Solyndra, Why Government Ventures Often Fail

By now just about everyone has heard about Solyndra. Solyndra is a producer solar panels, mostly roof mounted solar power systems typically for large commercial buildings. The Obama administration made sure that Solyndra received government backed loans totaling 535 million dollars even though there was disagreement within the administration over whether or not Solyndra was financially stable. Now the administration is trying to make sure that the blame is shifted away from Obama and onto Energy Secretary Chu.

This is an example of what happens when the government tries to interfere with the marketplace. If Solyndra were competitive in the market there would be no need for a large government backed loan. Solyndra can't produce it's solar systems cheaply enough to compete on the world market, or with existing energy sources. Also Solyndra was backed by the government so it could operate without the financial constraints which exist with no government backing. Solyndra could waste money knowing that the government was there to prop them up. Solyndra was supported by the wishful thinking of politicians and the taxpayer's wallets.

The situation gets worse though. There seems to be a trend with government backed ventures. These government backed companies receive more assistance as performance decreases. In other words, why would any government backed company try to succeed when it can be more successful financially by either maintaining or slightly decreasing performance. If Solyndra actually succeeded it might have to run on it's own. Solyndra has benefited from the ultimate corporate welfare program.

The waste the company exhibited is absurd. Take a look at some of the things within the facility alongside Interstate 880 in Fremont, California.

It wasn’t just any factory. When it was completed at an estimated cost of $733 million, including proceeds from a $535 million U.S. loan guarantee, it covered 300,000 square feet, the equivalent of five football fields. It had robots that whistled Disney tunes, spa-like showers with liquid-crystal displays of the water temperature, and glass-walled conference rooms.

“The new building is like the Taj Mahal,” John Pierce, 54, a San Jose resident who worked as a facilities manager at Solyndra, said in an interview.

Amid the still-unfolding postmortems, the factory stands as emblematic of money misspent and the Field of Dreams ethos that seemed to drive the venture, said Ramesh Misra, a solar-industry analyst in Los Angeles for Brigantine Advisors.

“When you don’t have the demand, you can’t go into something with the attitude, ‘Build it and they will come,’” Misra said. “You have to make sure the customers are already there when you build it.”

When will the socialist government types get it? People buy things they want or need. You can't fabricate a need. You don't artificially increase prices to drive people away from one product and towards another, it never works as planed. For all the talk of alternative sources of energy there have been none that are competitive cost-wise to what we have now.

Until someone comes up with a way to produce energy that is at least as cheap as we have now, these ventures are always going to fail. People aren't looking for "alternative energy sources" in the real world; they are looking for energy, if it's competitively priced and works people will buy it. So far that hasn't happened yet.

In the mean time the government is throwing money into ridiculous ventures like Solyndra instead of allowing the private market come up with something. The government is eating up capital and directing it without regard for results. When results are negative, the answer is always more money.

There was a very good reason that private sector investors didn't fund this venture. Government obviously didn't share their foresight.

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