Obama Energy Disasters Still "Abound" - Abound Energy, Compact Power, and Another $220 Million Destroyed

Throughout the past year or so we have reviewed the many failed programs from the Obama administration’s Energy Department and their vain, expensive, wasteful, and usually failed attempts to have any kind of positive impact in the alternative energy field. Their efforts have left behind a string of failed companies that have gobbled up billions of taxpayer dollars for no reason or benefit:

• Solyndra
• Beacon
• Ecotality
• Ener1
• A123
• Chevy Volt
• SpectraWatt
• Fisker Motors
• Abound Solar
• Others

Our most recent review of their unnecessary and failed efforts was a detailed review of Abound Solar which had recently went bankrupt, taking tens of millions of taxpayer dollars with it. The details of that business, cronyism, and financial failure can be read at:

http://loathemygovernment.blogspot.com/2012/07/more-losing-solar-bets-abound-as-abound.html

Today we will review some of the latest news from the government’s failed attempts to be a venture capitalist entity in the private market, starting with the latest from Abound Solar.

According to an article from The Hill and other sources:

• Abound Solar, a manufacturer of solar panels, received approval from the Energy Department for a $400 million loan guarantee last September, about the same time that Solyndra, the poster child for failed alternative energy loan guarantees, went belly up financially.
• In Congressional testimony this week, the chairman of Abound, Craig Witsoe testified how cheap Chinese solar panels had made it impossible to compete and thus, Abound also went bankrupt just 12 months or so after it received the loan guarantee from the Obama administration.
• Fortunately, for the American taxpayer, Abound had only wasted $70 million of the $400 million loan guarantee since the Energy Department had cut them off for not meeting performance guidelines that were outlined in the loan guarantee agreement.
• Unfortunately, those performance guidelines were the very reason why Abound went bankrupt and the American taxpayer is out $70 million.
• Apparently, the Abound solar panels were seriously flawed from a design aspect. So flawed that one news report quoted an unidentified Abound employee that the Abound solar panels were really good unless you put them out in the sun.
• Once displayed out in the real world, Abound solar panels had a tendency to catch fire as a result of the design flaw, causing fire damage not only to the panels but to whatever structure they were attached to.
• This design flaw was also probably the source of the panels underperforming in the real world relative to their performance in the lab. However, rather than shut down production and fix the design and engineering issues like a real company would do, Abound could not do that. The Federal government required Abound to hit sales and performance targets in order to get access to the remaining part of the $400 million loan guarantee.
• Thus, they continued to push known faulty product out the door to be installed at customer locations to meet the Energy Department’s performance guidelines.

The really sad part of this problem, from a taxpayer perspective, is that the company knew about the problem with the fire hazard and underperformance prior to receiving the loan guarantee, indicating 1) that the company was possibly not entirely truthful on their loan application or 2) the Energy Department did not do their due diligence before sacrificing taxpayer wealth on defective panels.

In 2012, the company had its hands busy replacing defective and under performing panels it had already installed. Two of these replacements included a prominent Democratic Party fund raiser, Pat Stryker, who had to have the Abound panels replaced on his home and BP Solar, which had to have 14,700 out of its 15,000 installed Abound panels replaced, at a cost of $1 million.

Thus, the shipping of known faulty panels both prior to and after the loan guarantee eventually caught up with Abound who insisted on selling and installing faulty panels to meet Federal government faulty guidelines.

So much blame to go around on this fiasco and loss of $70 million dollars. The government obviously did not do its job before approving the loan, not knowing that cheap Chinese solar panels would undercut domestic manufacturers, did not know there was a major design flaw that would weigh heavily on Abound’s ability to succeed and recover, and did not work with Abound on a recovery plan to fix the design and replace the dangerous panels in order to save the investment.

Abound may have also been dishonest by possibly not disclosing all of the problems it knew it had prior to submitting the loan application and not leveling with the government about the need to go into recovery mode and get some relief from its performance parameters.

But, as we have seen numerous times over the past year, 1) the Federal government is usually never successful when it hands out taxpayer money to their political cronies and 2) the government makes a lousy venture capitalist. In fact, most venture capitialists make lousy venture capitalists. According to a a graphic from the May 21, 2012 issue of Business Week, the track record of venture capitalists is not pretty:

• The Kauffman Foundation looked at the investment results of 99 venture capital firms.
• Almost half of them, 47, lost some or all of the initial investments that were made.
• More than 62% of the firms had investment returns that were lower than the Russell 2000 Index returns.
• Less than 18% of the venture capital firms generated a significant investment return with their investments.

Why we would ever think that the Federal government, who cannot operate any program or project inefficiently or effectively, could do any better is a mystery, especially when one of the major criteria for having a an application approved is whether or not you contributed to the Obama and the Democratic Party in the past. Disgraceful and unnecessary waste of taxpayer wealth.

But the alternative energy waste parade does not end today with Abound. A Michigan subsidiary of a South Korean company, Compact Power, was the recipient of $150 million taxpayer grant and millions more in tax deferments and credits from the Federal government in 2010. The overriding purpose of Compact Power was going to be the manufacturing of thousands of batteries for the Chevy Volt here in America.

President Obama was at the Compact Power ground breaking ceremony in 2010 and had the following words:

“The workers at this plant are already slated to produce batteries for the new Chevy Volt, learned the other day that they’re also going to be supplying batteries for the new electric Ford Focus as soon as this operation gears up. And that means, by 2012, the batteries that will be manufactured here in Holland, Michigan. So when you buy one of these vehicles, the battery could be stamped — Made in America.”

The initial production estimates for the completed factory called for about 15,000 Chevy Volt batteries a year being made at the Compact location. Unfortunately, two years after the taxpayer wealth was committed to the project and the President spoke, the South Korean parent company announced that employees were going to be laid off via a rotating furlough process BEFORE producing a single battery.

Now, the company spokesman claimed that once the Chevy Volt sales start to take off the factory would be ready to provide the necessary batteries. Until then, layoffs were necessary. However, given that Reuters reported in a September 10, 2012 article that General Motors loses about $49,000 on every Chevy Volt it sells, I find it doubtful that both the Volt and the battery Compact would make for those Volts are going to see a sales surge anytime soon.

Thus, another $70 million and $150 million down the taxpayer wealth drain without any appreciable benefit seen coming back to the taxpayer. Government’s make lousy venture capitalists. Unfortunately, they do this lousy job with our money.

An old marketing saying goes something like the following: “If a product or service fulfills a need in the marketplace, it does not need any government subsidies and support to be successful. If a product or service does not fill a need in the marketplace, than no amount of government subsidies and support can make it successful.”

It is basic marketing 101, basic reality 101, something that the political class never seems to understand.

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The United States of Purple is a new grass roots approach to filling the office of President of The United States by focusing on the restoration of freedom in the United States, focusing on problem solving skills and results vs. personal political enrichment, and imposing term limits on all future Federal politicians. No more red states, no more blue states, just one United States Of America under the banner of Purple.

The United States Of Purple's website also provides you the formal opportunity to sign a petition to begin the process of implementing a Constitutional amendment to impose fixed term limits on all Federally elected politicians. Only by turning out the existing political class can we have a chance of addressing and finally resolving the major issues of our times.

Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at www.loathemygovernment.com. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedomfor both yourselves and others everyday.

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http://www.reason.com/
http://www.repealamendment