For some reason, when times are tough, Americans believe that a government presence, with what appears to be unlimited amounts of cash, can help cure all business ills. As we are learning from the Solyndra bankruptcy, government as an investor appears to be less than competent. For the purposes of making a point, I want to focus on the government as a solar company investor.
The purpose of all these government subsidies, loans, and grants is to make it easier for green companies to build windmills, solar panels, and other instruments of green energy without revealing (or charging) their true costs to consumers. The downside of this is the incentive for the organization to properly manage operations.
Imagine how much easier running a business would be if you received a subsidized loan from the government equivalent to five times your last year’s sales. Failure has long been an effective incentive for individuals to properly manage organizations. However, with five times sales coming into from the federal government, that incentive is eliminated. Now, management does not have to worry about making bad decisions with cash like that coming in.
While the Solyndra bankruptcy continues to unravel ethical questions about the relationships between government officials and the business stakeholders of the company, I want to focus more the government’s decision making when lending taxpayer dollars to solar companies. Is the government assisting a new industry towards self-sustaining success or simply propping up a failed business model?
This article states that the solar industry is thriving despite the Solyndra bankruptcy. It states that while one company is bankrupt, 119 are thriving. Unfortunately, Solyndra is not the only recent solar energy bankruptcy. Since the first of August alone, Solyndra has joined Evergreen Solar, Hopewell Junction Solar, and SpectraWatt as solar companies who filed for Chapter 11 bankruptcy. If the author of the “pro-solar” article is right, would the industry need government loans?