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Solyndra lesson: Leave manufacture to private sector

Published September 13, 2011 1:01 am

This is an archived article that was published on sltrib.com in 2011, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

The following editorial appeared in Friday's Washington Post:

In May 2010 President Obama paid a visit to the California factory of a solar-energy firm known as Solyndra, which the Energy Department had backed with a $535 million loan guarantee. "The future is here," Obama declared.

On Thursday, FBI agents came through Solyndra's doors with a different message: "Search warrant." The details of the federal investigation are not yet public, but they probably have something to do with Solyndra's unexpected announcement last week that it is filing for bankruptcy, leaving hundreds of workers jobless — and taxpayers on the hook for almost all of its government-backed loan. The collapse of one of the Obama administration's signature "green jobs" efforts may mutate from an embarrassment to a scandal.

Obviously, everyone should reserve judgment as to whether there has been any wrongdoing, criminal or otherwise. But it's not too early to draw some policy lessons from Solyndra's ignominious downfall.

The first is that government is no better than the private sector at picking industrial winners — and usually worse. Solyndra's novel solar-panel design was supposed to produce electricity more efficiently than more traditional panels, offsetting its higher production costs. Many private analysts questioned that business model, especially given modest global demand for solar power and competition from China's heavily subsidized producers. But the Energy Department swiftly approved Solyndra's loan guarantee anyway. The department has also placed large financial bets on electric vehicles and related battery technology, despite private forecasts that the market for that technology is not ripe.

This hardly means that government has no role in promoting clean-energy technology. It just needs to limit its intervention to an earlier stage in the process: basic scientific research. This is a traditional public good — potentially useful to society but financially unattractive to the private sector. Leave the high-risk, high-reward business of manufacturing and selling specific energy technologies to the market.

The second lesson is that "green jobs" offer a dubious rationale for federal support of clean-energy technology. To the extent that government creates jobs by subsidizing particular companies, it does so by shifting resources that might have created jobs elsewhere. Political favoritism, or the appearance thereof, is an inherent risk; Solyndra's largest private investors are tied to one of Obama's key fundraisers.

Environmentalists — and their allies in the White House and Congress — have touted green jobs in response to industry's perennial argument that cleaning up the planet kills jobs. It would be better to defend the costs of a clean environment on their own terms.