Every time a cleantech company that received any manner of federal or state support goes bankrupt – and there have unfortunately been several major examples – the usual suspects emerge to dance on their graves.
Over the last couple of years we’ve seen Massachusetts firms like Evergreen Solar, Beacon Power, and now Konarka file for bankruptcy, along with the prototypical federal example: Solyndra.
It’s worth noting that there are as many differences between these cases – in terms of technology, the policy mechanisms through which they received support, and in how and why they failed – as there are similarities. Beacon Power, for instance, was able to find an acquirer shortly after bankruptcy. It’s a shame that they get bucketed together.
But with clean energy being used as a political football, failures in the industry are inevitably treated as political news. Perhaps those of us in media should resist the impulse to treat them as such – my headline on Konarka mentioned Romney – or perhaps as long as politicians are including these companies in their campaign narratives we have a duty to report that aspect.
Whatever your view on that question, it’s inevitable that government-backed cleantech failures will continue to be a topic of political conversation between now and November, so I wanted to offer my own perspective on how a sane political conversation should proceed. Of course, I have no hope that writing this will curb the insanity of our current dialogue on the subject, but I want to get it off my chest.
For the sake of full disclosure, my last job at the New England Clean Energy Council included reacting to these kind of stories on behalf of the industry through press statements and op-eds. Anyway, here goes…
The Failure of a Single Company Does Not in Any Way Change the Critical Importance of Developing and Deploying Clean Energy
The point of investing in the development and the deployment of clean energy technologies is to avoid the massive economic, health, and environmental costs that we would face if we continued with business as usual.
The failure of any one company or even an entire class of companies cannot possibly change any of these facts. Prosperity requires secure, affordable energy and that means moving past fossil fuels. The only question is how to get there in the most efficient and affordable way possible.
A Failed Company Doesn’t Necessarily Mean a Failed Policy
In venture investing, the failures often surface before the successes do. It might only take a year or two for investors to realize they backed the wrong team or technology. Meanwhile, it might take five, ten, or 12 years for a successful investment to pay off.
In VC, it’s the success of the portfolio that matters. Most companies will fail, some will do OK, and there will hopefully be one or two home runs. Government programs that invest in early stage or even growth stage technology companies should be evaluated the same way.
If a politician or pundit is blasting, say, the Department of Energy’s Loan Guarantee Program by simply citing Solyndra without making reference to that program’s overall portfolio, they don’t deserve to be taken seriously.
If You Don’t Like a Certain Policy, Suggest Something Better
It’s perfectly legitimate to believe that a certain program, like the Loan Guarantee Program, isn’t effective. I know plenty of people in cleantech who would agree. Or perhaps you think government shouldn’t be making equity investments into cleantech companies. Fine. What do you suggest instead?
As noted above, the failure of a company or a policy doesn’t change the fact that we need to transition away from fossil fuels, and we have to do it fairly quickly.
If someone criticizes clean energy policies, they need to suggest plausible alternatives that will enable that transition. Do they favor cap-and-trade or a carbon tax? A federal clean electricity standard? A higher gas tax? Tripling federal energy R&D?
It’s ok to have policy preferences, and enabling energy transformation as cheaply and efficiently as possible is hugely important! It’s not ok to use cleantech’s troubles to justify a continuation of our current unsustainable energy usage.
And by the way, saying that we can trust ‘the market’ to make this transition if left alone ignores both the central role of government in the development of new technologies and the massive externalities currently distorting energy markets.
So that’s it. If we want to have a sane conversation about energy policy in the wake of a company like Solyndra or Konarka going bankrupt we need to remember three things:
- The failures of a company or even a sector don’t in any way alter the urgent need for affordable clean energy.
- The merits of our energy innovation policies must be evaluated on a portfolio basis.
- If someone doesn’t like our current clean energy policies, they need to suggest plausible alternatives.
Unfortunately, the public debate between now and November will likely ignore all three.
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