have authorized the guarantee because an Oklahoma oil man who was a donor to the Obama campaign, George Kaiser, was an investor in the project. In a joint statement, Mr. Stearns and Representative Fred Upton of Michigan, the chairman of the committee, said, “We smelled a rat from the onset.”
But the Energy Department dismissed that assertion, saying that Solyndra applied for federal help during the Bush administration and that Obama-era officials merely finished the process the Republicans had begun.
The department says government subsidies are essential to keep the United States competitive in renewable energy, and not all companies will succeed.
“The project that we supported succeeded,” insisted Damien LaVera, a spokesman for the Department of Energy.
“The facility was producing the product it said it would produce, and consumers were buying the product,” he said. “The company struggled because the market has changed dramatically.”
Although the government typically guarantees loans made to a company by a commercial bank, that was not the case for Solyndra. Solyndra borrowed the money from the Federal Financing Bank, part of the Treasury Department, so in effect, the government was lending the money to the company directly. The Energy Department gave Solyndra a conditional guarantee for $535 million, in multiple stages, contingent on reaching a variety of milestones, and to date, it had received $527 million.
Article source: http://feeds.nytimes.com/click.phdo?i=b29c413af2f4d27292878778df5552c8
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