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The Solyndra Scandal

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In his September 8th address to legislators, President Barack Obama charismatically promoted the American Jobs Act bill in a nationally televised joint session of Congress. He declared, “We’re also planning to cut away the red tape that prevents too many rapidly growing startup companies from raising capital and going public.” By mitigating said regulation, the Obama Administration, in coordination with Congress, will effectively facilitate the growth of U.S.-based companies from gloomy, subdued Main Street to an “occupied” Wall Street. But at what cost?
Two days prior to the president’s speech, Solyndra, Inc., a California-based solar panel manufacturer, filed for Chapter 11 bankruptcy. Intriguingly, just two years prior, Solyndra was granted a $527 million loan-guarantee from the Department of Energy in order to invest in high-tech clean energy and aid in the construction of its factory in Fremont, Calif. (Time). It was the first of many similar energy companies approved for a portion of the stimulus ushered with the American Recovery and Reinvestment Act in the midst of the financial collapse of 2009. The entire chain of events can be traced back to a Republican Congress’s signing of the 2005 Energy Policy Act; the legislature called for green investments into wind, nuclear, and solar technologies.
When President Obama came to office, the same legislature was developed by his administration’s then-democratic-majority Congress. Under pressure from the peaking economic tension, officials frenzied to “cut red tape and expedite loans to companies like Solyndra” not noticing that “some loans appeared to be going to companies that either didn’t need government help or were profiting unduly from it” (Time). Another contributing factor as to how Solyndra was able to solicit such a daunting loan is that it used its resources to organize lobbying for the company. According to the New York Times, Solyndra spent about $1.8 million alone on Washington lobbyists whereas the other three solar panel companies that managed to get loans did not have any lobbying efforts whatsoever.
Upon receiving the loan in late 2009 from the Department of Energy, Solyndra resolved to begin immediate construction of its Fremont, Calif. factory which did not end until June of 2010. Due to a combination of Solyndra’s proprietary solar panel technology and a gradual decrease in the price of silicon, their solar panels were effectively devalued. What separated Solyndra from most other solar companies was that its panels were silicon-free; the company was strategic to circumvent this constraint in the solar industry (Time). A steady drop in the price of silicon was unforeseen by Solyndra executives; from the time its plant opened to when it received the loan, silicon’s value fell 40% (www.bloomberg.com). This overpriced their product, and cost them vital business which would have been theirs had silicon prices remained high relative to their silicon-free panels (New York Times). With growing losses, the company was forced to lower the costs of its product in order to better its chances at competing with other companies. When their business models failed, it is understandable as to why they filed for bankruptcy.
Solyndra’s half-billion dollar mishap is significant for a plethora of reasons. Firstly, it draws attention to the Department of Energy’s assessment of promising companies. This will bring federal scrutiny to future events where the government approves loans to companies. In accordance with Time magazine, SolarCity, another U.S. solar panel company, was denied a $275 million loan in order to install its panels in military bases across the map. Secondly, it poses a severe threat to President Obama’s presidential campaign while giving the Republican Party ammunition to attack current policies and fiscal spending. Obama visited the Fremont factory last year where he was seen to be pointing the way to a greener tomorrow, but now his green-energy agenda seems to be falling short of its promise. Thirdly, it caused a political scandal that has escalated with “FBI raids, congressional hearings, and leaked e-mails” (Time). Former CEO, Brian Harrison, attended a congressional committee where he invoked his 5th amendment right, and remained mute to all questions and comments regarding his dissolved company, stated the Washington Post.
With the green energy industry transitioning into a trillion dollar global market, the need to get ahead is of high priority. However, the country’s aims must not come down to sponsoring companies without thorough analysis of future market scenarios, as exemplified in the case of Solyndra LLC.




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