The latest installment in the ongoing investigation into the U.S. Department of Energy's (DOE) $535 million loan guarantee to bankrupt PV module manufacturer Solyndra featured a high-profile witness: DOE Secretary Steven Chu testified before a House committee on Thursday during a hearing titled ‘The Solyndra Failure: Views from DOE Secretary Chu.’
Throughout his testimony, the secretary maintained that the loan guarantee was given to Solyndra solely on the basis of the company's merits rather than due to any inappropriate political influence.
However, Oversight and Investigations Chairman Cliff Stearns, R-Fla., and Energy and Commerce Chairman Fred Upton, R-Mich. – along with several of their colleagues – claimed that their nine-month probe of the Solyndra deal has revealed several red flags and accused the DOE of putting ‘politics before taxpayers.’
‘Why did the DOE tie themselves so closely to Solyndra?’ Stearns asked during his opening statement, calling into question both the DOE's initial favorable impression of the company and its 2010 restructuring of the loan guarantee.
The controversial restructuring – which placed the taxpayer-backed portion of the package in a subordinate position to $75 million in new investor equity – came under particular scrutiny during the course of the hearing.
Chu told the committee that the DOE consulted with outside counsel in order to determine whether subordinating taxpayer funds violated the Energy Policy Act of 2005. ‘It was their opinion that this did not violate the terms of the law,’ he said.
However, Rep. Joe Barton, R-Texas, said that a memo from another law firm – Morrison & Foster – stating that such a move was illegal was ignored by the DOE. (The Morrison & Foster document was uncovered by the Oversight and Investigations Committee as part of its extensive examination of DOE documents.)
Restructuring the loan offered the best hope for financial recovery, Chu said. ‘We had a half-completed factory,’ he explained to the committee. ‘It was a difficult decision: We either had to stop the loan, which would [have made] Solyndra go into immediate bankruptcy, or we could continue on the contract of the loan, which was to build the factory.’
How did Solyndra reach that dangerous financial status in the first place? Did the DOE know it would happen? Chu reiterated that one of the purposes of the loan-guarantee program is help to advance high-risk, high-reward technology projects, and that Congress appropriated approximately $10 billion to cover potential losses in the DOE's portfolio.
But according to some of the lawmakers at Thursday's hearing, several red flags were ignored, and post-loan-origination monitoring fell short of what was appropriate to help protect taxpayers' investment.
‘The truth is that the DOE did predict [Solyndra's bankruptcy],’ Upton said, adding that he believes the department also sought to hide the ‘extraordinary measures’ it was taking to keep Solyndra financially viable as its business began to falter.
Stearns echoed this sentiment, pointing to internal emails exchanged among staffers at the DOE and the Office of Management and Budget (OMB) stating that Solyndra's business model was predicted to run out of cash in September 2011.
Chu clarified that the emails in question referred specifically to the construction of Solyndra's Fab 2 manufacturing facility, which began construction in September 2009 and was expected to produce 500 MW of PV modules annually.
Although Fab 2's cashflow would be temporarily negative, the facility was predicted to go rapidly into the black shortly thereafter, Chu said. ‘It is common for it to take some time for start-up companies, especially manufacturing companies, to turn a profit,’ he noted.
Similarly, when pressed to explain how the DOE could support a company whose cash burn rate was approximately $10 million per week at one point, Chu said such figures are not uncommon for manufacturing start-ups and were predicted to be only temporary.
Of course, as the months and years passed after Fab 2's construction began, the dramatically plummeting prices of polysilicon and PV modules battered Solyndra's business model – a development that Chu said neither the company nor most industry experts saw coming.
‘I believe Solyndra had expectations of sales that did not come to pass,’ he said.
‘They had to be selling at a discount,’ he added, in response to a question from Sue Myrick, R-N.C., about whether the DOE was aware that Solyndra's manufacturing costs far exceeded the modules' selling prices. ‘Solar panels, although very high-tech, are a commodity, and when prices go down by 70 percent, all companies are knuckling down.’
Rep. Edward Markey, D-Mass., noted that the unprecedented PV module price collapse – while obviously detrimental to Solyndra – has a silver lining.
‘The irony here is that Republicans attack renewables because they're 'too expensive,'’ he pointed out. ‘But Solyndra failed because solar is getting cheaper!’
Markey was not alone in commenting along party lines. Many Democrats expressed impatience with what they believe has been a misleading, ill-focused and overly aggressive investigation.
Rep. Henry Waxman, D-Calif., claimed that Republicans, for instance, have released internal emails and other documents selectively and out of context in order to give an appearance of wrongdoing on the part of the Obama administration. Meanwhile, the threats posed by climate change loom large, and deploying more renewable energy to combat it ought to be lawmakers' true priority, he added.
‘It is time for House Republicans to stop dancing on Solyndra's grave and start getting serious about energy policy,’ Waxman said. ‘Something far more important is at stake today than scoring partisan points.’
But before the book is closed on Solyndra, lawmakers and taxpayers alike are now looking to determine whether any of the money lost on the DOE loan guarantee can be recovered.
Chu admitted that although the exact amount of potential recovery remains to be determined, the answer likely is ‘not much.’
‘Who is to apologize for this half billion that is out the door?’ Upton asked in response. Chu declined to offer an apology, again stressing that no wrongdoing on the part of the DOE has been uncovered.
‘It is extremely unfortunate what has happened to Solyndra,’ Chu said. ‘But if you go back and look it, at the time, was there incompetence or anything of a political nature? I think the answer is no.’
Photo: Official White House portrait