World leaders react to a historic shift in U.S. policy toward Cuba. Pakistan buries victims of a school massacre by the Taliban. And U.S. officials say North Korea is behind the hacking of Sony Pictures. A panel of journalists joins Diane for analysis of the week's top international news stories.
Energy Secretary Steven Chu is facing tough questions on capital hill over the Obama administrations support for Solyndra. The now bankrupt solar panel company received a five hundred and thirty five million dollar loan from the federal government. Republicans charge got the loan because of political favoritism for a big Obama donor. The administration maintains the overall performance loan program will turn out to be sound. Chu, a Nobel laureate, points to the economic stakes for the U.S. in a growing global renewable energy market. A look at the controversy over Solyndra and what’s next for U.S. energy policy.
- Kevin Book managing director of research, ClearView Energy Partners.
- Coral Davenport energy and environment correspondent, National Journal.
- Nathanael Greene Director of Renewable Energy Policy at the Natural Resources Defense Council
- Robert Bryce senior fellow at the Manhattan Institute and author of "Power Hungry:The Myths of 'Green' Energy and the Real Fuels of the Future"
MS. DIANE REHMThanks for joining us. I'm Diane Rehm. The Obama administration faces new questions about its support for a now bankrupt solar company. The Energy secretary is testifying in defense of the hundreds of millions in loans Solyndra received. At stake is the loan program for renewable energy companies and perhaps even Steve Chu's jobs. Joining me here in the studio: Coral Davenport of the National Journal and Kevin Book of ClearView Energy Partners.
MS. DIANE REHMJoining us from NPR's New York bureau: Nathanael Greene of the Natural Resources Defense Council and, by phone from Phoenix, Robert Bryce of the Manhattan Institute. I know many of you have asked about Solyndra. This is your chance to get some answers. Do join us, 800-433-8850. Send us your email to firstname.lastname@example.org. Send us a tweet or join us on Facebook. Good morning to all of you.
MR. KEVIN BOOKGood morning.
MS. CORAL DAVENPORTGood morning.
MR. ROBERT BRYCEGood morning.
MR. NATHANAEL GREENEGood morning.
REHMLet me start with you, Coral Davenport. Lay out the facts for us on Solyndra. What do we know, and what is speculated about what happened with Solyndra?
DAVENPORTWell, at this point, we know a great deal. Solyndra is a -- well, is a solar panel manufacturing company in Fremont, Calif. The Energy Department has this loan guarantee program. It's tens of billions of dollars. And the idea is to create financial backing for different energy projects around the country in order to stimulate and promote projects that might not be able to get off the ground otherwise. Often, it's sort of created and mainly used for nuclear energy.
DAVENPORTBut in the 2009 stimulus law, the administration decided to take that existing loan guarantee program and use it to back a lot of different renewable energy companies and programs around the country. And the first and biggest loan guarantee was for this company, Solyndra. As it was looking through at various companies and various projects it wanted to back, Solyndra emerged as what the administration thought was kind of a poster child. And, in fact, people within the administration called it that of what the loan guarantee program should be.
DAVENPORTAnd it concluded -- it went through an authorized $535 million loan guarantee for this company Solyndra by 2009. Pretty early on, soon after that loan was approved -- and I should say that, when the loan was approved, the administration made a very big deal about it. You know, Joe Biden appeared via teleconference. Secretary Chu himself was at the groundbreaking. Later on, President Obama actually went and visited Solyndra and touted it as a great example of the success of this loan guarantee program and of the stimulus.
DAVENPORTBut behind the scenes, we now know from these emails that have been revealed, there were a lot of problems with the financing of the company from day one. And there was a lot of concern within the administration, within the Energy Department, just about the financials, sort of about the basic makeup of the company. And soon after the loan guarantee was approved, the administration actually had to restructure the loan. It became clear that the company might go bankrupt.
DAVENPORTWe also see -- we also saw that the company, at one point last year, was going do a large number of layoffs and that the administration asked the company to wait to do the layoffs until after the 2010 congressional elections. And meanwhile, again, sort of behind the scenes, we now know there were many, many concerns about, you know, the basic makeup of this company. And by this summer, it became clear that the company was probably going to go bankrupt. It asked for additional financing from the guarantee -- the loan guarantee program. The administration did not give it.
DAVENPORTThe company went bankrupt by September and had to lay off 1,000 employees. And this ended up being a terrible black eye for the administration, for the Energy Department, for the Energy Secretary Steven Chu, all the more so because they had touted it, you know, so publicly and because renewable -- this administration has become so associated with renewable energy.
REHMCoral, let me ask you just one question. How many other companies received money from this loan guarantee program?
DAVENPORTIt's dozens. I know that, overall, the loan guarantee program from the stimulus was for $16 billion. So the Solyndra, although it was a very large loan guarantee -- it was $535 million -- it was a tiny portion of all the other -- of all the loan guarantees that were given out.
REHMSo turning to you, Kevin Book, what kinds of questions do you expect Secretary Chu to receive today? What do you expect the outcome of today's hearing?
BOOKGood morning, Diane. The questions are almost always going to be political at this point because it has become, essentially -- as Coral said, it was highly celebrated by the administration as a political achievement. The loan guarantee program was bipartisan. And its creation at 2005 in the Energy Policy Act was the modification in 2009 that enabled conventional renewal projects like Solyndra to get not just loan guarantees, but to get the insurance on those loan guarantees essentially paid for the federal government, enabling smaller companies and more cash-poor companies to play in the space.
BOOKAnd that program itself is something that, I think, probably should be discussed. But, probably, they'll be focusing on the project and the process, which is to say, what did you know about Solyndra, and when did you know it, and how did you end up making the decision to fund it? Those will be most of the questions. Some Republicans probably will also veer into the realm of purpose and that being the question, I think, whether or not the federal government should be involved in the business at all.
BOOKNow, for my part, I think that the questions of project and process are already becoming very well documented. As an analyst myself, in 2008, we published a report that showed a huge potential production of non-Solyndra-like solar products, the conventional polysilicon product. And part of what Solyndra ran into was a market that was suddenly saturated with a regular solar panel that didn't need Solyndra's cool new solar panel.
BOOKAnd so part of what's happening here is really the project-specific questions probably deserve to be answered. But today, I think, what you'll end up with is mostly political theater.
REHMWhen you say the project-specific questions should be answered, what kinds of questions would you want answered?
BOOKWell, this is a financing question, and the question is, is this company going to be viable when it receives the financing it's getting from any source, whether it be public or private? And the viability was going to be a function of its cost structure and its ability to compete in a market that wasn't well understood or defined. When Solyndra first got involved, they were on a cutting edge at an opportunity to really play in solar when every other kind of solar panel was really expensive.
BOOKAs the costs of manufacturing fell with Chinese manufacturing cost increases or decreases and scale increases everywhere else, it became less viable. And it may have been worth reconsidering, the whole idea of funding them.
REHMAnd you've heard from Kevin Book. He is with ClearView Energy Partners. Coral Davenport is with National Journal. Turning to you, Robert Bryce, what do you see as the lesson in the case of Solyndra?
BRYCEWell, that's a good question, Diane. I guess I'd -- rather than talk about what the lesson might be, I'd rather talk about the contrast between this blowup, really, for the Obama administration and the Solyndra deal and, effectively, their cancellation of the Keystone XL pipeline. Now, the Obama administration said they're going to wait till after the election. But it's a question of scale, and it's one that -- I voted for Obama. I wish him well.
BRYCEI won't vote for him again. But when it comes to energy policy, it seems that the Secretary Chu and the president have no concept of scale. They have no idea about the quantity of hydrocarbons that we use or their importance. So how do you explain that? Well, last year, if you look at all the wind energy and all solar energy produced in the United States, according to the Energy Information Administration, it was about 96 million megawatt hours of electricity. You can convert that into oil equivalents.
BRYCEIt turns into about 160,000 barrels of oil equivalent per day. The Keystone XL pipeline by itself was designed for 700,000 barrels a day. Even if we reduce that by two-thirds to account for the energy loss and converting hydrocarbons into electricity, we're still talking about 230,000 barrels of oil equivalent or 44 percent more than all of the solar and wind energy production in the United States last year, and that was from one pipeline.
BRYCESo, to me, it's indicative of the Obama administration's, I think, truly wrongheaded focus on almost solely on renewable while the administration won't talk about oil and gas. It, in fact, actively works to prevent development of oil and gas.
REHMRobert Bryce of the Manhattan Institute. I want to turn quickly to you, Nathanael Greene, get you to talk specifically about Solyndra and what this hearing and what this controversy is going to mean for alternative energy.
GREENEWell, let me first say I'm really happy to be here. I've listened to the show so many times. It's nice to actually be on it. Thanks.
GREENEAnd let me say I am a wonky wonk. I agree with a lot of what Kevin said about what this -- what the debate is really and what the hearing is going to be about today.
REHMOkay, Nathanael, I just want to let you know we're coming up on a break. And what I'd like you to do, if you would, is to hold your comments until after we come back. If you'd like to join us, 800-433-8850, send your email to email@example.com. Short break and right back.
REHMAnd we're back, talking about Solyndra. Secretary of the Interior (sic) -- Energy Secretary Steven Chu is testifying on Capitol Hill today on that controversy involving Solyndra. We have four people with us. And I was talking just before the break with Nathanael Greene, director of renewable energy policy at the Natural Resources Defense Council. I was asking you, Nathanael, before I had to cut in, about the impact Solyndra and of the controversy on it we'll have on renewable energy.
GREENEThanks, Diane. I was just saying that, you know, I'm a wonk. I wish, like Kevin was saying earlier, that we were having a discussion, a national discussion, about the process, about this project, about how to perfect our policies to turn American leadership in developing renewable energy technologies. Let's remember that solar power, wind power, geothermal power these are technologies that Americans invented, Americans have innovated, Americans have brought to the point of commercial competitiveness.
GREENEWe should be figuring out how to perfect the policies to help bring those out of the lab and into the marketplace. And instead, what we've got is a political witch hunt going on. You know, I'm a father of two girls. I'm a homeowner. Important for this conversation -- I'm a taxpayer. I want to make sure our tax dollars are spent well, and that's really what we should be talking about. But let's remember every major technological innovation, from the railroads to the cars, to aviation, to the Internet.
GREENEThese are all technologies that America has led and that the government has really helped move from the lab to the marketplace. And we should be doing the same thing with clean energy. And that's really what we need to move to debate towards away from this gotcha politics that's really dominating Washington these days.
REHMAnd, of course, you heard Robert Bryce say that the contrast between Solyndra and the administration's postponement of the pipeline from Alaska down to Mexico has been put off. What's your reaction there?
GREENEWell, you know, this administration has approved more offshore drilling than the Bush administration. I don't think this administration has a problem with embracing fossil fuels. I think, though, you know, his question -- his discussion of scale is an interesting one because, in 2009, renewable energy -- renewable electricity generated more electricity in the United States than nuclear power. So if we're saying that renewables are too small, well, then what does that say about nuclear industry?
GREENEAnd I think most Americans just get the idea that rather than pouring more money down the hole after fossil fuels that are only getting dirtier and more dangerous and more difficult to get, we should be, you know, trying to really take advantage of our leadership, our innovation, our ability to generate those new technologies that capture fuel that's free today. It's going to be free tomorrow, and it just never going to run out. This is where the world's going. Every month, there's more and more renewable energy. We can either lead, or we can follow.
REHMAll right. And to you, Robert Bryce, the secretary of energy is testifying that in the past year-and-a-half, the China Development Bank has offered more than 34 billion in credit lines to China's solar companies, and that other countries are doing the same, Germany and Canada. So the question comes, do we want to lead, or do we want to be at the end of the line?
BRYCEWell, and Secretary Chu, Diane, at the end of testimony, he says, when it comes to the clean energy race, America faces a simple choice, compete or accept defeat. I believe we can and must compete. Okay, well, on clean energy, the president himself has identified natural gas as clean energy. When it comes to natural gas, the U.S. is light years ahead of every other country in the world in terms of the exploitation of shale gas, and we're going to maintain that lead for a long time to come.
BRYCEThe idea that somehow we're behind or that we should be subsidizing and extending these kinds of credits to companies in the United States, I think, is just -- is wrong. What's happening in Europe? The Dutch have just dramatically cut their renewable subsidies. The Germans have done the same. The Spaniards have done the same. Final point, what's the most admired company in the United States? I would argue it's Apple. What does Apple do? They design their products -- and they manufacture them in China.
BRYCEWell, where's the discussion then about our need for cellphone independence or laptop independence? The justification for -- in my view, for a lot of these subsidies for the solar and wind business, are very similar to the subsidies we -- the justification we heard from the corn ethanol scammers. It's a view that somehow we're going to be isolated or somehow that we have to subsidize this industry, even though it can't compete globally.
BOOKI think that there's a certain sentiment that the whole idea has to be repudiated. And what I would argue in sort of contrast to that is that maybe it just needs to be done right. The original Title 17 program was designed to be a portfolio of 10 different types of technologies. And the basic rule was, either it makes things cleaner, or it makes us more secure. And almost immediately after agreeing on these very good principles, Congress started to parcel out where they wanted to spend the money, which immediately subverted the idea of being technology-neutral, which was good.
BOOKAnd then in 2009, they took a really bad step, if you ask me. They went ahead and decided to use this as a stimulus idea. There are other ways to stimulate jobs through green power, and the administration did those things too with congressional support. They spent money on new credits. They turned tax credits into cash. Doing this was probably going a bit far in a sense that it de-balanced the portfolio. That portfolio, as Coral said, was supposed to be anchored by a relatively low-risk investment in clean nuclear power.
BOOKAnd not everyone thinks of it as clean, of course. But the idea was that that would give you the balance so that you can take some moon shots. And so in my own testimony on The Hill, when I talked about this, I've tried to be very clear that I think that what you needed was actually a green bank. You shouldn't be talking about whether or not we're competing unfairly. We should be trying to do it right in the first place.
REHMCoral Davenport, 38 companies received loans from this loan development group. How many of them have been successful? How many of them are still in business and moving forward?
DAVENPORTThirty eight companies received the loan guarantees, and two have failed. And that's -- so far, it appears that that would be a successful ratio. You know, if you talk to financial experts, they'll say, generally, you know, that's a pretty good result. You know, in these programs, the whole point of this program was, as Kevin said, to have a couple of moon shots. That's the expectation. And the Energy Department also budgeted in advance for some of these companies to fail.
DAVENPORTThey put aside $10 billion with the expectation that some of these companies that received backing would fail. That's written -- you know, written in to the principles of the program. So with $10 billion there, you know, so far, you've lost $535 million. Generally, it's...
REHMAll right. So $535 million gone down the drain. Solyndra failed. But the other controversial element here is that Solyndra turned around and gave the Obama administration a campaign donation.
DAVENPORTYes. And that's -- or one of the investors in Solyndra, George Kaiser. And again, you know, look, so far, it doesn't -- the documents and emails that have come out don't seem to have revealed anything illegal. But it continues to politicize this debate so much. And, you know, it's clear that Republicans on Capitol Hill, who are looking to, you know, cut programs specifically for renewable energy, to cut financing for renewable energy, are going to continue to wield this episode.
REHMSteven Chu also says that he made the final decisions on Solyndra and that he did not make any decision based on political considerations.
BRYCEDiane, can I jump in?
REHMBut that's where Congress is likely to go?
DAVENPORTThat's where the questioning is definitely going to go today. Again, Kevin talked about keeping the debate on the process and looking at what happened, you know, step-by-step. But it's -- this is -- the debate is not going to leave the political suggestions.
REHMAll right. We've got lots of callers. I'm going to open the phones now. First, to St. Louis, Mo. Good morning, Bobby.
BOBBYYes. Hello. I'm calling -- there's no question that the country needs to invest in alternative energy. However, what political parties or politicians have received donations for making these loans? And, of course, it would be at no cost to the company since the loan amount can be increased to cover the bribe.
DAVENPORTBribe is a strong word, and I don't think that we've seen any connection between, you know, specific campaign donations and these loan guarantees. I don't -- I'm not sure that we're seeing, you know, that direct connection.
REHMBut talk about that, Kevin Book. I mean, it does seem somewhat suspect that the individual who is a supporter of Solyndra, an investor in Solyndra, would then -- after receiving the $535 million loan guarantee, would then make a substantial donation. I don't know how much. Do we know how much? Why not?
BOOKWell, I'm sure it is, actually, probably a matter of record 'cause these things go into the FEC database. Diane, I've done a lot of work looking at how these decisions on energy policy get made. It's part of what my investor clients are always curious about, which is they've done the math. Now, tell us what's going to happen that we can understand. And about 80 percent of energy policy decisions made on Capitol Hill have a local basis. They're economically good for what's in the ground at home.
BOOKAnd that goes back over about 10 congresses. And so it's not unusual that you would see local influence applied both legislatively and then subsequently through the regulatory process. Now, that may be seen ugly, and it's a sort of scandalous-sounding.
REHMIt's the way the system works.
BOOKBut we have a citizen government in a market democracy, and it's kind of how the system works, yeah.
REHMAll right. To New...
BRYCEDiane, can I jump in...
BRYCESo I agree with Kevin on -- in the regard that this -- I think, clearly, there needs to be reform in this loan process. To me, the poster child for how this process has really jumped the tracks is the Shepherds Flat Wind project in Oregon. It's a $2 billion wind project, 850 megawatts. Who are the big players in that project? It's General Electric along with a couple of partners: Google and Sumitomo.
BRYCEGeneral Electric has a market capitalization of $170 billion, and yet for this project, they got a loan guarantee of $1 billion. And when the project is completed, they and their partners will collect $490 million in cash from the U.S. Treasury. Why? Why are U.S. taxpayers subsidizing General Electric? This makes absolutely no sense whatsoever.
REHMNathanael Greene, how would you respond to that?
GREENEYou know, I think the -- what these programs are starting to do, or set up to do, is to fix a financial system that is loaded towards the fossil fuel industry and the sort of traditional technologies and went through an incredible financial collapse in 2008. So we're trying to create liquidity and make these projects happen. What I don't understand is why, when it's, you know, when it's the nuclear power industry, when it's the oil industry and we're letting these people basically pollute, you know, into our air, which is a huge subsidy to them, we don't talk about that.
GREENEBut when we try to get American technology -- renewable energy technology into the marketplace, suddenly that becomes, you know, an unacceptable investment in our country, so...
REHMNathanael Greene, he's director of renewable energy policy at the Natural Resources Defense Council. And you're listening to "The Diane Rehm Show." Back to the phones, to Tom in New Bedford, Mass. Good morning. You're on the air.
TOMThanks, Diane. Two points about this loan guarantee: One, loan guarantee programs are intended to assist the development of new cutting-edge technologies, and as such, it's almost guaranteed that a certain percentage of them will fail. And, secondly, just one of Halliburton's no-bid contracts in Iraq was worth $7 billion. That's 14 times the amount of this loan guarantee. And if this is the worst that the Obama administration has done, I think they're doing a pretty good job.
REHMAll right. And, Bryce, I -- Robert Bryce, I wonder if you'd respond to, you know, these loan guarantee programs are probably expected, in some percentage, to fail.
BRYCEWell, there's no question about that. And to be clear, I'm not opposed to solar. I live in Austin, Texas. I have solar panels on the roof of my house. Why did I put them in? Well, the city of Austin gave me a big subsidy to do it. So the question, though, going forward, is how long do we need to subsidize these different energy sources? If you look back in history, the U.S. has spent billions on renewables over the past 60 years. I just looked at EIA data. In 1949, renewables' share of the U.S. primary energy mix was 9.3 percent. In 2009, it was 8.2 percent.
BRYCENow, yes, we can talk about solar and wind and the need to bolster them and so on. But the reality is if we're -- if the government is going to take -- the proper role for government, I think, is to assure cheap, abundant, reliable energy -- cheap, abundant, reliable. And what we see with solar right now is that it's at least three times as expensive as natural gas-fired electricity. Those are EIA data that are available to everyone. So I think the government's focus in all of this should be, how can we reduce cost? How can we make it more abundant? How can we make it reliable?
BRYCEAnd those are particularly important now, given the state of the United States' economy and the number of people that are collecting food stamps and are on unemployment.
BOOKWell, Diane, I think Robert's actually on the cusp of some of what I've been trying to get at, which is that there's a right way and a wrong way to finance things. And for large infrastructure projects, loan guarantees lower the cost of capital for the project sponsor. That's generally the difference between something happening and something not happening, particularly if your utility in a new nuclear plant can't fit on your balance sheet.
BOOKAnd we have tax credits that have been used in far greater amounts. I think that's most of what's he's talking about here. The ethanol tax credit is a favorite target, I think, on this show, and probably others, but the wind and solar tax credits as well. And what I'm suggesting is that if you're going to give out one, why give out both? Why go all three barrels firing? Perhaps what's wrong here is that there isn't a single way to coordinate this.
BOOKAs I think Robert said, at the end of that wind farm project, they're going to have a cash stream that comes from the tax credits from the wind. Plus, they got a low-cost loan. And the question is, can you balance this in a way that's more fiscally prudent so that you're giving other players a chance and not crowding them out?
REHMCoral Davenport, do you want to comment?
DAVENPORTWell, you know, I would just note that the federal government has been in the business of subsidizing and promoting different kinds of energy, you know, for decades. There are, you know, $4 billion in annual subsidies and tax breaks given out to the oil industry. Some of those have been in place since 1916. So, you know, part of what is going on here is kind of a balancing. I mean, this administration is trying to change that balance, to change that perspective.
REHMCoral Davenport of National Journal. Short break. We'll be right back.
REHMAnd welcome back. We'll go right back to the phones. To John in Louisville, Ky. Good morning to you.
JOHNTalking about the subsidies, it seems to me that if you look into all the details that non-renewables have already been subsidized enormously, probably far more than renewables has if you look at everything that the government actually pays for.
REHMRobert Bryce, do you want to comment?
BRYCEWell, sure. Let me just make a quick point, and it's on what's happening on the shale -- in the natural gas and oil sector in the United States. It's true that the U.S. oil and gas industry has had subsidies in the form of tax credits and in forms of deductions for intangible drilling cost, depletion, et cetera, for decades. But what is the most important development in the U.S. energy scene -- in fact, what I would say, probably, the world energy scene -- in the last 20 to 30 years? It's shale gas and shale oil.
BRYCEThis has been the best possible news for U.S. consumers in the last couple of years at a time when other commodities are going up and priced dramatically. The price of natural gas has fallen dramatically. And, in fact, if you just look at from 2005 to 2008, the price of natural gas was over $7. Now, it's under $4. It's saving U.S. consumers at least $80 billion a year. Now, how did that...
REHMBut, back to his question, it's hard to say that renewable energy should not get as much in the way of subsidies as the oil and gas companies have received over the years.
BRYCEOkay. Well -- and that's a fair argument. But my point is that what has happened in the oil and gas industry has lowered the cost of natural gas to the point where renewables are simply not cost effective. So we could say we can subsidize renewables. But if you listen to Boone Pickens, he says natural gas has to be at $6 for wind energy to be cost effective. Solar is twice as expensive as wind.
REHMAll right. Nathanael, you want to come in?
GREENEI do. I think there's -- you know, there's a -- especially when we talk about the loan guarantee and the programs that came out of the stimulus bill, it's important to distinguish between the sort of ongoing subsidies that we've used in the oil and gas sector, which are really trying to buy down the cost of fuel of inherently limited fuel base that's getting dirtier and more difficult and more dangerous.
GREENEI mean, how many more people are going to need to get stuck down in coal mines? Or how many more valleys do we need to fill with mountaintop removal? How many more oil spills from pipelines do we need before we understand that there are real costs, there are subsidies where, you know, we're putting our lands our public health as a sort of subsidy to these -- the fossil fuel industry?
GREENEAnd when we think about -- that this ongoing cost, that this growing mounting pile of money that we have to -- and health cost that we have to pay to that industry versus the renewable energy where we're doing -- trying to do something fundamentally different, we're trying to get a technology to the point where it is the most reliable, the most cheap, the best for our public health and can really be -- you know, and it's already starting to take off around the world. So it's a different type of subsidy.
GREENEIt's really much more of an investment. And I think, you know, we all -- all of us have homes or have ever taken out a loan. We understand the idea. You make an investment upfront. You get the benefit over a long period of time. And this is -- we've made a lot of investments in this technology, innovating developing the technology. Because we pulled the rug out from under this industry a few times already in the last few decades, we've seen a lot of the manufacturing move overseas. So now, I think, we have a fundamental choice.
GREENEAre we going to -- you know, every other technological revolution we've gone through has made our lives better, has made us richer as a country. This one can do all of that and make us healthier.
REHMAll right. Coral.
DAVENPORTDiane, I think, at this point, sometimes it's useful in the debate to step back and think, what is actually the overall policy or principle that the administration is trying to promote here? And the broad energy policy that the Obama administration is driven by is not actually about necessarily creating a specific industry. It's not about sort of picking and saying we want to grow industry X. It's about reducing our consumption and dependence on oil, and it's about reducing fossil fuel emissions, carbon emissions.
DAVENPORTThat is -- certainly, for Energy Secretary Chu and for this administration, that's the idea. So when you say, all right, in order to do that you need to use less oil. And you need a different kind of energy to come in and take its place. And there's a long-term -- they're trying to start a long-term transition to using a different kind of energy. So they're looking, and they're saying, well, these are the different kinds of energies that can slowly replace the oil that we use. And, yes, they are more expensive.
DAVENPORTAnd the idea is -- the administration's idea is you give these a boost. You -- you know, you help them out until they get cheap enough that you don't have to make that choice as a consumer.
REHMRon in Forth Worth, Texas asks, "Had Solyndra given any big bonuses to their executives? And if not, where did all the money go?" Coral.
DAVENPORTWe have not seen in the emails particular notice about bonuses or compensation for the employees. But, as Kevin pointed out, essentially, the financing was poorly structured, and the market changed. The market for solar panels, the product that they were making -- essentially, the Chinese flooded the market with a cheap alternative. So, you know, consumers were not going to buy the product that they made.
BOOKWell, I 'm not a big fan of promoting trade wars and -- particularly not during recessions. History says that's a bad idea. So blaming the Chinese isn't necessarily the right way to go here. There was a problem, which was that, to make polysilicon panels, you needed to turn trichlorosilane gas into polysilicon. And there are only a few companies in the world that could do that, and the ramp-up in solar spun mostly by Germany in the middle part of the last decade. They had the market very tight.
BOOKThe Chinese were the ones who broke up in the market with supply. But if they hadn't been, someone else would have. And that's the point. The point is that the technology Solyndra was pioneering was only going to work at a price point where, effectively, other solar panels would be too expensive. And I think where Robert's going, in essence, is part of the point which is that our government does want cheap energy. That is why we have oil tax treatment the way we do.
BOOKAnd if you look at what EPA just did, they just permitted a fossil fuel power plant in California as compliant with greenhouse gas reductions because it uses a parabolic trough, a solar reflector to create some of the energy for the plant. So to give you a comparable here -- it's sort of wonky, and Nathanael may be the only one who appreciates it. But a regular natural gas plant, it's about 850 pounds carbon dioxide per megawatt hour. This one's about 775.
BOOKAnd the point is that solar is being used in the plant, even though it's a conventional plant, to make it cleaner. There are applications here that aren't pure play, and they won't come out if you don't spend some money.
REHMAll right. Let's go to Portsmouth, N.H. Good morning, Steve.
STEVEGood morning. I got a question. I'd like someone to address the bigger questions, why some people think it's appropriate for the U.S. government to play venture capitalists with taxpayer money. And I'm a former VC myself. I don't remember once in my long career anyone leaving the industry to go work for the U.S. government. I don't remember in grad school, even before going to career in the private sector to go work for the U.S. government.
STEVESo who are these people making these decisions? And this venture capitalist is very risky. I mean, he's appropriate for causing damage to pension plans. You know, for every (word?), you have six to 10 that flame out and don't produce anything. But for some reason, many people think that the U.S. government can play venture capitalist with taxpayer money and...
DAVENPORTWell -- and, once again, that's kind of the point. That is the principle of a lot of these programs, is that they're funding technologies that cannot get the funding anywhere else. The idea is a sun shot or a moon shot in the same way that the federal government funded research through the Pentagon that led to breakthrough technologies like the Internet. The idea is, you know, these are -- these technologies are so sort of, you know, high-risk, high-reward that they would not get funding anywhere else.
REHMAnd from the hearing earlier, Congressman Henry Waxman, in his opening statement, declared, we can't lose this race. But Congressman Cliff Stearns from Florida says, if we intend to subsidize our industries to compete with China, who subsidize their energy, that's not a good way to handle it. And Secretary Chu said countries like China are playing to win in the solar industry. Is that how you see it, Kevin?
BOOKYes. China, actually, did play to win. They -- the solar industry is -- it's got two parts. It's got the manufacturing and the installation. And the manufacturing is a factor-cost-driven business. Low labor cost, weak environmental rules, cheaper stuff, and you win. The installation, you can do better. You can do it more efficiently, but there's a limit to how squeezed those margins can get in the countries where you install.
BOOKWe've tightened up on installation about as much as we can get, but there's just simply factor-cost differences. It's hard to see how we will win the solar manufacturing race without a new technology.
REHMNathanael, why don't you talk about why you believe that it's important that the U.S. win this race?
GREENEWell, I think it's important because we all want jobs. We all want to have a high quality of life. We all want to have clean air and clean water for our kids and for ourselves. And, you know, the alternative is, either we keep using dirtier and more dangerous and more difficult-to-get fuels, or we buy the clean energy technologies from overseas where we lead. I mean, again, we developed this stuff. We are the innovators. We made this technology work. Now, we, you know, face the prospects of seeing it all go overseas.
GREENEAnd, you know, we have actually been exporting solar technology, exporting components around the world in the last few years. And so that's why, you know, it's not -- I just don't buy Rep. Stearns' idea that we have to wave the white flag and give up. That's just no the American way...
GREENE...when it come to the market place.
BRYCEDiane, can I jump in?
REHMHold on one second because I want to read a posting on Facebook from Wayne. "The government does not operate like a ventured capitalist, investing in companies with the hope of ripping a profit for itself. Compare the effort to trigger a green energy industry to government-funded cancer research. Some directions of explorations don't pay out. But you don't know that until you fund the test, and this is what happened with Solyndra." Now, to you Robert Bryce, your comment.
BRYCEWell, just a couple of quick things. Coral said, you know, mentioned this idea, moon shots, and we've heard that kind of discussion many times. Well, giving a loan guarantee to General Electric and nearly $500 million as a cash grant, this is not a moon shot. This technology now, with wind energy, has been well-known for a long time. Regarding jobs, last December, the comptroller of public accounts in Texas, which has more installed wind generation capacity than any other state, looked at the cost of each wind-related job in the state and estimated each one of those jobs cost the state $1.6 million.
BRYCESo, look, this idea that we have to win this or all this technology is going to go overseas, the people are going to win in markets, whether you're talking about fresh flowers, bottled water, tennis rackets, tennis shoes or solar panels, are going to be the low-cost producers. Again, I go back to my point on Apple. Where's the outrage from the green left about Apple producing all of their products overseas?
BRYCEExplain the difference to me.
REHMRobert Bryce of the Manhattan Institute. And you're listening to "The Diane Rehm Show." Do you want to explain the difference, Kevin Book?
BOOKWell, the main difference is that energy infrastructure is something that sits around in your country for a long time. The turnover -- there is no Moore's law, for example, in energy technology the same there is in the semi-conductor devices we're talking about. You have rapid turnover at a relatively low cost point for those devices. For running shoes, the same is true.
BOOKThis is stuff that you're going to have for awhile. And the jobs that are going to be related in supporting to service and upgrade and maintain that infrastructure are going to be part of your high-paid workforce for some time.
REHMWe've had one of our callers say that it's too vague to answer that the money left because they were too poorly structured. Can we be more explicit about that $535 million? Kevin.
BOOKDiane, I suspect we can. Part of the question is whether they really did misallocate funds internally for some reason, not necessarily malfeasance, but just bad judgment. It isn't clear that (word?) rode home in a Porsche every night or had lavish parties with ice sculptures. But it also seemed surprising in light of the scale of the investment they must have undertaken, must have either been outside the bounds of a really good choice given the market we had, they ran through it awfully fast.
BOOKI think, so we'll have to find out, though, and that's a forensic investigation. It involves financial analysis and, really, second guessing an executive, which isn't necessarily something I'm prepared to do today.
REHMBut to what extent does the Department of Energy carefully look at each of these applications and run through the structure, run through the planning before it begins spending a loan guarantee?
DAVENPORTWell, as Secretary Chu said in his testimony today, he stands by that all of the applications are reviewed rigorously. There's a full staff. And one of the things that's concerning about the Solyndra loan guarantee, as you said, everything was done with rigor and correctness in the evaluation of the Solyndra loan guarantee, which causes some concern because it means that nothing was anomalous, nothing was done wrong, nothing was left to chance.
DAVENPORTIt means they used the analysis for Solyndra that they're using for everything else. There was one point though, with the loan guarantees that were specific to the stimulus, there was a deadline for them. The loan guarantees had to be completed. The money had to be allocated by a deadline of Sept. 30, 2011, which means -- something that we've seen is that they were rushing towards the end to make sure that all of those applications were reviewed, and the money got out the door in time.
REHMIs Secretary Chu likely to lose his job over this? Coral.
DAVENPORTThere's a lot of speculation about this. What we saw from his testimony this morning is he came in on the offensive. He is not apologizing. He did not signal in any way that he intends to resign. It's seems very likely, however, that he might leave after the elections.
BOOKWell, if somebody has to take the fall, the guy who says, it's my responsibility, is my first nominee.
REHMKevin Book, he is with ClearView Energy Partners, Coral Davenport of National Journal, Robert Bryce of the Manhattan Institute and author of "Power Hungry: The Myths of "Green" Energy and the Real Fuels of the Future," and Nathanael Greene of the Natural Resources Defense Council, thank you all. And thanks for listening. I'm Diane Rehm.
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