No such thing as a free lunch or free energy

October 30, 2012 by Amy · Comments Off
Filed under: Archive, New Energy Economy 

The Independence Institute’s Todd Shepherd, along with this blog, have spent two years covering, and ultimately exposing, what is now the Abound Solar scandal. Understandably, much of the focus is now on Weld County District Attorney Ken Buck’s criminal investigation as well as a Congressional Oversight Committee inquiry into the bankrupt solar panel manufacturer.

Recently released emails on Complete Colorado indicate that, despite statements to the contrary, the White House politicized the Department of Energy (DOE) loan guarantee process for politically well-connected Abound.

But something else within those emails caught my attention reminding me of free market economist and Nobel Prize winner Milton Friedman’s famous quote, “there is no such thing as a free lunch.” In other words, even things that appear to be free have an associated cost.

This basic economic concept is lost on Colorado State Representative Max Tyler’s (D-Lakewood) who in a March 23, 2010, press release bragged about a government-dictated increase in Colorado’s renewable energy mandate:

With HB 1001 we will manufacture and install panels and turbines all over Colorado to capture free energy….The sun will always shine for free, the winds will always blow for free, and our energy production will be cleaner.  Renewable energy, green jobs, and a cleaner future — what’s not to like?

At roughly the same time that Tyler publicly fantasized about “free energy,” a credit advisor for the Department of Energy (DOE) loan guarantee program James McCrea was concerned about “major issues” with Abound Solar’s marketability. In an email dated April 1, 2010, just seven days after Tyler’s press release, McCrea explained:

Another issue is the very limited supply of telluride, its potential price trajectory and other demands for it. Related to this is a question of the viability of the Abound panels as compared to other panels and whether there is sufficient benefit to allow the panels to be profitable if Te [telluride] prices really increase. If the price really rises will there be alternative uses that can afford it basically turning it into a non available input for Abound?

I don’t believe we have ever worked with an input material that is so limited. We need to think that through carefully.

Before going bankrupt this summer, Abound produced cadmium telluride (CdTe) thin-filmed photovoltaic solar panels. Cadmium and tellurium, used in the manufacturing of Abound’s panels, are two of the world’s 17 “rare earth elements” that are needed for everything from smart phones to solar panels to high tech weapons systems. My former colleague Michael Sandoval, now an investigative reporter with the Heritage Foundation, and I have written several columns on general issues with rare earth elements.

This email highlights the problem specific to Abound, and McCrea was right to be concerned. According to the December 2011 DOE Critical Materials Strategy the price of tellurium has been going up since 2007:

The price dropped in 2006, but in 2007 resumed its upward trend owing to increased production of cadmium telluride (CdTe) solar cells.

Furthermore, China controls the vast majority of rare earth elements. In August 2012, the Chinese announced an ambitious plan to increase its stranglehold on the world’s available supply of rare earths. According to China Daily the country:

launched a physical trading platform for rare earth metals as part of its efforts to regulate the sector and strengthen its pricing power for the resources.

As the world’s largest producer of rare earth metals, China now supplies more than 90 percent of the global demand for rare earth metals, although its reserves account for just 23 percent of the world’s total.

The article reiterated what Michael and I have said on numerous occasions, mining rare earths comes with a significant environmental cost that green zealots like Tyler completely ignore when claiming solar energy is free and clean:

Mining the metals greatly damages the environment. In recent years, China has come down heavily on illegal mining and smuggling, cut export quotas and imposed production caps, stricter emissions standards and higher resource taxes to control environmental damage and stave off resource depletion.

However, these measures have irked rare earth importers, who complained about rising prices and strained supplies.

But China did exactly what it said it would do in 2009. It drove up prices with reduced output as global demand increased.

China’s rare earth output fell 36 percent year on year to 40,000 tonnes in the first half of the year. Prices of major rare earth products in July remained twice as high as prices at the beginning of 2011, although down from the beginning of the year.

In July 2009, about a year before President Barack Obama announced a $400 million loan guarantee for Abound, Jack Lifton, an expert on sources and uses of rare minerals, wrote a lengthy article for Resource Investor about the availability of tellurium for First Solar, a global leader in cadmium telluride solar panel manufacturering. Lifton’s conclusion should have served as a prophetic warning for Abound and any hope of profitability:

A company such as First Solar, which is critically dependent on a secure supply of tellurium to exist and on an unsustainable growth in the supply to it of tellurium for it to grow and achieve competitive pricing is a big risk for short-term investors. The maximum supply and production levels attainable of tellurium are quantifiable even if the actual production figures are murky, and they do not bode well for the future of First Solar if it must make profits to survive.

The next time you hear a politician like Max Tyler tout the benefits of “free” and “clean” energy, remember Abound Solar because there is no such thing as a free lunch.

Pat Stryker waiting for more taxpayer money to fund Abound

March 20, 2012 by Amy · Comments Off
Filed under: Archive, New Energy Economy 

Leftist billionaire heiress Pat Stryker is waiting to see if taxpayers via the Department of Energy (DOE) will throw another $10 million at Stryker’s failed thin-filmed solar panel manufacturer Abound Solar before she puts any more of her own money into the Colorado-based company reports Eric Wesoff of GreenTech Media:

The firm awaits $10 million from the DOE and $10 million from its investors but has a bit of a chicken-and-egg problem. Our sources inform us that the DOE is waiting for the investors and the investors are waiting for the DOE. Abound’s venture investors include DCM, Technology Partners, GLG Partners, Bohemian Companies, and Invus.

The pay-to-play connection between Abound and Stryker’s Bohemian Companies was first exposed by Todd Shepherd of Complete Colorado. Shortly after the Solyndra scandal, the Energy Policy Center provided more details about Abound’s financially incestuous relationship with Stryker, Colorado State University (CSU), and former Governor Bill Ritter, now the head of the Center for the New Energy Economy at CSU.

Abound already has drawn down $70 million of its $400 million taxpayer-guaranteed loan, but it is still in a world of hurt. At current spending levels, Abound has less than four weeks of cash flow left according to Wesoff:

The firm is looking to lower its burn rate from $2 million per week to $2 million per month, according to sources close to the firm. The sources have indicated that there is roughly $7 million in the bank, a painfully short runway, and that vendors are being paid in a very selective manner.

Obviously the mass layoffs of nearly 70 percent of its Colorado workforce were a drastic cost cutting measure rather than a “retooling” of the production line as so many other media outlets have reported.

Stryker’s reluctance to provide more capital for Abound speaks volumes. If she won’t dump just a fraction of another $10 million, little more than pocket change for her Bohemian Companies, down the Abound rabbit hole, then why should taxpayers? As we reported last week, taxpayers may be on the hook for more than just the loan guarantee. They could be paying out more than $2 million in unemployment benefits for layoffs from jobs that taxpayers paid to create in the first place.

More bad news Abound

December 14, 2011 by Amy · Comments Off
Filed under: Archive, New Energy Economy 

With prices tanking along with sales, First Solar, the world’s largest manufacturer of thin-filmed solar panels, “slashed its profit and sales forecast today and said it will fire about 100 employees, most of them at a Santa Clara, California, research center, the Tempe, Arizona-based company said today in a filing,” Bloomberg reports.

In addition, First Solar is abandoning its quest to develop copper-indium-gallium-selenide technology, or CIGS, the same type of solar panel that Solyndra produced before its infamous bankruptcy.

In a column titled “First Solar Sounds Alarm Bells,” the Motley Fool reports that the world is catching on to the fact that thin-filmed solar panels are woefully inefficient:

First Solar is beginning to be hit hard by falling module prices and a generally weak solar market right now. If I had to read between the lines, I would say that more efficient modules from competitors like Trina Solar (NYSE: TSL ) , Yingli Green Energy (NYSE: YGE ) , and Suntech Power (NYSE: STP ) are beginning to become more favored as sales prices fall.

As a result, First Solar’s stock is dropping like a stone, down more than 20 percent just today.

Why is this bad news for Colorado-based Abound Solar?

Because First Solar now plans to “double-down” on its production of cadmium-telluride solar panels, the same kind that Abound produces. As we reported a few weeks ago, Abound cannot compete with First Solar on either volume or price, so First Solar’s plans to “double-down” on cadmium-telluride, thin-filmed production can’t be welcome news within the walls of Abound Solar. It also isn’t good news for taxpayers, since they are on the hook for a $400 million Department of Energy loan guarantee.

The mystical problem with wind

December 2, 2011 by Amy · Comments Off
Filed under: Archive, New Energy Economy 

Yesterday Complete Colorado headlined a Denver Post story about wind power “Another Bubble Bursting?” The reason for the headline is that in 2012 federal tax credits for wind power are set to expire and, as we revealed several months ago in a post about Xcel Energy’s latest compliance plan, wind power is not economically viable with out those tax credits.

The real problem with wind from the perspective of a physicist is that it is not a viable large scale energy resource — period. Dr. Kelvin Kemm writes:

Wind power paranoia has bypassed science logic and is well and truly in the realm of mysticism.

Let me state categorically that, as a physicist, I am in favour of wind power that is genuinely economically viable. The problem is that large-scale wind power fed into a national grid is just not viable – either economically or practically – from an engineering stand point.

The dream of some enthusiasts that there is some major technological leap just waiting in the wings that will make wind power viable is extremely unlikely to take place. The total energy in any wind stream is measurable, and there is no known quantum leap waiting for a solution that could produce considerably more wind energy than at present.

The extreme language and wild claims concerning the potential glories of wind power are becoming more and more exotic and are rapidly being blown further away from reality by the wind of reason. We really need a wind of change to blow now to bring debate back to sound logical discourse on the real strengths and weaknesses of wind power.

He provides an example:

A spokesperson of the South African Wind Energy Association was quoted in the media as saying: “Contrary to what most believe, a 30 000 MW wind energy plant would have an average daily minimum power output of 7 000 MW and would displace 6 000 MW of conventional coal or nuclear power baseload.”

This statement is significant for a few reasons. Firstly, it is irresponsible fantasy. Secondly, it does admit that a ‘plant’ of 30 000 MW does not produce 30 000 MW but only an ‘average’ of 7 000 MW. Take careful note of the word ‘average’. This word means that, in practice, the ‘plant’ could produce any output from zero to 30 000 MW, depending on if and when the wind blows. On ‘average’, they say, one should get 7 000 MW ‘daily’.

But what does that mean? How can one use the terms ‘average’ and ‘daily’ together. Think about it. The most common error committed unknowingly by the media, and knowingly by the wind proponents, is that a quoted figure for installed capacity for wind power is not the amount you get. Wind power systems are fundamentally designed to produce about 25% of their installed capacity, so one designs to get about 7 000 MW out of 30 000 MW of installed capacity. Frequently, the operating wind systems do not even deliver the designed 25% – at times half of this or less. In contrast, with nuclear power, one would get more than 25 000 MW out of an installed capacity of 30 000 MW and one would get it all the time, not only ‘on average’ when the wind blows.

It does make one wonder why we continue to throw taxpayer money into an energy source that is neither economically nor practically viable.

Abound Solar’s connections to $400 million

September 25, 2011 by Amy · Comments Off
Filed under: Archive, New Energy Economy 

This column appeared originally on Townhall Finance.

Crony capitalism Abound: anatomy of a taxpayer-guaranteed loan

By Amy Oliver Cooke

By now it’s obvious that the Solyndra scandal never should have happened.  It’s not even a case of Monday morning quarterbacking. A number of people involved could see the disaster coming.

There is a larger principle here. Government should not use taxpayer money to socialize risk while privatizing profits. Examples such as Colorado-based Abound Solar, which received a $400 million loan guarantee, prove that crony capitalism simply rewards the well connected at taxpayer expense.

Abound Solar

Abound Solar, according to its Web site, “produces next-generation thin-film cadmium telluride solar modules” and “is committed to reducing the cost of solar electricity to levels competitive with fossil fuels.”

It is the brainchild of former Colorado State University (CSU) Professor W.S. Sampath and two former students Kurt Barth and Al Enzenroth.  It began as AVA Solar and then incorporated into Abound in 2007.

The Web site says it employs 350 people in three Colorado locations.  Its Colorado manufacturing plant is located in Weld County, which granted Abound up to $100,000 per year for the next ten years in business property tax rebates.  According to sources, the reason for the rebate was job creation intended to benefit Weld County residents. Yet when officials and interested parties ask how many of the 350 jobs have gone to Weld County residents, the solar company does not answer.

Currently Abound has a manufacturing capacity of 65 megawatts expanding to 850 megawatts – at some point. However, in 2010 it manufactured only 30 megawatts. One wonders, if Abound can produce more, why doesn’t it?

The Web site does say it is “growing,” and news reports claim the company plans to add anywhere from 850 to 1,000 employees thanks to a $400 million taxpayer-guaranteed loan Abound received in July 2010.  The taxpayer cash is so it can expand its manufacturing capabilities to a facility in Tipton, Indiana. The Indiana Economic Development Corporation “extended up to $11.85 million in tax credits and $250,000 in training grants” as well.

Abound Solar further claims $260 million in private investments, part of which came from billionaire medical heiress Pat Stryker’s Bohemian Companies.  This is where the story gets interesting.

Thanks to Independence Institute investigative reporter Todd Shepherd, we still have access to the Web page that lists Bohemian as an investor even though it does not appear on the company’s current Web site. The exact amount that Stryker has given is not public at this time. Also, CSU and the National Renewable Energy Laboratory (NREL) are listed as funding resources.

Total public and private monies equal $673,100,000. Assuming Abound can “create” some 1,350 jobs, that is $498,593 per job, of which $360,000 comes from public coffers.

However, Abound’s Indiana manufacturing facility is not scheduled to open until 2013 or 2014, which seems like a long time to wait to “create” jobs and turn a profit.

As a comparison, the Denver Bronco’s stadium cost $364 million to build of which 68 percent was publicly financed.  With a yes vote from taxpayers in November 1998, construction began in August 1999 and was completed in September 2001.

This is not an endorsement of publicly funded professional sports facilities but rather an assumption that the Broncos management didn’t want a disruption in cash flow that could come from the inconvenience of a lengthy construction project.

I asked Abound if the company is still on track for a 2013 expansion and received no response. For most companies, time means money except in solar panels.

Pat Stryker

Forbes lists medical heiress and founder of Bohemian Companies/Foundation Pat Stryker as number 331 of its top “400 Richest People in America.” Worth $1.3 billion, the Fort Collins resident could single-handedly fund Abound Solar and still be well above the poverty line.

While some of her fortune has gone to Abound Solar, she also has chosen to donate more than $2.2 million (probably a low figure) to Democrats and their causes over the last several election cycles. Beneficiaries include Barack Obama, one-term Congresswoman and Fort Collins resident Betsy Markey, and Interior Secretary Ken Salazar when he successfully ran for U.S. Senate in Colorado.

Stryker is also a charter member of the notorious “gang of four” which changed the political landscape in Colorado through an organization called the Colorado Democracy Alliance (CoDA).  Their success was titled the “Colorado Miracle” and is being replicated in other states.

Congresswoman Betsy Markey

With the help from Stryker in 2008, Markey beat incumbent republican Congresswoman Marilyn Musgrave in Colorado’s conservative 4th Congressional District.  Abound Solar, Pat Stryker, and Colorado State University are all in the 4th CD. Between 2008 and 2010 election cycles, CSU employees also donated nearly $27,000 to Markey’s campaigns.

When the Waxman-Markey (named for Congressmen Henry Waxman and Ed Markey) cap and trade bill, which included a national renewable energy standard, came up for a vote, Congresswoman Markey danced around the issue for weeks because it wasn’t a popular bill in the 4th CD. Ultimately she voted “yes.”

In an interview on my radio show following the vote, Markey cited “green jobs” as one of her reasons.  What she didn’t cite was her relationship to Pat Stryker and Abound Solar or the $2,000 campaign contribution she received from Henry Waxman the night before the vote.

Shortly after the vote, Abound Solar was part of a group that helped pay for TV ads thanking Markey for saying yes to Waxman’s bill. Todd Shepherd exposed the politically incestuous relationship and suggested:

[T]he connections between Representative Betsy Markey (D, CO-4), billionaire heiress Pat Stryker, and Abound Solar, appear to have all of the fingerprints of the kind of pay-to-play agenda that has left many Americans wondering how they got stuck with unpopular bills such as cap and trade, formally known as Waxman-Markey (named after a different Markey).

Markey also urged the approval of Abound’s $400 million taxpayer-guaranteed loan. The Denver Business Journal reported, “Abound applied for the loan guarantee more than a year ago, and Markey and other members of Colorado’s congressional delegation pushed for approval.”

Colorado State University

Located in Fort Collins, Colorado, CSU fancies itself the “green” university:

“Colorado State University is internationally known for its green initiatives and clean-energy research including alternative fuels, clean engines, photovoltaics, “smart” grid technology, wind engineering, water resources, and satellite-based atmospheric monitoring and tracking systems. It’s also known as a “green” university for its sustainability efforts on campus and abroad.

Abound Solar founders got their start at CSU as the university bragged in a 2007 press release.

Stryker also has a connection to CSU, having donated millions to the university.  Furthermore, former CSU president Al Yates became Stryker’s mouthpiece and representative on CoDA. The Blueprint, a must-read book from Adam Schrager and Rob Witwer, details the Yates-Stryker relationship along with how democrats won control in Colorado.

Finally, CSU is home to the Center for the New Energy Economy headed by former Colorado Governor Bill Ritter, a renewable energy activist, and funded by private donations, a third of which came from Stryker’s Bohemian Foundation. Ritter now makes $300,000 to promote renewable energy throughout the country.

Governor Bill Ritter

With the help of CoDA and Pat Stryker, Democrat Denver District Attorney Bill Ritter won the 2006 Governor’s race. His one term legacy is the state’s New Energy Economy, 57 pieces of legislation to move the state from reliance on less costly on fossil fuels to renewables. Ritter is a true believer, an eco-evangelical, who signed laws mandating 30 percent renewable energy standards and fuel switching.

In April 2009, Governor Ritter hand-delivered two letters to Energy Secretary Steven Chu who was touring NREL. One letter urged the Department of Energy to grant a $300 million taxpayer-guaranteed loan to Abound Solar:

This request for $300 million would allow [Abound Solar] to triple production capacity within 12 months, develop a second manufacturing facility within 18 months and hire an additional 1,000 employees.

Abound received $400 million in July 2010. By all accounts, the solar panel company will not meet Ritter’s original promise of triple capacity in a year and a new facility within 18 months. Just won’t happen that fast.

When Ritter left office in January 2011, he became the Director of the Center for the New Energy Economy at CSU and one of the highest paid administrators on campus, thanks to Stryker.

President Barack Obama

President Obama received $11,700 directly from Stryker and Joseph Zimlich, who is a director at Abound Solar and is also associated with Stryker’s Bohemian Foundation. No doubt Obama benefitted as well from Stryker’s donations to other democrat causes including Campaign Money Watch and Democrat White House Victory Fund.

In Obama’s weekly radio address on July 3, 2010, he announced an acceleration of “the transition to a clean energy economy and doubling our use of renewable energy sources like wind and solar power – steps that have the potential to create whole new industries and hundreds of thousands of new jobs in America.”

He said that Abound Solar:

will manufacture advanced solar panels at two new plants, creating more than 2,000 construction jobs and 1,500 permanent jobs.  A Colorado plant is already underway, and an Indiana plant will be built in what’s now an empty Chrysler factory.  When fully operational, these plants will produce millions of state-of-the-art solar panels each year.

That radio address was the formal announcement that Abound Solar received a $400 million loan guarantee courtesy of U.S. taxpayers. Taxpayers get the risk while individuals get the profit.

To recap, Abound Solar receives support from Pat Stryker and Colorado State University both of which fund and promote Congresswoman Betsy Markey. She in turn votes yes on Cap and Trade and urges the federal government to approve the Abound loan.

Abound Solar then contributes to TV ads thanking Markey for her yes vote on Cap and Trade.

Governor Bill Ritter hand delivers letters to Energy Secretary Steven Chu urging the DOE to grant the loan guarantee.  When he decides not to run for a second term, he is offered a job at CSU, which is funded in part by Pat Stryker.

President Barack Obama benefitted from Pat Stryker’s political donations.  In July 2010, he announces a $400 million loan guarantee to Abound.

Can’t get a $400 million loan? Apparently you don’t know and fund the right people.

Amy Oliver Cooke is the director of the Colorado Transparency Project for the Independence Institute and writes on energy policy.  She can be reached at amy@i2i.org