In his letter of resignation as Secretary of Energy, Steven Chu pointedly rebutted those who have focused attention on the bankruptcies of Solyndra and several other companies given large loans by the Department of Energy. He wrote: “While critics try hard to discredit the program, the truth is that only one percent of the companies of the companies we funded went bankrupt. That one percent has gotten more attention than the 99 percent that have not.”
So let me get this straight: the test of government funding success is that a company manages to avoid bankruptcy after receiving government grants.
It seems a very low bar.
How about this test instead: how much of the support for the remaining companies has actually resulted in products that have been successful in the marketplace without ongoing subsidies?
There is little in the letter about that. Instead, Chu touts efforts in wind and solar (both heavily supported) and the “first all-electric vehicle manufacturing plant in the world in Tennessee.”
While an all-electric vehicle production facility may be newsworthy, it is not clear who will actually buy the output. Electric vehicle consumption continues to lag despite subsidies at every level. A number of manufacturers have decided there’s little promise in all-electrics. As a recent news headline about Toyota put it, “Demand for 100% Electric-Powered Cars is so Low, Toyota Has Basically Given Up on Them.”
If the efforts of the DOE under Chu have resulted in, as he says, “many successes,” then I have a modest proposal. Free them from subsidies, from feed-in tariffs, from mandates, and all the rest of the government support architecture of the past four years and let them compete on their own. Then we can see whether these companies are successes or just wards of the state, whether there have been real useful technological advances or only the inevitable switch of production from the wishes of consumers to the whims of politicians and bureaucrats.
As a historical footnote, there were “successes” with government-supported alternative energy technologies in the late 1970s and early 1980s. But successes in solar, to note that example, nearly destroyed the industry. Companies focused on producing what government incentives dictated not on what consumers demanded. When the incentives were lifted (and that had been the plan from the outset) the industry crashed.
Would that happen to alternative energy industries now? I suspect so; electric vehicles seem an especially vulnerable market segment. Nevertheless, let’s give it a try. I’d be willing to admit I was wrong if Nissan Leafs start flying off showroom floors.
In the meantime, let’s not pretend like Steven Chu that success lies in businesses that manage—whew—not to go bankrupt, but stay afloat primarily because of government largesse.