The Solyndra debacle is no surprise to this cleantech venture capitalist. The inherent conflict between trying to get money out of the U.S. Treasury as quickly as possible to stimulate the economy and, at the same time, have government agencies that are ill-suited at making business decisions do just that was nothing other than a recipe for disaster.
Anytime a government program is giving money to the private sector with the intent of getting the money back, the program is doomed to failure. Bureaucracies, politics and the lack of a profit motive simply don’t allow government to succeed in business. Anyone who was surprised that politics played a role in the loan decision for Solyndra (and almost certainly other awardees) is very naïve.
Even if, by some miracle, the government could make good business decisions void of political influence, such programs are still doomed to failure because the public and media won’t allow for even one loan or investment to fail. In venture capital we make investments that don’t succeed and we fail often. Yet, we are still successful on the whole.Our successes more than compensate for our failures.The government has no ability to operate this way. Even if a program like the DOE loan guarantee could operate with an overall effective return (which I find unlikely anyway), its first failure would sink it. The government can give away money, but it cannot effectively invest money in individual companies.
Solyndra won’t be the last default from the DOE loan guarantee program. The huge amounts of money that will ultimately have been wasted in the cleantech stimulus – both in terms of loans that won’t be repaid and the stimulus’ failure to create any meaningful job growth when growth was most needed – is bad for tax payers. The negative PR and the future demise of cleantech policies that otherwise may have had broader bipartisan support is bad for cleantech.
In 2009, amid the euphoria of the Obama Administration’s cleantech programs, I wrote that the Administration’s cleantech stimulus was bad policy but good politics. I was wrong… not only was the cleantech stimulus bad policy, it was bad politics too. While the politics by which the Administration pushed through these ill-thought programs may have been deft, the ultimate political impact is clearly bad for both the Administration and cleantech itself.
Ultimately, we may look back at Solyndra as the dagger that burst the cleantech bubble. The hype and euphoria are officially gone. The long, hard work that will be required to diversify our energy base and increase energy efficiency wasn’t reduced when the government sent floods of money out the door to cleantech companies, and it won’t change now that the hype of those programs is gone. The good news is that, like the Web and every other technology bubble, the real value creation comes after the bubble has burst.
So, let’s get back to work.
David Gold heads up cleantech investments for Access Venture Partners. He is also the author of the GreenGoldBlog.
Photo: ergsol.com
2 comments
So public investment in clean tech innovation represents hype? euphoria?. Public investment in R&D shows an interesting pattern. While US investment (to 2008) in energy R&D has maintained some consistency – even grown – China has massively ramped up investment in the sector. While the data is historic, rather than actual or projected, the following graphic is telling:
http://climatecommercial.wordpress.com/2011/04/27/us-government-investment-in-energy-rd-oustripped-by-china/
China obviously isn’t constrained by electoral politics when it comes to defining energy R&D investment, and the prioritization of new technology in this space within policy planning has clearly translated into cash – at a rate and level which now surpasses the US.
High risk early stage investment fits clearly within the realm of the public purse – costs are very high, timeframes long, but in the long term the benefits are largely public. The opportunties are transformative.
David is wrong. Not only wrong, but based on an almost completely inaccurate premise. That makes it embarrassingly wrong and, I’m sorry to say, it appears as pointedly political when it could and should have been informative.
The Solyndra business plan and application for governmental incentives/inducements originated and were originally presented to, reviewed and approved by the prior administration (Bush 43). The article neglects not only to identify the actual Solyndra timeline, but mis-associates the project to only one administration Obama (#44), and to only one set of political/policy market conditions (the post 9/2008 economic collapse). Cleantech deserves better than that.
David had an opportunity to address one of the more challenging tasks presented to the private sector when doing business with governmental institutions; that such relationships must often span multiple administrations with varying political and policy objectives and with different agency administrators that are almost always replaced when Presidential administrations change. Most agency personnel occupy merit based positions and remain with the agencies regardless of who occupies the White House, but agency directors typically occupy patronage positions; they’re appointed by the President/his or her cabinet members.
Finally, the article implies a virtual impossibility for the private sector to efficiently serve government and for government to efficiently procure goods and services from the private sector. Not only is that patently false, there are hundreds of years of data and trillions of dollars of contracts proving it to be patently false. Halliburton, Raytheon, Boeing, Honeywell and their stockholders (to name a select few) take great exception to any suggestion that the private and the pubic sectors are somehow incompatible simply because government has a reasonable expectation of a return on the investment it makes when for the benefit of our nation it purchases goods and services from the private sector.
Setting aside for a moment the apparent politically motivated rant that screams from between the words of the article, it seems we should acknowledge that as early as kindergarten we’re taught one of life’s cardinal rules; properly attribute and date our work. David’s article (as published) failed to do either. Most teachers would score that with a zero. Again, Cleantech deserves much better than an argument like Davids.
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