I wrote previously about how the debate in Washington over Solyndra is 100% detached from the serious debate in industry, academica, etc. about various mechanisms for facilitating clean energy scale-up financing. I was pleased to see that theme subsequently show up in The New York Times opinion pages in a piece by Joe Nocera:
The purpose of the hearing — indeed, the point of manufacturing a Solyndra investigation in the first place — is to embarrass the president. That’s how Washington works in the modern age: the party out of power gins up phony scandals aimed at hurting the party in power.
Undoubtedly, the Solyndra “scandal” will draw a little blood: there are some embarrassing e-mails showing the White House pushing to get the deal done quickly so it could tout Solyndra’s green jobs as part of the stimulus package.
But if we could just stop playing gotcha for a second, we might realize that federal loan programs — especially loans for innovative energy technologies — virtually require the government to take risks the private sector won’t take. Indeed, risk-taking is what these programs are all about. Sometimes, the risks pay off. Other times, they don’t. It’s not a taxpayer ripoff if you don’t bat 1.000; on the contrary, a zero failure rate likely means that the program is too risk-averse. Thus, the real question the Solyndra case poses is this: Are the potential successes significant enough to negate the inevitable failures?
So do the successes outweigh the failures? Jonathan Rothwell of the Brookings Institution takes on that question in a recent post and concludes that they do.
The bottom line: The loan programs have been solid initiatives that have created jobs in a recession, generated $4 to $8 of private lending for every $1 of public investment, begun to scale up important clean energy technologies, and begun the work of financing the long-term restructuring of the U.S. economy.
Even more important, Jonathan notes the broader importance of continued investment in clean energy.
There is a broader justification for programs like the DOE’s Loan Guarantee Program. These programs are a proven, targeted, low-cost way of addressing critical market failures—like externalities from pollution, asymmetric information—through the use of market-oriented financial tools.
We haven’t yet said much on the Solyndra case, but scale-up financing will be a topic at our Annual Meeting. And we hope to issue a white paper later in the year. In the meantime, I’ll continue to pass along some of the more thoughtful takes as I see them.
