JEFFREY BROWN: And we turn to a political storm over the government’s backing of a now-bankrupt energy company.
For the first time, Energy Secretary Steven Chu testified before a congressional committee looking into his handling of a loan guarantee to failed solar panel company Solyndra.
From the outset, he defended his actions.
STEVEN CHU, U.S. Energy secretary: The final decisions on Solyndra were mine and I made them with the best interest of the taxpayer in mind. And I want to be clear. Over the course of Solyndra’s loan guarantee, I did not make any decision based on political considerations.
My decision to guarantee a loan to Solyndra was based on the analysis of experienced professionals.
JEFFREY BROWN: Solyndra had been touted as an example of the country’s green technology future.
Secretary Chu was on hand in September of 2009 as Vice President Joe Biden appeared before company employees via video link, announcing a loan guarantee for Solyndra under the new federal stimulus law. Nine months later, in May of 2010, President Obama toured the company in Fremont, Calif.
In all, Solyndra received more than $500 million in federal aid. But less than two years later, in August of this year, Solyndra filed for bankruptcy.
Today, Secretary Chu blamed the company’s failure on the economics of a global market.
STEVEN CHU: It is extremely unfortunate, what has happened with Solyndra. But when the bottom of a market falls out and the prices of solar decreases by 70 percent in two-and-a-half years, that was totally unexpected.
And so, fundamentally, this company and several others got caught in a very, very bad tsunami if you will.
JEFFREY BROWN: But House Republicans see a very different picture.
Fred Upton of Michigan:
REP. FRED UPTON, R-Mich.: The number of red flags about Solyndra that were raised along the way, many from within DOE, and either ignored or minimized by senior officials is astonishing.
JEFFREY BROWN: Among the warnings, say Republicans, a 2009 email between Energy Department staff suggesting Solyndra was — quote — “likely to face severe cash-flow problems.”
Florida Republican Cliff Stearns chairs the House Energy and Commerce Subcommittee that held today’s hearing.
REP. CLIFF STEARNS, R-Fla.: So, the bankruptcy was predicted two years ahead of time. When you signed off on the loan guarantees, were you aware of this, of these emails and of these concerns?
STEVEN CHU: It wasn’t predicting bankruptcy of the company. It was predicting a cash flow issue that upon further analysis did not appear — and in fact it did not appear in reality.
JEFFREY BROWN: Republicans also claimed that both the initial loan guarantee and subsequent decisions were made on a political, not strictly business, basis.
They cited an email released by the committee last week suggesting that George Kaiser, a major Solyndra investor and Obama donor, was asked by the White House to delay news of layoffs until after the 2010 midterm elections.
Texas Republican Joe Barton:
REP. JOE BARTON, R-Texas: You know who George Kaiser is, I’m sure.
STEVEN CHU: Yes, I know now.
REP. JOE BARTON: You know that he was a major investor in a venture capital firm that had a major stake in Solyndra. You knew that?
STEVEN CHU: Not at the time of the valuation of the loan, not at the time of the restructuring. I know now what his connection — what his — his role has been.
REP. JOE BARTON: Everybody and their dog at DOE knew who he was and knew what he was involved in.
JEFFREY BROWN: But Chu insisted throughout the hearing there was no political influence in the department’s decisions.
REP. JOHN SULLIVAN, R-Okla.: Who put the pressure on you or them to delay divulging that knowledge until after the elections?
STEVEN CHU: There was no pressure. I wasn’t part of that decision, and I certainly not — wouldn’t have been in favor of that decision.
JEFFREY BROWN: For their part, Democrats on the committee charged Republicans were playing politics.
Henry Waxman of California:
REP. HENRY WAXMAN, D-Calif.: All of these records show that the decision to award a loan guarantee to Solyndra was based on the merits, not political considerations. It’s time for House Republicans to stop dancing on Solyndra’s grave and start getting serious about energy policy.
JEFFREY BROWN: Chu was also repeatedly pressed on why he approved a restructuring of Solyndra’s loan that allowed two private investors to be paid off before taxpayers.
STEVEN CHU: We had two choices. We either had to stop the loan, which would make Solyndra go into immediate bankruptcy because with a half-empty factory — half-completed factory. Or we could say continue on the contract of the loan, which was to build this factory. Once the factory was complete, there was — Solyndra would have a fighting chance of continuing, or it could offer that factory sale as a whole unit.
JEFFREY BROWN: Throughout today’s hearing, Chu stressed that helping Solyndra was just part of a larger energy strategy.
STEVEN CHU: The stakes could not be higher for our country. When it comes to the clean energy race, America faces a simple choice, compete or accept defeat. I believe we can and must compete.
REP. CLIFF STEARNS: The subcommittee is adjourned.
JEFFREY BROWN: And the energy secretary also said he continues to have the backing of the White House.
The Solyndra story has also prompted some big questions in its wake: Should the government help spur or back certain kinds of energy companies? And can it do well?
We explore that with Eileen Claussen, president of the Center for Climate and Energy Solutions, which works to inform energy and environmental policy, and 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.”
Eileen Claussen, I will start with you.
Critics of what has happened at Solyndra — and we heard it from Republicans today — they say, this is a story that shows that government — government’s inability to know how best, know when to invest and how to do it well in these kinds of technologies.
EILEEN CLAUSSEN, Center for Climate and Energy Solutions: I think, of all of the loan guarantees that were given under this program, which, I should point out, were — the law supporting it was signed by a Republican president, George Bush, and a Republican Congress.
But, that aside, I think it’s important to note that there are two, I think, out of 38 that are in this kind of condition, one of which went bankrupt, and one of which I think is very close to it, not nearly all. So a couple mistakes? Yes.
JEFFREY BROWN: You think there’s a case to be made for this kind of investment?
EILEEN CLAUSSEN: I do.
I think this is not the kind of thing that venture capitalists are going to do, because the time frames are very long and because the capital requirements are very large. If we are going to move to a clean energy future, I think there is a real role for government here.
JEFFREY BROWN: Robert Bryce, what lesson do you draw from the Solyndra story so far?
ROBERT BRYCE, Manhattan Institute: Well, I think that it’s — if you look at Solyndra and you look at the loan guarantee program in general, I think that it is clear that there needs to be some reform.
Look at the Shepherds Flat wind project in Oregon. It was the subject of a White House memo that was published last year. It was written last year by Larry Summers, Carol Browner talking about the subsidies that were being given to the project developers. One of those project developers — or the main one, rather, is General Electric.
It’s a $2 billion project, about 800 megawatts of wind capacity, and yet the government provided a billion dollar loan guarantee to General Electric, which has a market capitalization of $170 billion, is — and is one of the largest financial services companies in the world.
Further, once the project is completed early next year, GE and its partners, who include Google and Sumitomo, will get a $490 million cash grant. This is not the proper role of government. And I think, in that case, it’s clearly just the worst kind of corporate welfare.
JEFFREY BROWN: So, the lesson you draw is, the government should just not be in this kind of business, whether it’s solar technology, any of the energy sectors?
ROBERT BRYCE: Well, look, if I were energy secretary, I would say let’s have fair field, no favor.
Let’s eliminate all subsidies and let all these different sources compete on their merits. But I think what the problem with the solar business — and the Obama administration is being pilloried now for Solyndra, but in all of this, we have forgotten the issue of scale.
The U.S. gets at least 7,000 times more energy from hydrocarbons as it does from all solar. So I think we’re paying attention largely to the wrong source right now.
JEFFREY BROWN: And, Eileen Claussen, you would say this is precisely the source we should be paying attention to and, therefore, the government should be involved?
EILEEN CLAUSSEN: Exactly.
If you look at the power sector — and I’m sure Robert Bryce has done that — you would know that, over the next 20 or 30 years, we are going to be replacing almost all of the existing fleet. I would like to see it replaced with the most efficient, effective and clean technologies possible.
In order to do that, I think it is wise to invest in different technologies. Look, I know that Mr. Bryce likes natural gas. A lot of the fracking technology actually came out of government research. So government can do more than solar.
I mean, government can do research related to fossil fuels as well, and make things better. Nuclear, there’s a lot of stuff there that could be improved.
JEFFREY BROWN: Now, what about that, Mr. Bryce? I mean, isn’t it the case that government is already involved in so many different ways in all kinds of sectors of the energy industry?
ROBERT BRYCE: Well, look, there’s no question about that. And I am adamantly pro-nuclear.
I think if the U.S. is really serious about reducing CO2 emissions, then we should be aggressively moving toward nuclear and, in particular, modular reactors, and, if possible, fueled with thorium.
I think this is tremendously positive. But the reality is, right now, that nuclear is priced out of the market. Why? Because of low-cost natural gas. Exelon last year said they could not build nuclear plants in the U.S. because natural gas — with natural gas prices below $8.
The reality is that the shale revolution that’s now under way for both shale oil and shale gas is the best news in the U.S. energy sector since the discovery of the East Texas field in 1930. And if you talk to the International Energy Agency in Paris, they say the U.S. is now reducing its carbon dioxide emissions faster than is Europe.
And why is that? Because of low-cost natural gas.
JEFFREY BROWN: All right. Now, that…
ROBERT BRYCE: And Europe has a cap-and-trade system.
JEFFREY BROWN: I’m sorry to interrupt you.
ROBERT BRYCE: Sure.
JEFFREY BROWN: I mean, that — the natural gas, we have debated on this show. So, I want to focus it again on the government’s involvement in all of these things.
ROBERT BRYCE: Fair enough.
JEFFREY BROWN: So, Eileen Claussen, what…
ROBERT BRYCE: Sure.
JEFFREY BROWN: … about what the — what we heard from Secretary Chu at the end there, when he said, “When it comes to the clean energy race, America faces a simple choice, compete or accept defeat.”
Now, this is a global market. And I think he’s talking primarily about China, a few other countries, where they’re going down this path.
EILEEN CLAUSSEN: There’s no question about it. And they’re doing it in a very direct way.
I mean, there are subsidies, there’s government policy to really support clean energy. And I’m not saying that we should do what China is doing. But I do think it is a competition. I do think, if we had demand here, we would manufacture here. We have innovation capabilities here second to none. Why wouldn’t we want to compete?
JEFFREY BROWN: Mr. Bryce, why wouldn’t we, if China is in the game…
ROBERT BRYCE: Sure.
JEFFREY BROWN: … and it’s a global competition, and they get backing from the government?
ROBERT BRYCE: Absolutely.
Well, I will respond. And I respect Ms. Claussen’s position, but what’s the most admired company now in the United States or even around the world? I think it’s clearly Apple. What does Apple do? They design their products here in the United States and they assemble them and manufacture them in China.
Well, where’s the outrage in the green left about the fact that all of these cell phones, all of these computers, all of our iPhones, iPads, all these other technologies are being made in China? What I hear in terms of this clean energy and solar panels and all these other things, that we have to make those here in the United States.
To me, the rhetoric is remarkably similar to what we have heard in the past from the corn ethanol scammers about the evils of foreign oil. I don’t see much difference. Why is it OK for Apple to produce all — or manufacture all their products overseas, and that’s OK, but somehow now we’re supposed to be autonomous or we’re supposed to produce all of our own solar panels?
It doesn’t make any sense. It’s a global market.
JEFFREY BROWN: All right, you’re shaking your head, so, clearly, you don’t like this analogy. You don’t see it.
EILEEN CLAUSSEN: Well, no. I actually would like to see much more of it made in the America. I think that’s the way we generate jobs here, and that could be true for Apple products, as well as for clean energy.
I think we really need to build a manufacturing base in this country if we want the economy to grow. And there’s no reason why you should exclude clean energy from that.
JEFFREY BROWN: And, at the same time, briefly, you’re saying that safeguards could be put in for the kinds of — any potential problems that you see when the government is involved?
EILEEN CLAUSSEN: Sure. Absolutely.
And I also think there are a wide number of different technologies that should be looked at. I think it is important. I actually like nuclear also, and I like natural gas also. I think there are improvements that could be done in those areas as well. And I think there is a role for government.
JEFFREY BROWN: All right, we will have to leave it there.
Eileen Claussen, Robert Bryce, thank you both very much.
ROBERT BRYCE: Thanks, Jeffrey.