Friday, April 12, 2013

Solyndra, Beacon, Sun Power and Government Loan Guarantees

Government Subsidies versus Loan Guarantees
Earlier this week, Beacon Power, a company that builds systems to stabilize solar and energy power, declared bankruptcy. The company's Massachusetts plant will continue to operate at full capacity, but its finances will be restructured. This is big news mostly because Beacon Power received $43 million in Department of Energy loans, and because it follows the recent closure and bankruptcy of Solyndra, which got $534 million from DOE.

Solar is growing rapidly, averaging 65% compound annual growth rate for the last 5 years. Worldwide solar installations doubled from 2009 to 2010. The total amount of solar installed in 2010 was 17 Giga Watts! A gig watt is a big deal. One gig watt is equivalent to one nuclear power plant. Although a nuclear power plant produces more energy overall, solar provides "peak energy" and is critical to our society during high energy use times. So in 2010, solar negated the peak energy need for 17 nuclear power plants! All this, and installed in just one year! A nuclear power plant typically takes ten years or more from inception to actually producing power. These plants, unlike solar, are usually slated to be removed from service in approximately 20 years.

Some naysayers have gone on the record as saying solar should not be subsidized. No one I am aware of has ever endorsed loan guarantees. Especially for the likes of Solyndra whose business plan and installed costs were much too high to ever legitimately compete and succeed in the market place. What the solar industry has asked for is help in creating demand for a product that would ultimately require vast amount of private investment dollars to get a foot hold in the market place. Just for the record, government subsidies in oil and gas dwarf solar subsidies, and gas and oil industries are already established and should receive no subsidies from the American tax payer.

However, because of these subsidizes in solar, panel prices have dropped from $4.10 per DC watt in 2006 to $.60 per DC watt in 2012! These large drops in pricing are because the subsidies allowed for private investment into technology, research, manufacturing, and have ultimately helped establish volume discounts across the board. This is a perfect example of how subsidies should work and help every single American tax payer. Creating jobs, jobs that generate income taxes, employees that realize better buying power as consumers, consumers who have more money left over every month to invest or spend, and reducing our dependency on foreign oil are just a few of the benefits of solar subsidies.

Consumers are very aware that owning their own energy and preserving their current lifestyle, is paramount for their quality of life especially in retirement. In these very difficult economic times, when so many households are truly stretched, these subsidies have created an opportunity to lower consumer’s monthly electric bills while on their way to ultimate ownership of this energy.

Thanks to government subsidies and subsequently lower prices, we are now nearing grid parity in the solar industry. Grid parity is realized when no government incentives are needed to create demand for an industry.


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