The k2p blog

“Green” is also the colour of slime.

Subsidies are fundamentally corrupting.

Instead of promoting the commercialisation of a nascent technology (whether for later job creation or for pursuing policy goals), they lead more often than not to companies just maximising the subsidies they can get. And very often the vast amounts taken from tax money end up in the pockets of opportunistic individuals. It is no great secret that the “green” label has provided the path for the extraction (or is it extortion) of subsidies by developers and companies who have never had any intention other than maximising what could be extracted.

ABC News (here and here) lists a number of cases in the US where subsidies have been extracted, huge bonuses paid and then bankruptcy filings prevents any possibility of getting any recourse to the beneficiaries. They point out that “the Energy Department explicitly allows for federal funds to be used to pay out executive bonuses.” The “subsidy” industry is of course already well established in Europe with exorbitant “feed in tariffs”, carbon trading certificates and grants to solar and wind developers. 

1. Take, for instance, Beacon Power Corp., the second recipient of an Energy Department loan guarantee in 2009. In March 2010, the Massachusetts energy storage company paid cash bonuses of $259,285 to three executives in part due to progress made on the $43 million energy loan, Securities and Exchange Commission records show. Last October, Beacon Power filed for Chapter 11 bankruptcy. Beacon Power’s bonuses were specifically linked to executives’ progress in landing the company’s $43 million Energy Department loan guarantee in 2009.
2. EnerDel, maker of lithium-ion battery systems, landed a $118.5 million energy grant in August 2009. About one-and-a-half years later, Vice President Joe Biden toured a company plant in Indiana and heralded its taxpayer-supported expansion as one of the “100 Recovery Act Projects That Are Changing America.” Two months after Biden’s visit, EnerDel corporate parent Ener1 paid $725,000 in bonuses to three executives — including $450,000 to then-CEO Charles Gassenheimer, who led Biden on the tour. This January, Ener1 filed for Chapter 11 bankruptcy protection. In March 2011, Gassenheimer (Ener1 CEO) was awarded a $450,000 bonus, SEC records show. Two other Ener1 executives pocketed bonuses of $225,000 and $50,000 for a total payout of $725,000. In January 2012, one year after Biden’s visit, Ener1 filed for bankruptcy, citing $73.9 million in assets and $90.5 million in debts. Gassenheimer, reached for an interview, said he could not comment. He is no longer with Ener1.
3. Solyndra, bankruptcy records show, was among the companies doling out thousands in executive payments — in its case, just months prior to its late August collapse and early September bankruptcy. As a criminal investigation and House inquiry continue into the company’s implosion, the government must navigate bankruptcy proceedings in hopes of recovering a piece of its $535 million investment. Solyndra executives, bankruptcy records show, pocketed thousands in payments just months before the company dismissed 1,100 workers. At least 17 company executives received two sets of payments — ranging from $37,000 to $60,000 per payment — on the same days in April and July 2011. 
4. SpectraWatt, a New York state manufacturer of silicon solar cells. In 2009, SpectraWatt secured a $500,000 grant from the DOE’s National Renewable Energy Laboratory Photovoltaic Technology Pre-Incubator program. Last August, SpectraWatt filed for Chapter 11 bankruptcy protection. Five company executives, including Richard J. Haug, SpectraWatt’s President , received six-figure payments in late March or early April 2011, bankruptcy records show. The five “insider payments” totaled more than $745,000.
5. Abound Solar announced this week it has been forced to lay off 180 of its 400 workers as it tries to retool to produce a more efficient type of solar panel in order to keep a technological edge on Chinese manufacturers who are flooding the market with less expensive models. Abound received approval in 2010 for a $400 million government loan.
6. Electric car start-up Fisker Automotive announced it was being forced to halt production at its Delaware facility and lay off several dozen workers. In November, the company developing batteries for Fisker announced the temporary layoff of 125 employees. A123 Systems had received a $249 million Department of Energy stimulus grant.

Subsidies rarely work as an instrument of public policy. They distort the market and result in strategies being developed soley for the maximisation of the subsidies to be extracted. They encourage corruption and reward greed. 

Tags: Abound Solar, Beacon Power, bonuses from subsidies, Chapter 11 filing, corruption, Ener1, Green subsidies, Solyndra

This entry was posted on March 7, 2012 at 8:21 am and is filed under Business, Corruption, Environment, Ethics. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.