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Ben Bierman (left) and Chris Gronet (right) explain solar technology to U.S. President Barack Obama on a tour of the Solyndra solar panel company May 26, 2010 in Fremont, California.
This Steven Mufson piece from the Washington Post is a solid summary of how the government has long supported, as the headline says, "failed energy projects." Mufson argues that the feds have done a lousy job of making industrial policy work and peppers his account with all manner of money losers, going back decades.
He also holds Energy Secretary Steven Chu's feet to the fire of some flawed historical examples of the government investing in projects that we think were big successes but actually weren't — or that didn't involve any government money at all!
However, Mufson also follows a line of reasoning that has, since the controversial bankruptcy of solar startup Solyndra, become widely echoed by critics of the Department of Energy's loan-guarantee program for green energy and transportation, as well as the Obama administration's support of it.
It all boils down to a comment that Larry Summers made when he was working in the White House. Here's Mufson:
Perhaps the federal government is, as former Obama economic adviser Lawrence Summers put it, “a crappy VC,” or venture capitalist. Or perhaps it should stick to funding basic research. But if more recipients of Energy Department loan guarantees falter, they will become part of a long, if undistinguished, history of failure.
This misrepresents what the DOE was trying to do in the green space. In the case of Solyndra, the venture funding community had already identified the company and...funded it. It's probably true that past industrial policy involved the government funneling money toward projects that it didn't fully understand. But the DOE's most recent actions entailed assessing a potential loan recipient's viability, and that took into account what real-world investors actually thought.
For Solyndra, this meant that venture money was already in the company. The money was there because Solyndra had a disruptive technology: thin-film solar, which promised advances over existing, decades-old solar panels that were well on their way to being mass-produced by China in a successful effort to flood the solar market.
DOE saw this and elected to double down, nurturing an entire thin-film solar sub-sector.
They were the VC of last resort, when it came to scary high-tech capital-intensive undertakings. In fact, the "crappy VC" comment that has been so widely cited came in response to Solyndra investor who was getting skittish about the company.
Commenters have missed this critical distinction all over the place. At the Atlantic, Megan McArdle failed to distinguish between the thin-film solar startup and the rest of the solar market. Mickey Kaus took on the New York Times' Joe Nocera's defense of Solyndra, which resembles my own. At the New York Post, Kyle Smith...did what they do at the New York Post.
By now, you'd think the media would have figured out how the Solyndra "deal" went down. But you would be wrong. It wasn't IP. It wasn't VC. It was something bigger, at a scale that only the government could handle.
At the DeBord Report, it hasn't exactly been all Solyndra, all the time, but I have written a lot about the company and it's downfall (just ignore the title of the post):