In spite of the frantic attempts recently by supporters of dirty energy to disparage the solar industry, most Americans aren't buying it. Recent polling and surveys indicate that, by and large, regardless of our politics, we still think developing solar energy is a great idea.

Think about that last sentence for just a second. People in this country who vote Democratic think that solar energy is smart for the country, and people who vote Republican feel the same way. It's an issue that unites us. There don't seem to be that many of those these days, so it's worth examining why.

No, I don't think it's because the U.S. solar power market grew a record 67 percent last year, which makes it our fastest-growing energy sector. And it's probably not solely because the solar industry created jobs at a much higher rate than the rest of the U.S. economy during the past year. I don't even think it's because the cost of residential solar panels has dropped to the point where it's now affordable for millions of homeowners to buy or lease a system and start saving on energy while helping the environment.

But I don't think economic stats are what's behind solar energy's broad-based support from the American public. Instead, it's something so basic and obvious that folks just "get it": Capturing energy from the sun is renewable and sustainable, while burning fossil fuels is not. Clean energy is easier. And that means that solar energy will always make more sense economically in the long run.

But what a lot of people might not realize is that we aren't just talking about the long run anymore. Solar makes more sense economically right now. Compare it, for example, to generating electricity by burning coal. An article in the August issue of the American Economic Review (the journal of the American Economic Association, a group that no one has ever accused of being a bunch of tree-huggers), shows that the overall costs to our economy of burning coal are so high that they're actually greater than the market price of the energy that's generated. In other words, the roughly $53 billion in damages that the coal industry inflicts on our economy every single year is greater than the value of the electricity it generates!

And yet the supporters of Big Coal want us to believe that solar and other forms for renewable energy don't make sense? The American people don’t believe that -- and Washington, D.C., would do well to listen.

In spite of the frantic attempts recently by supporters of dirty energy to disparage the solar industry, most Americans aren't buying it. Recent polling and surveys indicate that, by and large, regardless of our politics, we still think developing solar energy is a great idea.

Think about that last sentence for just a second. People in this country who vote Democratic think that solar energy is smart for the country, and people who vote Republican feel the same way. It's an issue that unites us. There don't seem to be that many of those these days, so it's worth examining why.

No, I don't think it's because the U.S. solar power market grew a record 67 percent last year, which makes it our fastest-growing energy sector. And it's probably not solely because the solar industry created jobs at a much higher rate than the rest of the U.S. economy during the past year. I don't even think it's because the cost of residential solar panels has dropped to the point where it's now affordable for millions of homeowners to buy or lease a system and start saving on energy while helping the environment.

But I don't think economic stats are what's behind solar energy's broad-based support from the American public. Instead, it's something so basic and obvious that folks just "get it": Capturing energy from the sun is renewable and sustainable, while burning fossil fuels is not. Clean energy is easier. And that means that solar energy will always make more sense economically in the long run.

But what a lot of people might not realize is that we aren't just talking about the long run anymore. Solar makes more sense economically right now. Compare it, for example, to generating electricity by burning coal. An article in the August issue of the American Economic Review (the journal of the American Economic Association, a group that no one has ever accused of being a bunch of tree-huggers), shows that the overall costs to our economy of burning coal are so high that they're actually greater than the market price of the energy that's generated. In other words, the roughly $53 billion in damages that the coal industry inflicts on our economy every single year is greater than the value of the electricity it generates!

And yet the supporters of Big Coal want us to believe that solar and other forms for renewable energy don't make sense? The American people don’t believe that -- and Washington, D.C., would do well to listen.

In spite of the frantic attempts recently by supporters of dirty energy to disparage the solar industry, most Americans aren't buying it. Recent polling and surveys indicate that, by and large, regardless of our politics, we still think developing solar energy is a great idea.

Think about that last sentence for just a second. People in this country who vote Democratic think that solar energy is smart for the country, and people who vote Republican feel the same way. It's an issue that unites us. There don't seem to be that many of those these days, so it's worth examining why.

No, I don't think it's because the U.S. solar power market grew a record 67 percent last year, which makes it our fastest-growing energy sector. And it's probably not solely because the solar industry created jobs at a much higher rate than the rest of the U.S. economy during the past year. I don't even think it's because the cost of residential solar panels has dropped to the point where it's now affordable for millions of homeowners to buy or lease a system and start saving on energy while helping the environment.

But I don't think economic stats are what's behind solar energy's broad-based support from the American public. Instead, it's something so basic and obvious that folks just "get it": Capturing energy from the sun is renewable and sustainable, while burning fossil fuels is not. Clean energy is easier. And that means that solar energy will always make more sense economically in the long run.

But what a lot of people might not realize is that we aren't just talking about the long run anymore. Solar makes more sense economically right now. Compare it, for example, to generating electricity by burning coal. An article in the August issue of the American Economic Review (the journal of the American Economic Association, a group that no one has ever accused of being a bunch of tree-huggers), shows that the overall costs to our economy of burning coal are so high that they're actually greater than the market price of the energy that's generated. In other words, the roughly $53 billion in damages that the coal industry inflicts on our economy every single year is greater than the value of the electricity it generates!

And yet the supporters of Big Coal want us to believe that solar and other forms for renewable energy don't make sense? The American people don’t believe that -- and Washington, D.C., would do well to listen.

With U.S. unemployment at record levels, Washington’s $535 million funding of renewable energy company Solyndra—which folded and let go 14,000 workers—has stunned voters.

Could the Obama administration be any more ham-fisted? Believe it not, the answer is yes and to the tune of $700 million. Yet, most people haven’t noticed—including those in Congress—because this was money to be spent outside the country.

Early last year, the administration pledged nearly $700 million dollars to the World Bank’s $4 billion fund to reduce greenhouse gases in developing countries and to create emissions-friendly, “green” jobs in poor countries.

Both schemes wrongly assume government financing can create successful new private sector industries. Jobs only endure in the private sector when industries are profitable. Solyndra’s business was unproven, and the industries envisaged in the World Bank program don’t exist.

The first difference with Solyndra loan guarantee debacle is that the World Bank aimed not to create new jobs but to replace existing ones—particularly in forestry—to encourage reduction of greenhouse gases. Citing official U.N. climate change modelling, the Bank claimed forest industries in countries like Indonesia, Brazil, and the Congo pump 17 percent of human-generated carbon dioxide into the atmosphere.

It developed a $4 billion fund, so the U.S. and other aid agencies could pay governments in these countries to replace their forest industries with others, such as tourism and tropical fruits.

Another difference is this. While only time will tell if Solyndra was scam or monumental incompetence, there is clear evidence now World Bank staff knew their fund was shaky before they solicited contributions. Research supported by the Bank itself showed emissions of greenhouse gases generated by forestry in poor countries were overstated by at least 100 percent.

Finally, it is clear the Bank had a political agenda to an extent which private companies (even rent seekers) do not. Its real objective was not creating new jobs, but halting commercial forestry in developing countries.

The underlying message driving by U.S. Department of Energy’s loan guarantee program and World Bank’s is that an environmental agenda trumps that of economic growth and poverty reduction. Yet, ecological and economic interests are not necessarily mutually exclusive.

Forests, for example, can be sustainably harvested by limited felling, preserving biodiversity, and enabling regrowth. Many green NGOs teach that forests must not be touched at all. In California, forests are dying as a result.

At least, there is one saving grace about the World Bank green jobs program. President Obama is unlikely to have his $700 million pledge called in. The World Bank now cannot continue to perpetuate the myth that forests in developing countries are a major global source of greenhouse gases.

All we have to hope is that the bright spark in Washington, D.C. who thought Solyndra was a good idea hasn’t got something in mind on which the $700 million likely to be freshly available in the U.S. aid program might be spent.

Ambassador Alan Oxley is Chairman of pro-development NGO World Growth and author of a new report on World Bank policy: “Trees before Poverty.”

The collapse of solar firm Solyndra—and the fallout from its very public demise—does not, and should not, spell the end of federal involvement and investment in solar and other clean energy technologies. Pew research on the economic and national security rationale makes clear that one failed company must not deter our nation’s efforts to rapidly develop and deploy clean energy in the United States

Our ongoing research shows that the United States’ competitive position in the emerging clean energy economy is already at risk. In 2010, more than $243 billion was invested in the sector worldwide, but the United States attracted less than 15 percent of that total ($34 billion), well behind China ($54 billion) and Germany ($40 billion).

Clean energy represents an enormous economic opportunity, but only if we seize upon it. Based on research undertaken last fall, we project that as much as $2.3 trillion will be invested globally in clean power assets over the next 10 years, offering companies and countries enormous opportunities to compete for investments, jobs and export markets. This week, the Energy Information Agency projected that renewable energy will grow more rapidly than any other energy source in the coming decades. To compete and win in the global clean energy race, the United States must implement creative, consistent and ambitious clean energy policies—such as investment in research and development, access to financing and the adoption of effective market demand signals.

But clean energy means more than jobs and markets, it also improves our national security, as The Pew Project on National Security, Energy and Climate’s new report From Barracks to the Battlefield: Clean Energy Innovation and America’s Armed Forces makes clear. In short, our study shows that the Department of Defense’s reliance on liquid fuels on the battlefield and an aging electric grid on bases puts the lives of the American military at increased risk. One in 46 supply convoys in Iraq and Afghanistan experiences a casualty. Heavy batteries weigh down—and slow down—soldiers and reduce the amount of ammunition they can carry. Power outages at facilities pose threats to critical combat support operations. These are but a few examples of the limitations of traditional fuel.

Simply put, the future security and prosperity of the American people are linked to clean energy innovation. We cannot afford to sit on the sidelines as nations accelerate their ability to develop and manufacture the energy technologies of the future, abdicating a role in a multi-trillion dollar marketplace simply because one company was unable to compete. The failure of Solyndra should compel us to strengthen, not abandon, our commitment to compete for clean energy and to harness its economic, security and environmental benefits.

Anyone who has spent time in Silicon Valley knows that for every Google or Apple, there are scores of companies whose bets never pay off. Creating transformative technology is no easy task, and success always has failure in its wake. Indeed, venture capital firms expect just one in ten of the companies they invest in to make it.

Solyndra is one of those companies that didn’t. It was trying to create cheaper solar technology, but couldn’t achieve that vision and ultimately lost out in the very competitive solar marketplace.

Solyndra accepted taxpayers’ money, and if there was wrongdoing involved, those responsible must be held to account. But the failure of one company doesn't mean the industry at large is troubled. Solyndra is one of 120 PV solar companies in this country and 1 of 40 Department of Energy loan guarantee recipients. It represents just 2.9 percent of the DOE’s renewable energy loan portfolio.

Meanwhile, solar capacity has had annual growth rates topping 45 percent every single year since 2005. Last year it doubled and for the first half of 2011, has grown 72 percent compared to the previous year, according to the Solar Electric Industries Association. The price of a solar array has fallen by 42 percent since December, 2010, driven by a combination of market forces and government incentives. About 100,000 Americans now work in the solar power and solar heating industry, according to the U.S. Bureau of Labor Statistics.

Solar energy has enjoyed tremendous growth, but that doesn’t mean America has outpaced our competitors or realized our full clean energy potential yet. Five years ago, China didn't make solar panels. Now it controls half the global market. China has identified solar exports as a national priority, and it has tailored national policies and devoted national resources to achieving that goal. The strategy is working, at the expense of U.S. companies and American workers.

Smart incentives here in the U.S. would allow our home-grown solar industry to create even more jobs in America and generate even more pollution-free energy.

Solyndra’s collapse doesn’t mean the government should stop supporting something as big and vital as a new energy system for our country.

What would have happened if Washington said the government didn’t need to encourage canals to link factories to ports? What would have happened if Lincoln said the government should stop backing transcontinental railroads because of instance of graft in a few companies? Or what would have happened if Kennedy said there was no role for government in striving for the moon—a mission that ushered in the beginnings of computers, smart phones and the Internet.

American innovators have a track record of making technological leaps that improve our lives, but the American government also has a history of nurturing those transformations. It should continue to do so for solar energy.

(Written by ITIF Clean Energy Policy Analysts Matthew Stepp and Matt Hourihan)

When it comes to supporting clean energy innovation, the government should act like a limited venture capitalist. Counter to what some folks on this forum believe, government must support – as it has over the last century – breakthrough technologies that the private sector is unwilling to support on its own because the technologies are too risky.

The real problem isn’t necessarily Solyndra’s failure in itself. In fact, we should actually expect some advanced technologies receiving public support to fail. It’s a fundamental truth about innovation: when you’re trying new things, the likelihood of failure is high and the newer and harder the things you’re trying, the more likely it is that you’re going to fail. Just ask Steve Jobs. Or Bill Gates. Or a venture capitalist. Or any number of Governors, city councilmember’s, and members of Congress hoping that just one or two of the new ideas sprouting up in their districts turn into competitive businesses.

No, the real problem is that Solyndra has exposed a weakness in the politics of public investment in innovation. Government is at its best when it focuses on the kind of risky innovation with big social returns that the market can’t deliver purely on its own. The tricky part is that if public innovation programs are doing what they should there should be some failures. This is because companies that receive public support should, by definition, be doing things nobody has actually tried before commercially, but nevertheless have clear upside. If innovative ventures receiving public support never failed, you’d know something might be wrong: the bets might not have been risky enough and the public investments are being wasted.

Yet, why should the government act like limited venture capitalists anyway? The United States has an active venture capitalist industry and they play a vital role in supporting the clean economy. Even so, there is a large gap in funding for high-risk, high-reward breakthrough clean technologies from lab to market. While the energy sector is one of the most profitable industries in the world, its businesses invest less than 0.3 percent of sales back into innovation. Compared to other forward-looking, innovative industries, the energy sector significantly underinvests. Why does this matter? If America is to address its energy challenges, this gap in support needs to be filled.

To make matters even more complex, clean technologies are capital intensive, risky and require significantly larger investments traditional venture capitalists and investors typically provide. Many of these technologies need to be tested a commercial scale. That’s where loan guarantees come in. Government can play a meaningful role in supporting these capital intensive, risky breakthrough technologies as they begin to move from lab and through the valleys-of-death. Yet, this doesn’t mean simply propping up any company with a new idea; that risk has to come with clear upside in pushing the technological envelope. Remember, venture capitalists invest because of the possibility of larger returns down the road. In the case of public investments in clean energy, the governments return on investment is more than just higher monetary returns than the loan guarantee, its energy independence, energy security, economic growth, and climate mitigation.

But even so, the political system still needs to be willing to accept the failures and limited, but invigorating role of government that comes with supporting advanced technologies new to the market. We shouldn’t be afraid to use the venture capitalist model and make smart investments when no one else will, but society needs. Understandably, in today’s current climate of finger pointing and grandstanding, it’s asking a lot. Regardless, the Loan Guarantee Program shouldn’t be judged solely by Solyndra (even though many will do exactly that).

In fact, the big debate – and the type of debate we should really expect from our policymakers - is not just about Solyndra failing, but whether Solyndra’s technology was innovative enough to merit public largesse and should the loan guarantee program invest in even riskier technologies (not no technologies at all). Maybe. Maybe not. That’s the key question.

(These comments were submitted by Arno Harris, CEO of Recurrent Energy)

Solyndra was a gamble on a promising new technology that didn't pay off. It's the kind of failure you have to expect in innovative technology markets.

Ironically, Solyndra failed because of conventional silicon-based solar's amazing success. Silicon-based solar has come down 70% in cost in the past couple of years--and prices continue to fall. Solyndra was caught selling $2/Watt solar panels in a market where silicon panels are rapidly approaching $1/Watt.

And don't blame China for Solyndra's inability to compete. Chinese subsidies account for roughly a 10% cost advantage over other non-Chinese silicon modules. That doesn't explain the 100% gap between Solyndra's costs and today's market price. The explanation is that silicon prices have dropped dramatically making silicon-based solar far more affordable.

Thanks to rapidly declining costs, solar is one of the fastest growing industries in the US today and employs over 100,000 Americans. As costs continue to come down, additional growth and jobs will come too. That's worth supporting.

Why would anyone remove incentives and raise taxes for an industry that is proving it can cut costs and create jobs? It defies common sense--particularly when the Senate's Energy and Natural Resources committee voted a couple of months ago NOT to cut $21B in subsidies that go to oil and gas, whose prices seem to increase with each passing month!

Investing is a game of balancing risk and reward. Any investor will tell you that they work in an inherently risky business—and having an occasional investment not work out as planned doesn’t stop them from investing altogether.

Government investments in innovation are no different. Not all investments the government makes will be successful. But this is not reason enough to stop investing altogether, especially when our global competitors—countries like China and Germany—are investing in clean technology up to 30 times more than the United States.

In 2008, the economy was on the brink of collapse. Companies looking to put projects in the ground and create jobs could not find the necessary capital from the banks, which were decreasing lending at a frightening pace. Congress passed the stimulus partly in order to compensate for the lack of available capital. An infusion of government monies was never going to make investing a guaranteed homerun. However, it would be hard to know that by listening to the partisan rhetoric coming from the Hill these days.

As tends to be the case around election season, the political fallout is far worse than the real world. This is not to say the jobs lost by Solyndra’s bankruptcy are insignificant. The Solyndra story is tragic and the ramifications for those employed and involved in the company are equally tragic. That being said, the only people running away from the solar industry are politicians. Solyndra’s troubles are having little impact on the venture capital and investor community—investment in solar technology is as strong as ever. As many outside of DC have pointed out, 2011 has been a good year for solar: the cost of solar panels has dropped 30%, making renewable energy more affordable for everyone.

What criteria the government uses when choosing where to invest is a valid point of discussion. Moreover, no one is arguing that the loan guarantee program is perfect, but that is no reason to abolish the program—and others supporting clean technology—altogether. Calls to do so are irrational at best and, at worst, are politically opportunistic at a time when the country and the economy can least afford such antics.

The government can play a constructive role helping new technologies reach the market and commercialize to competitive scale. Reasonable policymakers on both sides of the aisle recognize the value of such investments. The failure of one investment in a large portfolio (the Solyndra loan constituted 1.3% of all loan guarantees) is not reason enough to halt all investment in technologies of the future. Some will fail, but others will forever change the way we live for the better—much like airplanes and the Internet did.

The U.S. economy does not operate in a vacuum. Our competitors are already outpacing us, and now is not the time to be timid. China is not abandoning their investments in clean technology; they recently announced their intention to invest directly in early stage companies. If the United States wants to stay competitive in the global marketplace, the government cannot walk away from these investments. Now is more important than ever.

The case of the solar company Solyndra has been getting widespread attention, but much of the current discussion misses the point. While some would like to portray the collapse of this company as the downfall of the U.S. solar industry, the larger picture tells a very different story.

Solar power is rapidly expanding around the world, driven by opportunities for innovation and investment in low-carbon energy. According to the International Energy Agency, solar power is on a path to provide 20-25 percent of the world’s electric power by 2050. This is a huge market opportunity. And, a recent report by Ernst & Young confirms that the solar energy market has grown from less than $1 billion in 2000 to $79 billion in 2010.

Many countries are moving toward more renewable energy production. Last year, China alone invested $54.4 billion in clean energy – more than any other country.

But that doesn’t mean there are no opportunities for the United States. In fact, policies that create clean energy demand can help drive manufacturing and job creation up and down the supply chain. One recent industry study found there are over 100,000 Americans currently working in the U.S. solar industry. And, somewhat surprisingly, the United States is actually a net exporter when it comes to solar energy products, with $1.9 billion in net exports in 2010.

Overall, however, the United States is lagging in investment in renewable energy. According to a report by the PEW Charitable Trusts, the United States falls in the middle of G-20 countries in terms of financial support and investment in clean energy. Spain, Brazil, the UK and China have all invested at least 3 times more than the U.S. in this sector.

It is therefore worth asking what are some of the factors that are helping clean energy to flourish in other countries?

One major factor, according to research by the World Resources Institute and the Peterson Institute for International Economics, is the presence of a clear policy framework that provides long-term certainty to investors. In Germany, for example, the Renewable Energy Act was put in place in 2001, which is based on a feed-in tariff that ensures renewable energy will be fed into the grid and provides price certainty for that technology. Germany’s renewable energy share just hit 20 percent in the electricity sector, and is on its way to meet the country’s national target of at least 35 percent renewables by 2020. The industry has created 347,400 new jobs and is projected to create half a million jobs by 2030. Germany’s progress is linked to the long-term price signals that encourage industry to plan, hire, and build in this sector.

Similarly, in China, the government has made a clear commitment to include solar and other renewables as part of its energy mix. In its 12th Five-Year Plan, the Chinese government has set a target to shift to 11.4 percent non-fossil energy by 2015 (and 15 percent by 2020). It is expected that China will raise its target for solar capacity to 10 GW in 2015 and 50 GW by 2020. China has put in place policies to both support the supply side with incentives for research and development as well as manufacturing, and the demand side with the recently introduced solar feed-in-tariff. These policies have set the conditions for China to surge ahead in the high-tech rush.

Other countries, such as the Philippines, Thailand, and South Africa, are similarly putting in place national renewable energy strategies. WRI has found that more and more developing countries are implementing “smart renewable energy policies” in order to increase energy security and reduce vulnerability to international fuel prices, expand energy access for their population, reduce pollution and health risks, and spur economic development.

What is clear from this picture is that solar energy production is indeed surging ahead worldwide. This is largely driven by policies and market conditions that accelerate the innovation required to make renewable energy more competitive with traditional fossil fuels. These factors can also help drive both demand and supply of renewable energy in the United States. But, ultimately, the United States needs national policies that provide greater certainty to businesses that investing in clean energy is a good bet over the long-term.

Innovation in new technology, of course, has always been the backbone of American society and its economy. Certainly, it isn’t without risks, but it can hold considerable rewards. Rather than finger-pointing, U.S. officials should look for ways to help America take advantage of the clean energy opportunities ahead.

The failure of Solyndra no more signifies impending problems for the U.S. solar industry than did the failure of any one of hundreds of Silicon Valley start-up companies suggest the end of the Internet.

The Internet industry continues to expand—as does the U.S. solar industry. In fact, the United States is predicted to become the world’s largest solar market by 2014; and solar is already the fastest growing energy sector in the United States. By 2014, solar energy will likely be the largest source of new electric capacity in America.

The solar industry will achieve those results because of the opportune nature of both the domestic and global markets—and because federal policies reflect the right strategy for advancing the U.S. solar industry.

Solyndra was but one of more than 5,000 mostly small- and medium-sized solar businesses employing workers today in every state in the union. These 5,000 companies employ more than 100,000 Americans, double the amount in 2009.

We in the solar industry believe that sound, bipartisan federal and state policies have lay the foundation for a strong solar industry in America. Tax credits and loan guarantees passed during the last two administrations are not unlike the policies that have helped foster the coal, oil, natural gas and nuclear industries over the decades.

The Department of Energy Loan Guarantee Program (LGP) was crafted to overcome the great challenges that large nuclear, renewable and other energy projects face obtaining affordable long-term financing in the commercial marketplace. Loan guarantees are not a direct loan from the government to the applicant. The program is designed to encourage private investment while minimizing risk to the taxpayer. Each program dollar leverages up to $13 in private sector investment.

The LGP has achieved a number of notable successes for the solar industry. Chief among these are guarantees for seven utility-scale solar power plants in the Southwest. These projects, which typically have contracts in place a to sell electricity to utilities, are currently under construction, employing thousands of workers and taking advantage of a nationwide supply chain that includes Michigan, Kentucky and Alabama.

In the last year, solar grew by 69 percent, making it one of the fastest growing industries in the economy. Since the start of 2010, the price of solar panels has dropped by 30 percent. The United States was a net exporter of solar products in 2010 by $2 billion, even to China. Solar power in the United States now exceeds 3,100 megawatts, enough to power more than 630,000 American homes.

Competition in the solar industry is good for American consumers. It drives down costs, making solar affordable for more and more Americans every day. Our industry is getting stronger every year and will be creating both electricity and jobs for more and more Americans for as far as the eye can see.

Congress is right to investigate Solyndra, but the public needs to know that the Solyndra bankruptcy is not indicative of the health of the U.S. solar industry. As with any competitive and dynamic market, some companies will prosper and others will fail.

We cannot let the collapse of one company turn the clock back on the advances of an energy sector born right here in America. There has simply been too much progress to date—and too many successes yet to come.

When something bad happens, people generally respond in one of two ways: reaction and overreaction. It’s no surprise that Washington tends toward the latter, especially when points can be scored against the other political party.

Like most issues, the Solyndra case certainly deserves reaction to make sure everyone understands how it happened and to learn if the approval was somehow rushed because of the Administration’s interest in having an event or tainted because certain contributors to the President’s campaign were involved in the company’s finances.

However, let’s not overreact and paint a broad brush of corruption or ineptitude. Nor should we predict the demise of solar or other alternative energies because this one company failed.

At this point, it looks like Solyndra went bankrupt because they picked the wrong type of solar panel technology. They placed a bet, the government supported the risk because it was new technology it thought was worth investing in and it didn’t pan out. This happens in many new industries that are trying to bridge the gap between success in the lab and success in the marketplace. Granted, the price tag to taxpayers is not always this high.

The government certainly needs to pick and choose its projects carefully, but they can’t guarantee that every bet they make will pay off (nor should they).

There’s a Lisle, Illinois-based-company called INEOS Bio that received government support to help build its first commercial-scale waste-to-energy project in Florida. It’s under construction now and when completed it’s projected to produce biofuels and electricity from biomass including residential garbage from a nearby landfill.

Will the technology work at that scale? Will it be economically viable? Who knows! That’s the reason why government help was needed to build the first one. However, if we find a marketable way to turn some of our garbage into biofuels and power, and the private sector sees an opportunity to invest and build upon the success of this pilot project, isn’t that worth the risk? Even if it doesn’t work, wasn’t it worth the try?

For those of us old enough to remember the Osmond Brothers in the early 1970s, no one went to their concerts to wax poetic on the philosophy embedded in their music. But sometimes, just sometimes, one bad apple don’t spoil the whole bunch (girl).

As usual with Washington political assaults, the Solyndra episode is blown way out of proportion. The investigations will drag out, with loads of document requests, subpoenas and oversight hearings. Then there will be calls for reform of loan guarantee programs, to make sure the taxpayer is kept whole in any future programs. Some will call for ending the programs altogether, and others will point to clean energy successes that created more jobs than Solyndra lost. But we shouldn’t be distracted from the political ping-pong to let the occasion pass without learning important lessons. Two are paramount:

First, Solyndra exposes the challenges of a policy model where federal officials must pick winners for government financial assistance, rather than leaving those decisions to private sector entrepreneurs.

Second, Solyndra grew from the large stimulus budget that is likely to be a thing of the past. With the budget decisions expected in the coming weeks, the outlook is not good for large expenditures to promote innovative energy initiatives. The old federal tools of stimulating private investment with tax incentives, loan guarantees and technology partnerships are all under duress, given the tight federal budget. So the potential for future Solyndra debacles is declining.

Where does Solyndra leave us? Many Americans agree that we need more renewables, more incentives for efficient energy use, more advanced fossil generation. We need to grow our clean energy base while respecting the environment. So why isn’t more happening? Because private sector financing is extremely constrained right now, because of policy uncertainty on clean air and climate policies.

We need a new policy framework that attracts private sector financing and channels it toward cleaner alternatives. It needs to leave technology choices to the private sector, and it needs to reward the successful entrepreneurs financially. A clean energy standard with trading flexibility could work, but the regional political divisions probably won’t allow it. A carbon trading program could work even better, but it would need to be rid of the large auctions that caused it to appear tax-like.

Washington experts missed an important story in last year’s climate debate. Despite the “cap and tax” attacks in the fall campaign, most industry and financial executives would rally around a well-designed cap-and-trade program, so long as it did not appear to be a tax in disguise. Their real gripe with last year’s climate bills was that it wasn’t a pure “cap and trade” program like the acid rain program. Instead, it was dominated by a large auction producing massive financial flows in and out of government coffers. The auctions were to fund federal spending initiatives, which industry feared would put bureaucrats in the position of picking winners and losers. A familiar story?

Right now, the private sector could step in with significant financing for clean energy, if it had more confidence in the policy and regulatory expectations for the next 20 – 30 years. We need a bipartisan solution to the uncertainty around federal clean air and climate change regulations. The answer, by the way, is not simply delaying or blocking new rules. It is forging a compromise on clean air and climate policies that is simple, stable and market-based – providing business with confidence to invest and with market incentives to reward innovators. No one expects a new climate and clean air policy to emerge overnight. But it is critical to getting the country on track towards a cleaner energy future.

Bad news from Solyndra has set off a bit of a panic around everything from the future of solar in the U.S., the role of government in supporting innovative technologies, and prospects for clean energy jobs. Caution is advised and perspective is needed lest we walk away from a pivotal new global market. Let’s start with the big picture on solar. I believe it is critical that we focus on the full value chain for energy and environmental solutions to better understand the economic growth inherent in the clean energy market. In the case of solar, an analysis released last month by GTM Research examined the entire value chain – from raw material inputs and capital equipment needs to panel assembly and installation and maintenance. The results show that the U.S. has a trade SURPLUS with rest of the world AND with China in the solar sector defined across the entire value.

Let me highlight some of the key findings:

• The U.S. was a significant net exporter of solar energy products with total net exports of $1.9 billion in 2010.
• The U.S. solar industry had a positive trade balance with China with net exports of $247 million - $540 million.
• The largest solar energy export product is polysilicon, the feedstock for crystalline silicon photovoltaics, of which the U.S. exported $2.5 billion in 2010.
• 2010 U.S. solar energy installations created a combined $6.0 billion in direct value, of which $4.4 billion (75%) accrued to the U.S.

This is a good news story, and not surprisingly to me as over the past several years we’ve heard positive stories from companies like Komax Solar, an equipment supplier. Six years ago, Komax took a risk and transitioned itself from medical technology and electronic machines to supplying the equipment needed in the assembly plants for solar panels. Komax is exporting, has tripled its workforce, and has leveraged its expertise in precision machining to move into new solar markets.

What role the government played in the larger solar story is hard to pinpoint, but many solar companies had real and critical capital needs during the recession that the American Recovery & Reinvestment Act of 2009 (ARRA) filled. Project Sunburst, a Maryland Energy Administration (MEA) initiative that benefitted greatly from the ARRA funding, created demand for solar panels installation on public buildings and triggered $36 million private investment. In addition, while the primary goal was making it easier for public entities to go solar, “It had an additional goal or larger goal to encourage the growth of solar energy generation in the state as a resource,” MEA spokesperson Ian Hines said. The investment helped give the industry the extra push that put it over the tipping point as a maturing industry in Maryland.

This leads me to believe that ARRA has indeed been an important ingredient. The government has also taken a portfolio approach that includes companies like Nanosolar, which received almost $44 million as a 48C tax credit (one of the ARRA programs) and is currently hiring. This is a company whose prospects excite me.

At the end of the day, experience shows that the private sector is better at picking winners and losers, and the government is much better at “setting the table” – for example, investing in core, enabling innovations such as developing a well-designed, open-platform smart grid that enables new entrants such as solar power to compete with old electricity providers (the value chain for smart grid solutions, by the way, is extremely promising for US firms and job creation). And, equally as important, the government must put into place energy policies that provide a level playing field and ensure that the full costs to society of energy products and services are accounted for, policies that ultimately put a price on carbon.

Maybe the Department of Energy (DOE) would lend me money to buy lottery tickets. For the tickets that win, I’ll pay them back their dollar (plus $0.001 for a week’s interest). For those that lose, well, that just happens in this sort of business. They have to expect losses.

That’s the argument we now hear from the Solyndra apologists: “Hey, it’s a risky business.” But venture capitalists get equity positions so that they get the big rewards when a risky venture pays off. Nobody should be making loans to high-risk businesses at Treasury-bond rates.

Even if Solyndra offered equity to the DOE for the $528 million, it would still be a bad idea. The government is not, and should not be, a venture capital fund. Government investments are made according to political rates of return and not economic ones.

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.

Solyndra illustrates that the inability to get private financing was because it was not commercially viable. However, two other examples should raise eyebrows even though they may well repay their loans.

For instance, NextEra Energy received a $682 million loan guarantee for its Genesis Solar Project. NextEra has a market capitalization of over $20 billion. If it could not get private financing, the project must be a real dog. Or it is a dog compared to other investment opportunities, or it could get private financing but (big surprise here) it would rather pay the lower interest that comes with the government guarantee.

A second example is a $1.4 billion loan guarantee to BrightSource Energy for a solar-thermal project where two utilities have already signed up to buy the entire electric output (passing the high cost on to the ratepayers). The investors in BrightSource include subsidiaries of Statoil (market capitalization of over $220 billion), Chevron (market capitalization of nearly $200 billion), and BP (market capitalization of over $120 billion).

Again, it would seem that Chevron, BP, and Statoil could have scraped together $1.4 billion if they thought it was the best use of their capital. They didn’t. So we are making the investment for them.

In the cases of BrightSource and NextEra, the suboptimal allocation of capital is just as real—but not so clear as it is in the case of Solyndra. With Solyndra, the political/special interest aspects of government loans are as obvious as they can ever be. E-mails imply that the process was rushed to help with a photo-op. The company never made a profit, and independent analysts warned of Solyndra’s weak prospects. The DOE subordinated its loan to another made by original, politically well-connected investors. The FBI executed search warrants. The President, Vice President, and Secretary of Energy went out of their way to make Solyndra the green-energy poster child. They painted the project in the public relations equivalent of Day-Glo orange.

Whether or not there turns out to be any criminal activity, Solyndra offers a spectacular object lesson on why the government should not be in the loan guarantee or venture capital business. If this lesson helps put an end to the billions and billions of dollars that would otherwise fly under the radar, then the Solyndra case may be the best $528 million the government ever wasted.

As we all now know, in September 2009 the Department of Energy finalized a $535 million loan guarantee for Solyndra to finance construction of the company’s new solar manufacturing facility in California. The project, eligible under the DOE Loan Guarantee provisions of the Energy Policy Act of 2005, should have created 3,000 construction jobs, but instead the company has filed for bankruptcy.

Was Solyndra’s failure a “Bad Bet or Tip of the Iceberg?” That answer may depend upon how policy makers respond to the Solyndra bankruptcy. Will this ignite a retreat on clean energy policies, or become a lesson learned that is used to improve policies supporting the growth of these industries?

Bankruptcy is nothing new in the energy industry – an industry in which one learns quickly to expect the unexpected, particularly regarding prices. For example, oil prices today hover around $85 per barrel and the outlook is for prices to increase. Just two years ago oil and gas exploration and development company Pacific Energy Resources and seven affiliates filed for bankruptcy protection citing a precipitous drop in the price of crude oil. They weren’t alone. A few months previous, one of the largest privately held companies in the United States – the oil refiner and retailer Flying J – had also filed for bankruptcy.

Solyndra’s bankruptcy might be seen as not surprising given the recent report from Lawrence Berkeley National Laboratory that solar PV prices fell sharply in 2010 and 2011.[1] Solyndra was part of a national initiative – endorsed by the President and Congress -- to “accelerate the domestic commercial deployment of innovative and advanced clean energy technologies.” Somehow, with a complex web of federal policies and programs supporting clean energy, one might think it should have been different.

Cheap energy prices have undercut renewable growth before. One study by researchers of renewable energy during the 70s and 80s found that renewable technologies surpassed most cost reduction goals set by the government during that period, but they made little progress in the marketplace.[2] Why? Competing energy prices dropped much more than expected. While renewable technologies and companies ran a good game, someone moved the goal line. How could that happen? The study suggests the government’s renewable programs were undercut by innovations supported by the government’s own “significant…subsidies, tax breaks, and other assistance” to the fossil and nuclear energy industries.

So, what will the fallout be from the Solyndra bankruptcy? While investigators are pouring through documents looking to see if there is someone to blame, there should be as much effort put into asking whether and how our energy policies failed. If national policies are going to support new clean energy technologies, then they need to provide an accountable, market-oriented pathway to sustained growth. They also need to recognize these are global industries and competition from other countries is usually government supported. Finding the right balance between government support and the marketplace and designing effective policies for complex and volatile markets will take work, vigilance, and collaboration; but if successful it could reap significant economic, environmental and security benefits.

If, instead, Congress uses this as an excuse to dismantle a range of bi-partisan clean energy initiatives built upon the 2005 Energy Policy Act, the set-backs of the past may be about to repeat themselves but with a new twist. Unlike past eras, this time prices dropped because of foreign competition, particularly from China. A set-back for US renewable companies today won’t stop the growth of these technologies, they will just grow overseas and in the future Americans can pay to import fossil fuels and renewable energy technology.

[1] http://www.solarserver.com/solar-magazine/solar-news/current/2011/kw38/berkeley-lab-us-pv-system-costs-fall-sharply-in-2010-2011.html

[2] “Winner, Loser or Innocent Victim: Has Renewable Energy Performed as Expected?” by James McVeigh, Dallas Burtraw, Joel Darmstadter, and Karen Palmer http://www.repp.org/repp_pubs/articles/mcveigh/index_mcveigh.html

The real question we should ask about Solyndra is, “When did Americans stop tolerating risk?”

Loan guarantees inherently carry risk. If they didn’t, the loans wouldn’t need guarantors. The U.S. Department of Energy’s program was designed specifically to fund cutting-edge innovations that could not secure sufficient private capital. That’s the way to help potentially breakthrough technologies get off the ground without picking specific winners and losers. The expectation is that a handful of these companies might succeed spectacularly and that some of these companies would fail. This risk was explicitly built into the program by Congress and the Bush Administration at its inception.

Solyndra is an example of the downside of investing in risk. But let’s not make more of the company’s failure than is really there. The loan guarantees to Solyndra make up less than 2 percent of the total Department of Energy program. This is out of a total of 18 loan guarantees to 14 companies. The wisdom of investing in a portfolio of companies is that the risk is spread out so that the program can tolerate the failure of any given investment. That is what is happening.

Does the company’s bankruptcy merit closer scrutiny? Absolutely. We have to learn from our mistakes. But does this mean DOE should eliminate all financing for renewable energy? Not if the United States wants to continue to develop potentially market-changing technology. This is an example of the kind of creative destruction—the case when weaker business models fail and companies are overtaken by stronger ones with new technologies or innovations—that drives the economy. The condemnations of loan guarantees as intolerable risk are contrary to the fundamentals of capitalism and more than 100 years of American economic success driven by government investment in emerging technologies.

Cheap capital from China only makes the need for loan guarantees, or another form of government-financed capital for emerging technologies, even greater. We have to invest more in clean energy—not less—if we want to compete with the Chinese for the $2.3 trillion global clean energy market. China has twice as many initiatives to boost clean-tech development at the federal level than the U.S. It now leads the world as both the largest source of, and destination for, clean energy investment. China is beating us at our own game—the risk and reward of investing in innovative new companies and the ability to make a profit when an idea pans out is a foundation of capitalism.

Since when did China become better capitalists than the United States?

The failure of Solyndra is regrettable – particularly since flags were raised by DOE and administration personnel conducting due diligence on the company – but it remains an isolated example. We should draw appropriate conclusions about the federal loan guarantee program as a whole. This incident has nothing to do with advanced biofuels.

Consistent, long-term federal commitment and policy stability are needed if we are serious about reducing over-reliance on foreign oil, rebuilding a healthy economy and growing jobs. Federal loan guarantees for renewable energy are intended to help mitigate risk for pioneering companies introducing new solutions to U.S. energy challenges.

Advanced biofuel companies have used industrial biotechnology to develop new and better ways to make advanced biofuels. Any new solution will require large amounts of capital to scale up these technologies, due to the size and vertical integration of energy markets. Large debt financing for new technology is inherently risky for institutional investors. A recent study in the journal Environmental Science & Technology shows that it could take 131 years for alternatives to displace oil if we rely solely on the free market to guide investment. Global oil could run out years before alternatives are developed relying solely on market change.

With the looming possibility of a second recession, institutional investors are exceedingly risk averse at the moment – there is a great deal of capital that is currently not being put to work in the economy. Instability in federal policy contributes to uncertainty among investors and keeps that capital on the sidelines. Loan guarantees with proper due diligence can help.

Critics of the loan guarantees ignore the fact that they and most of the grants for research and development are public-private cooperative endeavors. The federal loan guarantees are a back stop to private investment and the grants require a minimum of matching private investment, usually 50 percent.

The loan guarantee program has had shortcomings. The Department of Energy applied a one-size-fits-all evaluation of applications from both energy and transportation fuels, which are different markets with different risks. The DOE is only now beginning to issue loan guarantees for biofuel biorefineries. In contrast, the USDA has made several key loan guarantees that are helping move commercialization of cellulosic advanced biofuels forward. Companies have made extraordinary investments in these projects and deserve a chance to prove they can succeed.

We must not allow the experience of one loan guarantee project to derail an essential program for the development of clean energy technologies in America. Investing in nuclear energy and other energy options remains a necessary step to meet our future electricity needs in a manner that creates tens of thousands of jobs and protects the environment. Addressing the financing challenge is paramount and will require innovative approaches.

Loan guarantees are one of the most effective tools available to the federal government, and are widely used by the federal government to support financing of projects that have substantial public value. The federal government manages a successful loan guarantee portfolio of approximately $1.2 trillion which, on balance, returns more to the Treasury than it costs the taxpayer. The United States government uses these credit support programs to support shipbuilding, steelmaking, rural electrification, affordable housing, and construction of critical transportation infrastructure.

Meeting these investment needs will require a partnership between the private and public sectors, combining all the financing capabilities and tools available to the private sector, the federal government and state governments. Properly executed, loan guarantees can drive innovation and reduce the cost of energy to consumers. The electric industry faces a formidable investment challenge--between $1.5 trillion and $2 trillion in new power plants, transmission and distribution systems, and environmental controls by 2030. To put these numbers in perspective: the book value of America’s entire electric power supply and delivery system today is $750 billion, and that reflects investments made over the last 60 years.

By reducing the cost of capital, loan guarantee programs serve the public interest by accelerating the deployment of clean energy technologies at a lower cost to consumers. In the case of nuclear energy loan guarantees, the program complements the investment of billions of dollars in equity by the companies developing projects. The project sponsors also have a vested interest in ensuring the viability of these projects while protecting consumers, shareholders and taxpayers. All nuclear energy projects seeking loan guarantees are subjected to detailed due diligence and underwriting by a rating agency and the Department of Energy. The independent analysis includes a rigorous assessment of the creditworthiness of the project, which can be accurately measured using well-established project finance ranking criteria.

The nuclear energy industry is confident that the new nuclear power plants being developed can be built and commissioned to cost and schedule. Recent construction and operational experience demonstrates that experienced project management teams can complete projects on budget and on schedule. The nuclear industry, including U.S. partners, has performed projects ranging from new plant construction to major upgrades to plant restarts to refueling outages efficiently, on time and on budget.

The Energy Department has offered one conditional loan guarantee for a nuclear energy project, to Southern Co.’s Vogtle reactors in Georgia. The company’s exceptional financial strength and 30-year history of safely operating nuclear energy facilities make it a solid credit-worthy candidate for the DOE loan guarantee. The company is well positioned to meet the obligations of its loan guarantee commitment. Moreover, the loan guarantee, along with other regulatory mechanisms, will provide customers nearly $1 billion in benefits. Our industry understands and appreciates the need to ensure that America's taxpayers are protected. In doing so, this is an investment that will help ensure expansion of American-made energy, create thousands of jobs and provide affordable, reliable electricity to power our economy.

Solyndra is a classic example of why the government shouldn't be subsidizing “green energy.” If these projects were destined for success in the marketplace then private investors would fund them. But the high costs and inefficeincy of renewables make them less than desirable investments. As you'll see in my testimony shows the cost of renewable energy is much higher than conventional energy (see http://www.accf.org/media/dynamic/2/media_281.pdf).

Renewable mandates cost business money and reduce their competitiveness. Homeowners can’t afford to pay higher bills for electricity and gasoline in these tough economic times.

Government funding of basic research in alternative energy technology is appropriate but they should stop wasting taxpayer dollars on companies that do not meet the market test.

Furthermore, Global GHG concentrations will not be reduced through U.S. renewable energy portfolios , we should therefore stop devoting taxpayer dollars to funding alternative energy companies and states should scale back or drop renewable portfolio standards.

Only time will tell whether Solyndra turns out to be a full-fledged scandal or just another item on the long list of government industrial policy failures. At least for now, it’s showing some of the trappings of other high profile Washington scandals (congressional hearings, incomplete answers from the administration, media field days with released emails, etc.).

What’s most shocking about Solyndra’s failure is that anyone is surprised that it went under and left the taxpayers holding the bag. It had a flawed business model and only stayed active because of the Obama administration’s industrial policy and handouts.

The belief that investing in “green jobs” and “green energy” were the keys to future economic growth set the foundation for the Solyndra failure and others, such as Evergreen and Green Vehicles. The flawed assumption was that the President, his staff, and some members of Congress were smarter than the market, private investors, and the proven process of innovation—what Frederick Hayek termed the “fatal conceit.”

The market provides real time information as well as opportunities to experiment, succeed and fail, and be rewarded for successful risk taking. Government does not and cannot operate that way. Creating new industries is the job of the private sector, not government.

The history of innovation and industrial policy makes clear areas where government can be successful and areas that it should avoid. For example, the Defense Advanced Research Projects Agency undertakes research and innovative projects where DOD is the consumer. It has a good track record because there is a close linkage between its work and its “consumers” (the military services).

Successful businesses have a similar linkage that includes knowledge of the technology, its strengths and weaknesses, user needs, and enthusiasm being tempered by using its own capital. The historical evidence of government picking winners in the market place is unequivocally negative.

Green energy is something for which everyone can hope, but there are limits to turning hopes into reality. Hopes become reality with time, patience, experimentation, and learning from a lot of failures.

Research on solar energy and wind power is not new. In the United States, the pioneering work on solar energy was done by the petroleum industry in the 1970s. Most of those companies got out of the solar business when they concluded that they could not make it commercially viable on a large scale. Over the past two decades, the anti-carbon club has pushed wind and solar as if technical and economic obstacles to their deployment could be willed away with enough government money and influence.

The technology of solar panels and wind turbines is maturing. As it does, the cost is declining. While that is necessary, it alone is not sufficient. Power generation involves a system. And the solar and wind power systems are beset with a large number of problems.

The cost per kilowatt-hour is still much higher than that of conventional power. And, as has been documented by the scientific literature, renewables suffer from low power densities, and are intermittent dispersed sources that are unsuited to baseload without transmission and storage capabilities. The amount of land required for solar and wind to produce the same output as a conventional source is 10 to almost 50 times greater.

The Solyndra case proves once again that government loan guarantees create a moral hazard. They encourage companies to take risks that private investors would not take. They create a condition where the government takes the down side risk while the companies capture any upside gains.

The irony of Solyndra and other firms that have failed in spite of being favored with taxpayer dollars is that they have shed jobs while oil and gas firms—which are in the White House’s crosshairs for higher taxes—have been creating them. Truly perverse.

A recognition of the potential of domestic energy and a realistic policy to achieve it would unleash billions of dollars of pent up private capital and lead to the creation of steady stream of good paying jobs. Over the course of the next decade, upwards of 1 million jobs could be created. That policy shift could be the key to restoring business confidence for across the board investments.

Renewed confidence in the future would lift the economy from it current doldrums and begin to put 14 million people back to work. President Obama would do well to heed the counsel to do the right thing and let the chips fall where they may.