ricky

The only question is, is there real beenfit to having domestic manufacture in this area?
Were jobs enough, or was there something else that made a strategic investment worthwhile?

Steve

You can't say "the only question is" and then ask a second question, can you?

If the second is a subset then certainly the logic is maintained. Jobs being one benefit of many potential benefits.

And you've continued into this anlysis your self. "They had a unique product, one that if they had marketed correctly might have succeeded."
If this is true then the question becomes, if the project had indeed succeeded would it have made the investment worthwhile? (Its strange when someone claims, "only poor marketing" in an industry sector which is still so new. Product superiority of the sort you allude to, would almost certainly over come marketing mistakes. I think its a lot more complicated. Plus, if the techology was that much better - someone would have bought it from the bankruptcy agents as the firm went under.)
Would it have created the base industry around which an entire sector could have grown. Amplyfying the resulting employment, and creating a new domestic industry.So that instead of importing another high tech product made in China, the US could have supplied their own domestic market and exported as well? There are lots of examples where this has happened. How about aluminum smelters and fabrication growing up around sources of cheap hydroelectric power, even though Bauxite has to be imported?)
As it is, almost all solar panels are now imported into the US right? And the development, refinement and improvement in solar energy products will probably move towards the manufacturing centres where the feed back loop from real world experience will provide an advantage over isolated research labs...
Chu screwed up in this, I'll give you that. But mostly its a case of a neo-mercantilist nation buying another high tech sector by subsidizing it to where its competition cannot thrive.
The attempted cover up of the screw up is pretty sleazy. But criminal? You wouldn't be describing it as murky and GOP congressmen wouldn't be straining to make their point if it clearly were criminal.

By the way, the analysis of jobs created by Brightsource is interesting. I assume thats per job, and not per job year.
If the 650 jpermanent jobs created are permanent, whats the cost per job per year work out to? Say over 25 years? $40,000 ? If those jobs pay an average of only $80,000 per annum per job over 25 years that represents an initial subsidy of 2% of the total value of the permanent employment payroll. . Forget the construction jobs and spin off jobs....

Ricky, "oh."

Great response.

Not.

It's not murky that it is illegal to subordinate taxpayers to private interests. That is clear and it occurred. What we don't know is who is ultimately responsible--how high the illegality goes.

The Administration broke the law in a way that benefitted one of its bundlers at taxpayers' expense. You don't seem to care. Is that because you are an anarchist, a socialist, favor corruption, or because you're a canadian--or is that repetitious?

There's a tremendous amount of clean energy private equity and VC money available. Any company looking for capital will go to these sources first. If you were starting a new venture, wouldn't you want money from people who know the business world and can help you manage your company with experience. They would take some of your upside, but they would have similar motivations to create a win / win. If you truly have a winning business plan, these guys and gals will spot it, invest in it, nurture it via their business connections and expertise. Your idea will spread very quickly and you will get rich too.

If you cannot get funding from a private source, only then would you pursue government funding. Government funding often derails your business plan by forcing you to focus on social goods rather than profitability. It also tends to slow your business down. By definition, any enterprise going to the government is a substandard investment depending on political rents (who you know) and not financial sensibility. Either that, or the business just likes the government terms better, so in effect, there would have been funding anyway.

At this point Ricky will argue that Germany has been successful in this way. But for every Germany with a successful government industrial policy, there are 2 Greeces who have failed doing the same.

rickyp wrote:ricky

The only question is, is there real beenfit to having domestic manufacture in this area?
Were jobs enough, or was there something else that made a strategic investment worthwhile?

Steve

You can't say "the only question is" and then ask a second question, can you?

If the second is a subset then certainly the logic is maintained. Jobs being one benefit of many potential benefits.

And you've continued into this anlysis your self. "They had a unique product, one that if they had marketed correctly might have succeeded."

Right, so shame on me for pointing out the minor potential upside of the product. Note well "might have succeeded" is not the same as "would have succeeded." I did point to their substantial higher cost per watt produced. Their only advantage was the design shape itself, which permitted a smaller, lighter footprint. The company failed to figure out how to take advantage of that.

If this is true then the question becomes, if the project had indeed succeeded would it have made the investment worthwhile? (Its strange when someone claims, "only poor marketing" in an industry sector which is still so new. Product superiority of the sort you allude to, would almost certainly over come marketing mistakes. I think its a lot more complicated. Plus, if the techology was that much better - someone would have bought it from the bankruptcy agents as the firm went under.)

Obviously, it was too much to ask for you to read the article. You didn't, did you?

if you had, you would see the author speculates it will get purchased by a foreign concern.

Would it have created the base industry around which an entire sector could have grown. Amplyfying the resulting employment, and creating a new domestic industry.

"Could have" is an interesting term. The question as RJ says in another way, is why is the government using taxpayer money to speculate? If the business has a reasonable chance of success, it will find investors. This one never showed much promise. Even after a massive influx of government money, they wasted some of it on opulence (ever read about the things in their facility?) and never came close to profitability.

So that instead of importing another high tech product made in China, the US could have supplied their own domestic market and exported as well? There are lots of examples where this has happened. How about aluminum smelters and fabrication growing up around sources of cheap hydroelectric power, even though Bauxite has to be imported?)

If there were not tax subsidies for solar power, would there be any market? The difference between solar panels and aluminum and hydroelectric is that those two products actually make some sense. But, hydroelectric is not without environmental and other concerns.

As it is, almost all solar panels are now imported into the US right?

Why is that? Oh, because they are selling them to us more cheaply than we can make them, right?

So, the solution is to pour taxpayer money into poorly-managed companies and try to compete with a dictatorship exploiting its working class?

Does that sound like it's going to work? On what planet?

Chu screwed up in this, I'll give you that. But mostly its a case of a neo-mercantilist nation buying another high tech sector by subsidizing it to where its competition cannot thrive.

Again, the answer then cannot be to try and out-subsidize them. That will not work. Strain yourself and read this--you'll see that there was no market for Solyndra (main source is WaPo). It was destined to fail. All Obama and Chu did, for $535M, was delay the inevitable.

The attempted cover up of the screw up is pretty sleazy. But criminal? You wouldn't be describing it as murky and GOP congressmen wouldn't be straining to make their point if it clearly were criminal.

Sleazy? No, it's worse than that. What possible motivation is there for subordinating the interests of the taxpayers to other investors (some of whom just happen to be Obama bundlers)? Why would anyone do that when it's against the law?

Committee members balked at Chu’s justifications.

“When I voted for the 2005 energy bill I never expected taxpayer money would be made a lesser priority than outside investors,” Texas Republican Rep. Gene Green said. “Having supported that loan guarantee program, we need to change that law because I don’t think we ought to ever let the taxpayers be subordinated.”

When pressed by committee members, Chu said he wasn’t aware at the time of many emails from his own agency, the Office of Management and Budget and the Treasury Department raising questions about the financial health of Solyndra.

By the way, the analysis of jobs created by Brightsource is interesting. I assume thats per job, and not per job year.
If the 650 jpermanent jobs created are permanent, whats the cost per job per year work out to? Say over 25 years? $40,000 ? If those jobs pay an average of only $80,000 per annum per job over 25 years that represents an initial subsidy of 2% of the total value of the permanent employment payroll. . Forget the construction jobs and spin off jobs....

That's a big assumption. To use your own favorite weaponry against you: do you have a source?

Btw, this is from May--and gives ample reason to wonder if Brightsource can overcome the Federal bureaucracy and get its plant built:

BrightSource Energy, Inc. has gotten a lot of good news lately. Google Inc. (NASDAQ: GOOG) invested $168 million in the company and the federal government ponied up $1.6 billion in loan guarantees to construct the company’s 392-megawatt Ivanpah solar thermal power plant. The company has also filed for an IPO, mainly on the strength of its go-ahead to build Ivanpah. That permission could be in danger, though, since the US Bureau of Land Management has countered an earlier biological assessment by the US Fish and Wildlife Service, concluding that a rare species of desert tortoise is, in fact, in danger of being killed or displaced by the BrightSource project.

The US FWS survey estimated that the project would disturb only a few dozen of the creatures, while the BLM study estimated that the project could lead to the loss of nearly 1,000 of the tortoises. The BLM study requires that BrightSource relocate the tortoises, which will add to the cost of the project and probably push out the schedule. How this particular wrinkle is ironed out will have a significant impact on federal government plans to open up large tracts of federal land for industrial scale clean energy projects.

Protect the turtles!

People talk about the externalities of private sector activity, but government and non-profit activity also have externalities.

Steve, if you really want your blood to boil, if you haven't already, check out the sweet heart deal ($15 million) that went to race track owners as part of the recent Mass casino deal. Now the government (after denying a citizen referendum to return taxes to regular levels) has given money to a favored industry whose redeeming qualities are idleness and animal cruelty. (At least one can argue that clean energy is a laudable goal.) It was a backroom deal so all the legislators can deny their responsibility. I'm aghast even though I believe in legalized gambling.

It appears that while venture capital has a role to play in developing clean energy, that Ricky P has a valid point about the need for government financial support. http://leadenergy.org/2010/12/venture-c ... nnovation/

Ray Jay wrote:There's a tremendous amount of clean energy private equity and VC money available.

Citation needed.

Any company looking for capital will go to these sources first. If you were starting a new venture, wouldn't you want money from people who know the business world and can help you manage your company with experience. They would take some of your upside, but they would have similar motivations to create a win / win. If you truly have a winning business plan, these guys and gals will spot it, invest in it, nurture it via their business connections and expertise. Your idea will spread very quickly and you will get rich too.

Sure, but we are living in an uncertain economic environment. The confidence of investors will be lower than it was several years ago. I think a while ago I presented to you stats on the level of venture capital over the past few years. It's big, but lower than it was pre-2008 in real terms.

If you cannot get funding from a private source, only then would you pursue government funding. Government funding often derails your business plan by forcing you to focus on social goods rather than profitability. It also tends to slow your business down. By definition, any enterprise going to the government is a substandard investment depending on political rents (who you know) and not financial sensibility. Either that, or the business just likes the government terms better, so in effect, there would have been funding anyway.

So you mean that they feel that the private investment terms are more of a hindrance to their business plans than government 'interference' is? How could that be? I was getting the impression that private venture capitalists were veritable money-fairies!

At this point Ricky will argue that Germany has been successful in this way. But for every Germany with a successful government industrial policy, there are 2 Greeces who have failed doing the same.

There are two Greeces? But there's also Singapore, Korea, Sweden, Finland, the USA and many others that have successfully invested in their own industries in the past. A few more could be pulled out. Perhaps we need more than just a list of countries that are good and bad, and a more rigorous analysis.

Ray Jay wrote:Steve, if you really want your blood to boil, if you haven't already, check out the sweet heart deal ($15 million) that went to race track owners as part of the recent Mass casino deal. Now the government (after denying a citizen referendum to return taxes to regular levels) has given money to a favored industry whose redeeming qualities are idleness and animal cruelty.

The joys of one-party rule. They don't have to listen to what the people want. In this Commonwealth, the people reflexively vote for Democrats, then bemoan the corruption that inevitably ensues. Even if it was the Green Party, genuine competition would reduce the corruption.

(At least one can argue that clean energy is a laudable goal.) It was a backroom deal so all the legislators can deny their responsibility. I'm aghast even though I believe in legalized gambling.

I'm ambivalent about gambling. It's like smoking or any other vice--it's going to happen. However, it also, unlike smoking, will bring unsavory characters and activities into communities. We are sure to see more loan-sharks, protection rackets, prostitution and the like.

It's not murky that it is illegal to subordinate taxpayers to private interests

Then we should expect charges any day. Let me know when that happens.

Ray, I can point to many examples where governments have invested in the establishment of industries in their jurisdictions. FInalnd, Australia, Canada, Norway, Sweden, Germany, South Korea, Japan, Thailand, Viet Nam, The Phillipines, Indonesia, Singapore...
However, Greece? Are you aware of anything that Greece has done in this regard or is this unsubstantiated rhetorical flourish?

The Right and many others in the US is complaining about a pipeline who's construction is being held up because of Nebraskan enviromnental concerns. Its a pretty important part of an initiative to limit oil purchases from the Middle East. But the project it comes from was only developed to a commercially viable scale because of governemnt involvement and investment. VC and major oil producers shied away from the expense, the risk and the long term pay off. Often its projects of that size which do require governments.

danivon wrote:

Ray Jay wrote:There's a tremendous amount of clean energy private equity and VC money available.

Citation needed.

I've done that before. If you Google "private equity clean energy" or "venture capital clean energy", you will get dozens (scores?) of companies who do this sort of thing for a living. They are doing it to make money and will invest in a profitable company.

danivon wrote:

Any company looking for capital will go to these sources first. If you were starting a new venture, wouldn't you want money from people who know the business world and can help you manage your company with experience. They would take some of your upside, but they would have similar motivations to create a win / win. If you truly have a winning business plan, these guys and gals will spot it, invest in it, nurture it via their business connections and expertise. Your idea will spread very quickly and you will get rich too.

Sure, but we are living in an uncertain economic environment. The confidence of investors will be lower than it was several years ago. I think a while ago I presented to you stats on the level of venture capital over the past few years. It's big, but lower than it was pre-2008 in real terms.

You did, but I didn't find it persuasive. There's no absolute level that is appropriate. It could be $100 billion or it could be $500 billion. The important point is that if the business plan makes sense, there will be investors. Fewer people are investing in horses and buggies, but that's okay.

danivon wrote:

If you cannot get funding from a private source, only then would you pursue government funding. Government funding often derails your business plan by forcing you to focus on social goods rather than profitability. It also tends to slow your business down. By definition, any enterprise going to the government is a substandard investment depending on political rents (who you know) and not financial sensibility. Either that, or the business just likes the government terms better, so in effect, there would have been funding anyway.

So you mean that they feel that the private investment terms are more of a hindrance to their business plans than government 'interference' is? How could that be? I was getting the impression that private venture capitalists were veritable money-fairies!

They aren't fairies. They hard very hard core business people. But there are many of them and if you have a good product / concept they will compete to invest in your company. It's not that they are a hindrance. It's just that they will try to take as much of your company as they can. But we have a competitive market which keeps that in check.

danivon wrote:

At this point Ricky will argue that Germany has been successful in this way. But for every Germany with a successful government industrial policy, there are 2 Greeces who have failed doing the same.

There are two Greeces? But there's also Singapore, Korea, Sweden, Finland, the USA and many others that have successfully invested in their own industries in the past. A few more could be pulled out. Perhaps we need more than just a list of countries that are good and bad, and a more rigorous analysis.

I agree. Perhaps we should cool our investments until someone makes a persuasive case that the US is pursuing it in a way that it is money well spent. I don't see that case being made at the moment.

Ricky:

Ray, I can point to many examples where governments have invested in the establishment of industries in their jurisdictions. FInalnd, Australia, Canada, Norway, Sweden, Germany, South Korea, Japan, Thailand, Viet Nam, The Phillipines, Indonesia, Singapore...
However, Greece? Are you aware of anything that Greece has done in this regard or is this unsubstantiated rhetorical flourish?

Unsubstantiated rhetorical flourish. Would you say the developing countries of Thailand, Vietnam, the Philippines, and Indonesia are appropriate comparisons to the US, or is that URF? (useless rhetorical flourish)

rickyp wrote:

It's not murky that it is illegal to subordinate taxpayers to private interests

Then we should expect charges any day. Let me know when that happens.

Again, who is going to prosecute? Holder?

When even a Democratic Congresswoman gets it and says it, why is it so hard for you?

If there are no charges, does that mean the law was not broken? (Hint: think before answering)

The Right and many others in the US is complaining about a pipeline who's construction is being held up because of Nebraskan enviromnental concerns. Its a pretty important part of an initiative to limit oil purchases from the Middle East. But the project it comes from was only developed to a commercially viable scale because of governemnt involvement and investment. VC and major oil producers shied away from the expense, the risk and the long term pay off. Often its projects of that size which do require governments.

Bad example. We know oil works. We have no empirical evidence that solar is commercially viable.

Still waiting on a source for your claim about the permanent jobs on BrightSource project. If it's just speculation on your part and you really have no idea, just say so. That is what I've come to expect.

That's a big assumption. To use your own favorite weaponry against you: do you have a source?

Grade 4 math.
650 jobs X 80K a year X 25 years = total payroll generated for permanent jobs.

I've excluded a lot of benefits from this calculation. temporary construction jobs, spin off jobs (jobs generated by service industries for the emploeees)
Its this type of long term calculation that govenrments can make when helping establish an industry sector that private investors can't. And, as the artcle by Freeman stated getting to a point where an industry can be comercially viable usually takes some time.
Thats the kind of subsidzation that the Asian Tigers havn't shied away from making... But that seems to be anethma every where in the US, except Texas. (see R Perrry)
I'm not certain solar is necessarily the right choice for the govenrment, and its certain that this particular investment was a bad bet. However the idea that it should never be done probably dooms anyone trying to start a company in a new industry when and if China or another nation decides its worth them having the industry rather than the US.
Solyndra seems to have been doomed by China's intervention in the industry more than anything else. You can argue that you'd rather import Chinese solar panels then make your own. But at some point new industry sectors will have to develop domestically. If it isn't solar or computers or other high tech ...whats it going to be? IF most of the world is willing to compete for these sectors with government invovlement, what does it serve to be the boy scout who plays by self imposed rules and doesn't win any of the industries? (note: i know that as the lasrgest economy in the world, with an important base in all kinds of sectors, I'm not talking about a fundamental crash...just a slow withering as slices get taken away.)

Would you say the developing countries of Thailand, Vietnam, the Philippines, and Indonesia are appropriate comparisons to the US, or is that URF? (useless rhetorical flourish)

Each of these countries has invested in specific industries to attract production of products that were once made in the US.
So actually they directly impact the arguement two ways. Not only did their intervention help create secure long term employment and secure an industrial sector in which their bsuinesses can compete - which was the goal of the govenrment investment in Solyndra, and the goal of government intervention by most other nations...
But they also did so by hiving them off from the US.