WASHINGTON—Dr. Steven Chu, secretary of the U.S. Department of Energy (DOE), has vigorously defended his decision to contribute further taxpayer funds to now defunct solar cell company Solyndra, saying it was a rescue effort that had to be tried.
Calm before a Nov. 17 congressional hearing packed with media, observers, and concerned lawmakers, the diminutive Chu, a Noble laureate, told an Energy and Commerce subcommittee that when he realized the company had cash flow problems he had only two choices: “pull the plug” or try and save the company.
“Although both options involved significant uncertainty for the value of the company, our judgment was that restructuring was the better option to recover the maximum amount of the government’s loan. It also meant continued employment for the company’s approximately 1,000 workers,” he said in a statement released before the hearing.
“I approved restructuring of the loan guarantee to give the taxpayers the best chance at recovery.”
Under advisement from its legal team—advice questioned by the committee—the DOE put in additional funds on top of the initial loan guarantee, part of the government’s clean energy industry loan guarantee program. Those funds, however, were relegated to two subordinate private investors should the company default.
Solyndra, once publicized as a model of innovation in the U.S. renewable sector, suffered from a dramatic drop in silicon price and the impact of the U.S. economic downturn. The company filed for bankruptcy in September of this year, wiping out a $535 million loan from the government.
Members of Congress from both sides of the house grilled Chu in a hearing that went for over three hours. Some noted their support for developing new forms of energy but questioned the process, others trawled through the details.
Rep. Jan Schakowsky (D-Ill.) reminded the hearing that it had been during the previous Bush administration that Solyndra had first applied for the loan, and that it had, at the time, been rated highly among financial analysts, with considerable investment from the private sector.
Chu noted as such in his statement saying “The Solyndra transaction went through more than two years of rigorous technical, financial, and legal due diligence, spanning two administrations, before a loan guarantee was issued.”
Solyndra, which had developed unique cylindrical solar panels of thin-film solar cells, had been named one of the worlds 50 Most Innovative Companies in 2010, it was later noted.
Rep. Edward Markey (D-Mass.) said Solyndra had been the victim of an aggressive campaign by China to dominate the market. Those in the solar industry had complained that China had been dumping on the U.S. solar market he said, noting that the price of solar panels had dropped 42 percent in one year alone.
The demise of Solyndra has been blamed on solar being too expensive, he added, “but Solyndra failed because it is too cheap.”
Rep. Michael Burgess (R-Tex.) told the hearing he supported the development of solar energy, saying it had a place in the U.S. energy “armory,” but Solyndra’s collapse had been a huge “setback.” Was this sort of failure to be expected from the Energy Department under Dr. Chu, he asked?
Innovation in industry was risky and unpredictable Chu replied, which was why the loan guarantee program had been set up.
Burgess questioned the legality of taxpayer funds being subordinated to the interests of other investors, asking Chu if he could see how the general public would see that as a concern.
Burgess’s concerns echoed those of others at the hearing. Rep. Gene Green (D-Texas) said having been on the original committee that had approved the loan program he questioned the legality of the DOE’s actions, saying “subordination” of U.S. government funds was not what had been intended.
Chu said he had taken legal advice and believed there had been no violation of the law.
Responding to questions from Rep. Marsha Blackburn (R-Tenn.) on what improvements in oversight had been made in the DOE since the Solyndra collapse, Chu said the DOE now had a separate department and another special committee to monitor loan guarantee recipients.
“So again another set of eyes to monitor loans and disbursement ... particularly in current market conditions,” he said.
Chu said while Solyndra had been disappointing, the DOE remained committed to fostering innovative technologies under Congress’s mandate.
“When it comes to the clean energy race, America faces a simple choice: compete or accept defeat. I believe we can and must compete,” he said.
