President Obama just can’t seem to catch a break. About a month ago, amidst a bipartisan battle over our nation’s energy policies, a company that received roughly $500 million in federal loan guarantees — Solyndra — went bankrupt, bringing new evidence for those of us who don’t think the government shouldn’t be getting into the business of picking winners and losers in the energy marketplace. Earlier this week, a second company — Beacon Power — which received a relatively paltry $39 million, filed for bankruptcy. It is worth pointing out that the company will continue to operate during bankruptcy and will hopefully come out alive.
There’s nothing remarkable about the company. It has been around for about 6 years and appears primarily to be involved with building power storage — similar to batteries — to help lower the problem of intermittent power generation associated with wind and solar power. Ideally they would store sufficient power such that solar/wind would provide relatively consistent power throughout the day.
A quote from the CEO just about sums up the debate over loan guarantees:
“We absolutely couldn’t have done it without support from the government, because no one else was willing to do it,” he said, adding that it was challenging to find venture capital firms willing to finance a plant.
I wonder why no one else was willing to do it? It appears as if venture capitalists took a look at the numbers and didn’t see a promising investment opportunity, so they didn’t fund it. Perhaps venture capitalists are much better at judging the potential profitability of a start-up than the Department of Energy.
The bankruptcy of Beacon Power is yet another data point suggesting that venture capitalism should be left to the private sector, less it be known as ‘venture socialism.’ Regardless of your views, this will certainly bring more attention to the debate over loan guarantees and various other subsidies given to energy industries. Representative Mike Pompeo (R-KY) is introducing legislation which would put an end to all direct energy subsidies, from oil and coal to ethanol and solar power.