Dems, Solar Industry Defend Abound Loan, DOE Program

July 19, 2012

A Congressional report notes that one of Abound's major financial supporters was Bohemian Companies, whose founder is Patricia Stryker, a prolific Democratic donor and Obama supporter

WASHINGTON — If the Chinese government had not subsidized the country’s solar panel manufacturers in 2011, a Colorado solar panel maker that went underwater would have survived and prospered, two former company officials told Congress Wednesday.

“With over $30 billion in reported government subsidies, Chinese panel makers were able to sell below cost and put Abound out of business before we were big enough to pose a real competitive threat to China’s rapidly growing share,” Craig Witsoe, the previous CEO of Abound Solar, a Loveland, Colo-based firm, said in his testimony to a congressional committee.

“These investments resulted in substantially more production capacity than could possibly be absorbed by the market,” Thomas Tiller, former CEO and chairman of the board for Abound, said in his testimony. “The price of solar panels fell dramatically, by more than 50 percent in just over one year. Such a severe market change made it difficult for Abound and others to survive.”

Witsoe and Tiller’s remarks served as a premise for a former Obama administration energy official’s conclusion that if the federal government continues to offer loan guarantees to solar panel makers, the United States can re-establish its dominance in the market.

“The United States invented the solar panel,” Jonathan M. Silver, the former executive director of the loan programs office at the U.S. Department of Energy, said in his prepared remarks. “Today 8 of the 10 largest solar panel manufacturers in the world are headquartered outside the United States. It is shameful that America has allowed this migration of intellectual capital and jobs overseas.”

The House Oversight and Government Reform subcommittee hearing represented the solar-panel industry’s and liberal Democrats’ defense of both the $400 million federal loan guarantee to Abound Solar and the Department of Energy’s loan guarantee program.

The bankrupt solar panel maker and program have come under Republican attack for squandering millions of taxpayer dollars, including the $68 million that Abound received. The company filed for bankruptcy July 2 and plans to lay off 125 employees, in addition to the 280 workers who were let go from its plant in Longmont in February.

Last week, David G. Frantz, the acting executive director of the loan programs office at the Energy Department, said his office made the loan to Abound in late 2010 with “market considerations” in mind. Wednesday, his predecessor, Silver, fleshed out Frantz’s remark, providing the most detailed explanation to date of the agency’s loan to the Colorado solar panel maker.

Silver described Abound as a technologically innovative company that had secured more than $300 million in private capital. “Why did the loan programs office offer a loan to Abound? The company developed an advanced cadmium telluride, thin film solar panel based on technology developed at Colorado State University. The production process potentially enabled the company to produce panels faster and more efficiently than other manufacturing processes,” Silver said in his prepared remarks.

To Republicans, the Colorado solar panel maker was a dubious recipient of federal loan guarantees.

“Much like Solyndra, Abound Solar manufactures solar panels using unproven technology, received a dismal credit rating for its loan guarantee, and has strong Democratic political connections,” Rep. Darrell Issa of California, House Oversight Committee chairman wrote in a congressional report last March.

The report noted that one of Abound’s major financial supporters was Bohemian Companies, a Fort-Collins based venture-capital firm whose founder is Patricia Stryker, a prolific Democratic donor. Democrats counter that Republicans, including Indiana Governor Mitch Daniels, supported Abound Solar’s plan to build a manufacturing plant in Tipton, Indiana.

Democrats have acknowledged that the Energy Department’s loan guarantee program has flaws. Frantz has said his office could benefit from hiring more experienced reviewers of loan guarantee applications. Colorado Democrats complained of delays a December 2009 letter to the agency. Rep. Jim Jordan (R-Ohio), the subcommittee chairman, made a bolder claim, saying that the program distributed loan guarantees in “cavalier fashion.”

Yet both current and former Obama administration officials defended the loan guarantee program at the subcommittee hearing Wednesday.

Silver and Frantz emphasized that Abound Solar lost less money than commonly portrayed. Although the solar panel maker was given a $400 million loan guarantee, Silver said it “is really only a $400 million ‘line’ [of credit]. About $70 million has actually been financed.” Frantz credited his department’s “strong protections” for not forfeiting more taxpayer dollars and added he expects to recover a part of the outstanding loan in bankruptcy proceedings.

More broadly, both current Obama administration officials and solar-panel industry representatives defended the Energy Department’s loan guarantees program.

Gregory H. Kats, president of Capital E, a clean energy advisory firm, made the boldest claim at the hearing. In his testimony, Kats noted that the Energy Department’s programs has endured only three defaults — those of Abound Solar, the California-based Solyndra, and Beacon Power, a Texas-based energy storage company.

He added those losses will amount to $400-800 million, a figure that represents much less than the $2.47 billion the Office of Management and Budget budgeted and funded. “Given these very limited losses,” Kats said in his prepared statement, “the program would have to be fairly viewed as very successful.”

House Republicans at the hearing disagreed sharply with Kats’ conclusion. Subcommittee chairman Jordan noted that the Energy Department’s program is two years old and that more companies may default.

Veronique de Rugy, a senior research fellow with the libertarian Mercatus Center at George Mason University, concurred with Jordan, mentioning three companies as examples. “Whether these companies will fail or not is not yet clear, and the potential cost to taxpayers is not known,” de Rugy said in her testimony. “However, the precarious situation of these companies exemplifies the risk faced by taxpayers when the government extends loan guarantees to high-risk companies.”

“The fact that the Obama administration continues to defend the failures of Solyndra and Abound Solar shows how out of touch they are with the economic realities of taxpayer-subsidized energy programs,” said TQ Houlton, a spokesman for the free market advocacy group Compass Colorado.

“Democrats like [Rep.] Ed Perlmutter and [Sen.] Mark Udall continue to lead the charge against an all-of-the-above energy solution while simultaneously handing out billions in taxpayer dollars to their environmentalist cronies,” Houlton added, a reference to letters the Colorado Democrats signed in 2009 backing additional taxpayer funding for Abound.

The congressional battle over Abound Solar and Solyndra is likely to continue. Fred Upton, chairman of the House Energy and Commerce Committee, last week unveiled a bill called the “No More Solyndras Act” to sunset funding for the Energy Department’s loans to renewable energy companies.

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