Like some of my other public radio colleagues here in LA, I'm a fan of former local TV guy John Schwada, and so I've been glad to see his writing over at LA Observed. But the other day, he looked at the amount of loan guarantees the Department of Energy made in California, through the prism of political rhetoric and a Brookings report, and seems to have concluded that the program's too risky for the public. "It all adds up to a huge taxpayer bet on the ability of a handful of companies to turn California's sunlight into green energy. That could be a big windfall for the state's environment but - as the numbers point out - the long-term outlook is that these green power projects will create only a handful of permanent jobs."
There's another way of looking at the DOE loan program in specific and renewable energy and jobs in general. In conversation with Matt Debord, who has spent a couple weeks figuring out Solyndra and loan guarantees, I've lately been thinking about loan guarantees as bets. The federal government, like venture capital companies, has been betting on emerging technology. I have a friend who writes for the Daily Racing Form, and I enjoy a day at Santa Anita (or the Fairgrounds Racetrack in New Orleans, or Keeneland) as much as anyone, so in that spirit, here's four things to remember at the track when you're watching this metaphorical horse race that everyone's desperate to handicap.
1. Know your horses. Solar isn't just one horse in the race; it's several. That one word that covers a crazy number of markets. Some companies design and sell residential technology. Others are in the commercial market. There's a market for flat rooftops, and a different set of products that's good for angled ones. Concentrating solar, and thin-film, and PV. These technologies compete primarily within their sub-markets. They may, in places, compete with each other; they certainly compete for mainstream media attention; I am beginning to suspect we don't do a good enough job of distinguishing between them. But if the DOE gave money to a handful of companies in this mix of markets, maybe that's not the craziest idea ever. When you go to the track, you don't bet on every horse.
2. Know your odds. As important as the size of the bet is, the risk factor is important too. The DOE has backed the horse Solyndra with half a billion dollars; the odds magnify the risk of that bet. Energy's loan guarantee program made bets of different, and hedged them. You can talk about them geographically, or in dollar amounts, but that doesn't tell you anything about the program's overall aims or success rate. (That takes math, and I am not a mathematician.) Last year, DOE also guaranteed an $8.3 billion loan (which it reaffirmed this year after Japan's incident) for a nuclear power plant for Southern Co.'s Georgia Power, the first nuclear plant to get funding since 1990. The loan was for a type of power plant not even built yet, sure, and the company had to redesign the plant to deal with heavy winds. But in terms of renewable energy in the south, that's scalable, you've got biomass and nuclear, pretty much. As Todd Woody wrote in an New York Times blog, "Opposition isn’t fierce, the population is growing fast, and the south doesn’t have many other options for carbon-free power. The wind isn’t very brisk and it’s too cloudy for solar."
3. The racing form's handicap sheet is a better source of information than the guy selling tickets to the track. By which I mean: politicians stuck the idea of job creation together with renewable energy, but that has always seemed to me like rhetoric, and risky rhetoric at that. Promising to create jobs from green enterprise is a little bit like patting your head and rubbing your belly at the same time: it happens a lot less than you think. I rarely, if ever, heard the DOE sell itself as a jobs creation machine. They're scientists; they're innovators; they're geeks. When Steve Chu talks about home runs, he's talking about technological ones, not getting 10,000 new workers across the plate.
4. You pays your money and you takes your chances. I'm citing to my high school Western Civ teacher Donna Gilboa here, but the substance of this one's all Matt Debord, from a post he wrote yesterday about Solyndragate that I like so much you should read the whole damn thing. He's talking about how just because the government's the government, nobody should expect the rules of venture capital not to apply to them. VC's, he says, want to bat over .500 and are lucky to batt .300. "[T]he government shouldn't expect to do any better. But if other countries are willing to take their chances on the Green energy solutions of the future — and accept high-risk as a cost of doing business — they're probably going to better positioned to reap the gains when their good bets pay off."
As a woman who works in public radio, I don't take a lot of money to the track in the first place. But having hit an exacta more than once, I still like to play. I just have learned that for me, to play is to win; the back end's the windfall.