On the heels of the FBI's arrival last week at the company's California headquarters for an unspecified search, the U.S. House of Representatives has begun an investigation into whether Solyndra – and the Obama administration – engaged in wrongdoing when the company was offered its loan guarantee in 2009.
At a Wednesday hearing on Capitol Hill, representatives from both sides of the aisle interrogated Jonathan Silver, executive director of the DOE's Loan Programs Office, and Jeffrey Zients, deputy director of the Office of Management and Budget (OMB). (Solyndra executives are expected to testify next week.)
The four-hour-plus probe – titled ‘Solyndra and the DOE Loan Guarantee Program’ – revealed no groundbreaking revelations and frequently devolved into partisan sniping. However, it zeroed in on a few crucial questions that will likely dominate ongoing discussion of the Solyndra scandal.
Most importantly for the solar sector, the answers to these questions could determine the course of the federal government's future support – or lack of support – for solar and other forms of renewable energy.
1. Why did Solyndra fail?
During his opening testimony and the question-and-answer session, Silver maintained that Solyndra's proprietary cylindrical-module technology simply fell victim to poor timing. As solar professionals are well aware, the market in 2006 and 2007 was vastly different from today's market.
When loan-guarantee application due diligence was starting, Silver said, the combination of high polysilicon prices and expensive balance-of-system components made Solyndra's technology compelling – despite its higher production costs.
But plummeting polysilicon prices, an influx of low-priced crystalline modules from China and rocky conditions in several critical European solar markets over the past couple of years hit across the PV industry.
‘These changes were particularly damaging to Solyndra,’ Silver added.
Of course, as several members of Congress mentioned during the hearing, due diligence should include the evaluation of future risks and thorough industry analysis.
Accepting Solyndra's failure as a consequence of market forces raises the question of whether DOE staffers were fully aware of Solyndra's vulnerabilities at the time of the loan guarantee's approval – and, if so, whether they and their counterparts in other governmental departments responded appropriately to this knowledge.
2. Did Solyndra get preferential treatment from the Obama administration?
Much of the hearing focused on a critical three-week period in January 2009, during which President Bush left office and President Obama took over. At this point, the DOE's judgment of Solyndra's loan-guarantee application changed from critical to favorable – an abrupt change of heart that has raised red flags.
‘One of our witnesses today, Mr. Silver, attempts to claim in his written testimony that the Bush administration is equally at fault for approving Solyndra and that Solyndra was a train ready to leave the station when President Obama took office,’ said Oversight and Investigations Chairman Cliff Stearns, R-Fla., in his opening statement.
‘In reality, on January 9, 2009 – at the end of the Bush administration – the DOE Credit Committee voted against offering a conditional commitment to Solyndra, saying that the deal was premature and questioning its underlying financial support,’ he continued. ‘Only after the Obama administration took control, and the stimulus passed, was the Solyndra deal pushed through.’
While acknowledging that the timeline was correct, Silver pointed out that the DOE committee (which comprises career public servants, not political appointees) did not ‘reject’ the loan under Bush, but rather, ‘remanded’ it, requesting additional information.
What type of information was provided that suddenly convinced the DOE that Solyndra's application had become sound? Silver mentioned ‘due diligence’ and ‘market research’ but did not reveal any specifics.
Like many of his fellow Republicans at the hearing, Rep. Joe Barton, R-Texas, remained unconvinced. ‘'Due diligence' doesn't cut it,’ he told Silver. ‘We know that one thing changed: The president changed.’
The George Kaiser Family Foundation owns approximately a 35.7% stake in Solyndra, according to Securities and Exchange Commission filings cited by Bloomberg, and Kaiser has visited Obama's aides 16 times since 2009.
The foundation's owner, George Kaiser, reportedly made substantial donations to Obama's election campaign, possibly indicating a conflict of interest.
Silver and Zients denied ever having personal interaction with Kaiser, and both insisted that they and their staffers were never pressured by anyone at the White House to give a green light to the Solyndra deal. Silver said he had ‘no reason to believe’ that Kaiser's donations played any role in the process.
3. Do internal emails reveal that DOE staffers skipped or rushed necessary due diligence?
Stearns produced transcripts of emails from DOE personnel regarding the timing of the highly publicized loan-guarantee approval, which he said contained ‘disturbing revelations.’ The approval was allegedly fast-tracked in order to coincide with Vice President Joe Biden's and DOE Secretary Steven Chu's appearances at Solyndra's ground-breaking ceremony.
Portions of emails distributed by Stearns appear to support this assertion. ‘We would prefer to have sufficient time to do our due diligence reviews and have the approval set the date for the announcement rather than the other way around,’ an unidentified DOE staffer wrote in one of the messages.
But Rep. John Dingell, D-Mich., urged his colleagues not to jump to conclusions. ‘I am still waiting to see something that shows wrongdoing,’ he said. ‘I don't want us to proceed just on suspicions or misinterpretations of emails.’
Zients, whose department assigns credit subsidy scores to DOE loan-guarantee applicants, insisted that the OMB reviewed Solyndra strictly according to procedure and, in fact, increased its credit subsidy score to make it more conservative in the final approval stages.
‘I want to be crystal clear â�¦ these scheduling requests had no impact whatsoever on the credit subsidy score that was given to the project,’ he said.
4.Should the U.S. government continue to invest in solar power?
As to whether Solyndra's failure should cause the federal government to take a hard look at investing in any solar manufacturing projects or installations, the members of Congress largely took their stances along party lines.
‘I disagree vehemently with the policy conclusions my Republican colleagues have already drawn,’ said Rep. Henry Waxman, D-Calif. ‘They say Solyndra shows the failure of solar investments.’
‘If you live in reality, you know that the world cannot continue its reliance on fossil fuels,’ he added, stating that ceasing federal support would be an ‘economic death sentence for fledgling renewable energy companies that have to compete against both heavily subsidized fossil-fuel firms and low-cost overseas companies.’
Those ‘low-cost overseas companies’ include numerous China-based PV cell and module manufacturers, whose dominance in the marketplace was discussed numerous times during the hearing.
According to Silver, the Chinese government has already committed more than $30 billion to several large manufacturers, in addition to providing other incentives. The U.S.' investments pale in comparison.
Silver reiterated that the DOE loan-guarantee program allows the U.S. to begin to compete in what is projected to be a lucrative market. ‘I can't imagine a scenario under which we, as a country, will walk away from an industry that will be one of the biggest in the world,’ he said.
Stearns, however, indicated that walking away from – or, at least, intensively questioning involvement in – the solar sector may be a good idea for the government.
‘Go back and look at all the solar energy projects, and you'll realize that this industry is truly dependent on subsidies,’ he said. ‘When you look at all this and do the analysis, even at $140 per barrel [for oil], the idea that solar panels are going to break even is questionable.’
Zients stressed that aside from Solyndra, other solar energy firms that have received loan guarantees are likely to deliver on their promises to the solar sector, U.S. taxpayers and the country as a whole.
‘The program is relatively new, so loans have recently closed, for the most part,’ he said. ‘We have every reason to believe that the portfolio, as a whole, will perform.’