Tomorrow, the House Energy and Commerce Committee will hold its second hearing on Solyndra, the manufacturer of innovative non-silicon-based solar panels that borrowed $527 million only to file for bankruptcy, shutter its brand new Freemont, Calif. factory, and lay off 1,100 employees on September 6. Expect Committee Democrats to blame China and the allegedly unforeseen fall in the price of conventional silicon-based solar panels for the debacle.

That’s the line the Department of Energy’s (DOE) witness, Jonathan Silver, took at the Committee’s first (September 14) Solyndra hearing, noting China’s provision of more than $30 billion in subsidized financing to its solar manufacturers, which rapidly dropped silicon prices, “taking Solyndra, and many industry analysts, by surprise.” DOE’s blog, Energy.Gov, had already adopted this explanation on August 31, the day Solyndra announced it would file for bankruptcy.

Similarly, Solyndra’s August 31 announcement coyly cited the “resources of larger foreign [i.e. Chinese] manufacturers” and a “global oversupply of [mainly Chinese] solar panels” as factors foiling the company’s business plan. Solyndra’s ex-employees have applied to the Department of Labor (DOL) for aid under the Trade Adjustment Assistance (TAA) program, claiming that China put them out of work. If DOL approves the application, Solyndra’s former workers will receive allowances for job retraining, job searching, and health care for up to 130 weeks, or about $13,000 per employee. Blogger Scott Linicom decries such double dipping:

So to recap: massive government subsidies created 1,100 “green jobs” that never would’ve existed but for those massive government subsidies.  And when those fake jobs disappeared because the subsidized employer-company inevitably couldn’t compete in the market, the dislocated workers blamed China (instead of what’s easily one of the worst business plans ever drafted) in order to receive . . . wait for it . . . more government subsidies. Behold, the Circle of Government Life.

Whether it’s Solyndra execs and DOE officials trying to save face, ”progressives” defending the honor of green industrial policy, or former employees looking for more taxpayer freebies, they all would have us believe that Solyndra’s $535 million loan guarantee was a good bet at the time it was made. They need a scapegoat for Solyndra’s crash, so they blame China. Indeed, some (e.g. Grist) claim Solyndra’s collapse shows that the U.S. government isn’t doing enough to help our “clean tech” companies “compete.” Balderdash.    

Solyndra’s business plan was dubious from the getgo. Committee Ranking Member Henry Waxman (D-Calif.) claims that “under both the Bush Administration and the Obama Administration, DOE officials strongly backed Solyndra.” In fact, on January 9, 2009, Bush’s DOE declined to approve Solyndra’s loan guarantee application, citing several “unresolved” issues including lack of an independent study of the company’s long-term prospects, questions about the company’s financial strength, and concern about the scale-up of production assumed in the business plan (Documents Entered into Record, p. 1).

As for the allegedly unanticipated glut in rooftop solar panels, which made Solyndra’s thin-film panels uncompetitive, it was the topic of a January 12, 2009 USA Today article. In an email dated January 13, 2009, Bush DOE staff cited the glut, reported in USA Today, as the reason for the DOE Credit Committee’s “unanimous decision not to engage in further discussions with Solyndra at this time” (Documents Entered into Record, p. 2).

Emails obtained by the Committee suggest that White House pressure for quick approval may have compromised the depth and quality of DOE and Office of Management and Budget (OMB) review of Solyndra’s loan application (Documents Entered into Record, pp. 4, 11, 12):

• “There’s a recurrent problem with the [White House] scheduling office looking for events [loan guarantee approvals] before they are ready to go.” (March 10, 2009)
• “As long as we make it crystal clear to DOE that this is only in the interest of time, and that there’s no precedent set, then I’m okay with it. But we also need to make sure they don’t jam us on later deals so there isn’t time to negotiate those, too.” (August 27, 2009)
• “We have ended up in the situation of having to do rushed approvals on a couple of occasions (and we are worried about Solyndra at the end of the week). We would prefer to have sufficient time to do our due diligence reviews and have the approval set the date for the announcement rather than the other way around.” (August 31, 2009)

DOE approved the Solyndra loan guarantee on September 4, 2009 — an event timed to coincide with the ground breaking ceremony for the company’s Freemont, California factory. Speakers included DOE Secretary Steven Chu, California Gov. Arnold Schwarzenegger, and Vice President Biden (via satellite feed). But a scant two weeks before, on August 19 and 20, emails between DOE staff note that when Fitch modeled Solyndra’s cash flow over time, the company ”runs out of cash in Sept. 2011 even in the base case without any stress. This is a liquidity issue” (Documents Entered into Record, pp. 8-9). Rarely has a government business forecast been so accurate!

In addition to the liquidity problem, it is unclear whether Solyndra had a viable plan to reconcile its production costs and sale prices. According to an ABC News analysis:

While Energy Department officials steadfastly vouched for Solyndra — even after an earlier round of layoffs raised eyebrows — other federal agencies and industry analysts for months questioned the viability of the company. Peter Lynch, a longtime solar industry analyst, told ABC News the company’s fate should have been obvious from the start.

“Here’s the bottom line,” Lynch said. “It costs them $6 to make a unit. They’re selling it for $3. In order to be competitive today, they have to sell it for between $1.5 and $2. That is not a viable business plan.”

Along the same lines, ELECTRO IQ (November 8, 2010) posed the question: “Can Solyndra reconcile cost-per-watt and sale price?” From the article:

In the last year, there have been numerous stories about CIGS [copper idium gallium selenide] thin-film manufacturer Solyndra’s troubles — a pulled IPO, a restructuring of the executive team, and, most troubling, the high cost of module production. (In an S-1 filing a year ago, the company said its average sales price was over $3.20 a watt, about 65% more than leading crystalline-silicon PV manufacturers. Its cost of manufacturing was over $6 a watt). Solyndra aims at $3.5 per watt by the end of 2011.

Tim Worstall, writing in Forbes (September 17, 2011), argues that, “Yes, it was possible to see this failure coming.” Defenders of the loan argue that the fall in silicon solar prices was unforeseen, hence “Solyndra’s non-silicon technology got bushwhacked by something no one could have anticipated.”

In reality, it was “blatantly obvious” that competitors’ prices would fall. In the mid-2000s demand exceeded supply and the price soared. But as Econ 101 tells us, soaring prices create incentives to increase supply, which then push prices down.

What’s more, says Worstall, by 2008, First Solar, a leading supplier of non-silicon modules, had already achieved lower cost-per-watt than Solyndra hoped to achieve by 2011.

Concludes Worstall: “It wasn’t an unexpected fall in silicon prices that did in Solyndra: they were never even close to being competitive on pricing against non-silicon technologies. They weren’t even in the right ballpark at all.”

Let’s take a closer look at DOE loan program director Silver’s ’don’t-blame-DOE-or-Solyndra’ explanation of why the company went bust:

In 2009, Solyndra appeared to be well-positioned to compete and succeed in the global marketplace. Solyndra manufactured cylindrical, thin-film, solar cells, which avoided both the high cost of polysilicon — a crucial component used in conventional solar panels — and certain costs associated with installing flat panels. But polysilicon prices subsequently dropped significantly, taking Solyndra, and many industry analysts, by surprise. Among the principal beneficiaries of this pricing environment were four of Solyndra’s Chinese competitors, which sell polysilicon panels and received $20 billion in credit from the China Development Bank in 2010.

* * *

Unfortunately, changes in the solar market have only accelerated in 2011, since the restructuring [of Solyndra's loan guarantee in February 2011] — making it more difficult for the company to compete. Chinese companies have flooded the market with inexpensive panels, and Europe — currently the largest customer base for solar panels — have suffered from an economic crisis that has significantly reduced demand and forced cuts in subsidies for solar deployment that were important to Solyndra’s business model. The result has been a further and unprecedented 42% drop in solar cell prices in the first eight months of 2011.

All of that may be correct, but the pertinent issue is whether anyone could have foreseen these changes in the marketplace in 2009 and 2010 when the U.S. government decided to bet taxpayers’ money on Solyndra. Far from being unforeseeable that China would subsidize its ”clean tech” companies to beat out U.S. firms and capture market share, this was a major premise of DOE’s loan guarantee program. We had to fight fire with fire or else lose the “clean energy race,” Obama officials warned. As DOE Secretary Chu said in testimony on October 27, 2009:

China has already made its choice. China is spending about $9 billion a month on clean energy. . . .The United States, meanwhile, has fallen behind. . . .We manufactured more than 40 percent of the world’s solar cells as recently as the mid 1990s; today, we produce just 7 percent. When the starting gun sounded on the clean energy race, the United States stumbled. But I remain confident that we can make up the ground. . . .The Recovery Act includes $80 billion to put tens of thousands of Americans to work developing new battery technologies for hybrid vehicles, making our homes and businesses more energy efficient, doubling our capacity to generate renewable electricity, and modernizing the electric grid.

Moreover, one did not need to be a rocket scientist to predict that if the U.S. government leverages billions of dollars in private investment to compete with Chinese firms, China would up the ante. After all, Beijing is flush with cash, whereas Washington is deep in debt.

Nor was any great acumen required to anticipate that the economic crisis would cut subsidies and thereby reduce demand for solar panels in Europe. In October 2009, the Rheinisch-Westfälisches Institut (RWI) reported that Germany’s feeder tariff system was on course to subsidize solar voltaic modules to the tune of $73 billion from 2000 through 2010, yet solar power was providing less than 1% of the nation’s electricity. Such lavish subsidies are unsustainable, especially during a financial crisis.

One also wonders why Solyndra had to hire 3,000 people to build a brand new factory (“Fab 2″). Wouldn’t it have been cheaper to rent space in an existing building? Ah, but then there would have been no groundbreaking and no photo-op for Secy. Chu, Gov. Schwarzenegger, and Vice President Biden. Mixing politics with business politicized Solyndra’s business plan.

Even if one makes the dubious assumption that Solyndra’s business plan was sound at the time DOE approved the loan guarantee, why did S0lyndra stick to the plan when it became clear the company was going broke?  ”The Fed money was explicitly tied to being *solely* used to build Fab 2. Solyndra could not use the loan proceeds for *anything* else,” according to an anonymous member of Solyndra’s management team. The DOE loan guarantee, it seems, reduced Solyndra’s ability to adapt to changing market conditions.

Sadly, the one lesson Team Obama will never draw from Solyndra’s failure is the most important one: the folly of government trying to play venture capitalist. Heritage Foundation economist David Kreutzer offers some choice words in two recent blog posts:

“We have such a great product that nobody will lend us the money,” was the nonsensical argument from Solyndra and its backers. Those who did not see the logical flaw in 2009 cannot help but see the flawed result in 2011. Unfortunately, some still do not see the logical problem that led to the mess.

Indeed, two of the criteria for the loan program show how silly it is to have government run a bank. One is that the loan must be for a commercially viable project. Another is that the applicants have to demonstrate that they could not get private financing. By definition, the second criterion rules out the first.

Earlier this week, the House Energy & Commerce Committee held its third hearing on the Energy Tax Prevention Act, a bill to stop EPA from determining national policy on climate change through the Clean Air Act, a statute enacted in 1970, years before global warming was even a gleam in Al Gore’s eye. The hearing, requested by ranking member Henry Waxman (D-Calif.), was entitled Climate Science and EPA’s Greenhouse Gas Regulations.

Although Democrats are now the minority party in the House, they got more witnesses (4) than did the majority (3). I don’t know how Rep. Waxman pulled that off. Did he ever let Republicans have more witnesses when he was in the chair? No. Would he return the favor if Dems regain control of the House? Doubtful.

The most effective minority witness, IMO, was Dr. Richard Somerville, whose testimony updates the continual — and predictable — refrain that ‘climate change is even worse than we previously predicted.’ Much of Somerville’s testimony is drawn from a report he co-authored called the Copenhagen Diagnosis.

It’s not my purpose here to provide an alternative assessment of climate science, though if you’re looking for one, check out Drs. Shirwood and Craig Idso’s Carbon Dioxide and Earth’s Future: Pursuing the Prudent Path. 

My beef, rather, is with Somerville’s claim that he’s simply a spokesman for science, not for an agenda. It’s amazing he can say this with a straight face and in the same testimony spout partisan cant about the Climategate scandal. He writes:

In late November 2009 . . . a crime was committed in which thousands of emails of prominent climate scientists were illegally obtained from a server at the University of East Anglia in the United Kingdom. . . .The short answer is that the hacked emails do not undermine the science in any way [emphasis added].

Now, I always thought scientists deal with facts and evidence. Where’s the evidence that the Climategate emails were hacked rather than leaked by a whistle blower fed up with the Climatic Research Unit’s stonewalling and refusal to comply with the UK Freedom of Information Act (FOIA)? Somerville provides none. Whether the person who leaked the CRU emails was a hacker or a whistle blower remains an open question. For Somerville to assert as a fact what is actually conjecture casts doubt on everything else he purports to say as a “scientist.”

Let’s delve into this a bit further. Somerville says:

The Copenhagen Diagnosis is about climate change science, not policy. For example, we summarize recent research underpinning the scientific rationale for large and rapid reductions in global greenhouse gas emissions, in order to reduce the likelihood of dangerous man-made climate change. However, we have no political or policy agenda, and we do not speak to the issue of formulating policies to achieve such reductions in emissions. As scientists, when climate change research is relevant to public policy, we consider it important to bring that research to the attention of the wider world. We are convinced that sound science can and should inform wise policy. This conviction led us to write The Copenhagen Diagnosis. In this testimony, I also have no political or policy agenda. I am simply summarizing my view of the current state of scientific understanding.

 And again:

Like IPCC, we insisted on being policy-relevant but policy-neutral.

Who does he think he’s fooling? Cap-and-trade, carbon taxes, EPA regulation of greenhouse gases through the Clean Air Act, and President Obama’s “clean energy standard” proposal are all part and parcel of one and the same agenda. They are all means to the same objective, and in public policy, the choice of objective is the most important choice.

How governments choose to ration, restrict, or penalize the carbon-based fuels that supply 85% of U.S. and global energy — or, in Somerville’s words, how governments compel “large and rapid reductions in global greenhouse gas emissions” — is a subordinate issue. The fundamental policy issue is whether governments should coercively limit the production and use of greenhouse gas-emitting fossil fuels. Somerville is emphatically a spokesman for a political and policy agenda — the Kyoto agenda of coercive de-carbonization.

It’s a very old rhetorical trick. Throughout history, partisans of one stripe or another have claimed to speak on behalf of some trans-political moral authority. In antiquity it was the gods. In the Middle Ages it was Holy Writ. Today it’s the “Consensus of Scientists.” Thus we have the spectacle of Al Gore, in An Inconvenient Truth, portraying himself as a non-political Mr. Science while lambasting G.W. Bush and other political opponents. Gore even insinuates as the film begins that Bush appointees on the Supreme Court stole the 2000 year presidential election from him. How very scientifical!

Surely one objective of the Copenhagen Diagnosis report was to buck up those at the 2009 Copenhagen climate conference advocating ”large and rapid” greenhouse gas reductions. That’s “policy neutral” only if you think the Kyoto-inspired campaign to restrict mankind’s access to fossil energy is policy neutral. Somerville’s post-mortem on the Copenhagen conference leaves no doubt that the Copenhagen Diagnosis was designed to drive the negotiations in a specific direction: 

Thus, it is profoundly regrettable that what I must characterize as dithering and procrastination at COP15 in Copenhagen continued a year later in December 2010 at COP16 in Cancun, Mexico.  

Just how “large and rapid” does Somerville think greenhouse gas reductions should be? He says:

To stabilize climate, a decarbonized global society – with near-zero emissions of CO2 and other long-lived greenhouse gases – needs to be reached well within this century. More specifically, the average annual per-capita emissions will have to shrink to well below 1 metric ton CO2 by 2050. This is 80 to 95% below the per-capita emissions in developed nations in 2000.

To be sure, Somerville acknowledges that policymakers, not scientists, get to decide ”how much climate change is tolerable”: 

This choice by governments may be affected by risk tolerance, priorities, economics, and other considerations, but in the end it is a choice that humanity as a whole, acting through national governments, will make. Science and scientists will not and should not make that choice.

But his message is obvious even if not explicit: ‘Morally you have no choice but to adopt my agenda and mandate large and rapid greenhouse gas reductions.’

The irony is that EPA is doing exactly what Somerville professes to believe scientists should not do – presume to determine, rather than merely inform, the direction and even the content of public policy. EPA is now ’legislating’ climate policy through the Clean Air Act, issuing regulations to control greenhouse gas emissions from both mobile and stationary sources. On what authority? The authority EPA conferred on itself by issuing its “Endangerment Rule.”

By issuing an assessment that greenhouse gases endanger public health and welfare, EPA obligated itself to promulgate greenhouse gas emission standards for new motor vehicles. That, in turn, obligated EPA to apply Clean Air Act permitting programs to stationary sources of greenhouse gases. In addition, the Endangerment Rule authorizes or obligates EPA to establish: (1) greenhouse gas emission standards for heavy trucks, marine vessels, aircraft, locomotives, and other non-road vehicles and engines; (2) greenhouse gas performance standards for potentially dozens of industrial source categories; and, (3) national ambient air quality standards (NAAQS) for greenhouse gases set below current atmospheric concentrations. In short, the Endangerment Rule not only sets the stage for a very rapid transition to what Somerville calls a ”decarbonized” society, it also predetermines the options for advancing that agenda.

Even if EPA were an honest broker of climate science, the agency’s greenhouse gas regulations would still amount to a usurpation of legislative power, since, as Somerville says, the job of science is to inform policy choices, not dictate them.

EPA, however, is not an honest broker; it is a stakeholder, a dog in the fight. The scientific assessment EPA made in its Endangerment Rule directly advances the agency’s interest in expanding its power, prestige, and budget. 

An elementary principle of justice is that no one should be judge in his own cause.  Implication: One and the same agency should not have the power to make the scientific assessments that authorize regulation and the power to promulgate rules based on such assessments. Otherwise, the agency has an inescapable conflict of interest. It will always be tempted to assess the science in ways that expand its power.

More importantly, though, an assessment should only inform policy, not dictate it. A good example is the famous 1964 Surgeon General’s Report  detailing the evidence that cigarette smoking causes cancer. A purely scientific assessment, the Surgeon General’s Report did not even offer policy recommendations. How different from EPA’s Endangerment Rule, which triggers a cascade of policy decisions Congress never approved!

If Somerville really believes science should only inform policy, not dictate it, then he should support the Energy Tax Prevention Act! Contrary to the bill’s detractors, the Energy Tax Prevention Act takes no position on climate science. It neither affirms nor denies the reasoning or conclusions EPA sets forth in its Endangerment Rule.

Rather, the bill aims to overturn the legal force and effect of the Endangerment Rule, ensuring that Congress, not bureaucrats posing as custodians of policy-neutral science, make public policy.