Abound Solar shut its doors three weeks ago because it couldn’t compete in a market in which Chinese trade practices cut solar panel prices in half, witnesses told a U.S. House committee.
The U.S. House Committee on Oversight and Reform held the hearing July 18 and some lawmakers cited allegations of political influence in the Obama administration. The committee Republicans wanted to show how political influence overrode evaluations of Abound’s business prospects.
The Colorado company received a $400m federal loan guarantee in December of 2010. On July 2 it filed under Chapter 7 of the bankruptcy code for liquidation of its assets. It drew down only $70m and was cut off from further funding a year ago as it failed to reach performance and financial benchmarks.
The hearing was titled “The Administration’s Bet on Abound Solar: Assessing the Costs to the American Taxpayers.”
“This is a vast scandal, given the amount of dollars lost,” said Committee chair Rep. Darrell Issa (R-Calif.) when disputing Democrats’ characterization of the hearing as a political vendetta.
The largest failure in the program so far is Solyndra, which was the subject of a recent hearing before subcommittees of the House Energy Committee.
The loan program has set aside about $2.5bn to cover anticipated losses. So far, the tab is about $650m.That total would go up if other companies among the 28 recipients fail.
Abound had attracted $300m in investment from private sources. Former Abound CEO Craig Witsoe said Abound was formed as a start-up company in 2007 based on advanced photovoltaic research started in the late 1980s. It produced ‘thin film’ Cadmium Telluride or ‘Cad-Tel’ solar panel and hoped vast quantities could be made for lower costs than traditional crystalline-silicon modules produced by the Chinese.
“With over $30 billion in reported government subsidies, Chinese panel makers were able to sell below cost and put Abound out of business before we were big enough to pose a real competitive threat to China’s rapidly growing market share,” Witsoe said.
In October 2011, General Electric (NYSE: GE) announced the country’s largest U.S. solar panel manufacturing plant to be based in Colorado but then put those plans aside for at least 18 months.
Former Abound Chairman Thomas Tiller said private investors vetted the company’s patents, processes and books enough to put $300m of private equity, about one-half of that before the loan guarantee, into Abound. “Ultimately, these seasoned professionals made the decision that investing in our company was a good bet,” he said.
Instead, panel prices declined 47% last year, making Abound’s and other manufacturers’ products uncompetitive.
Jonathan Silver, the former head of the Department of Energy Loan Program Office was mostly grilled over his administration of the program, fending off accusations of political favoritism. He even had to defend his hosting of a party attended by both politically connected donors and the department officials who were handling his job application before he was hired to run the program.
He also had to defend his use of his personal email for government business. He turned over documents to the committee but his main defense was that the government technology was dated and inefficient for transmitting larger documents.
After opening statements the former Abound executives were mostly spectators, with the majority Republicans trying to link loan guarantee awards to political influence.
But as Democrats pointed out, a component of the Abound loan was the expansion of a second manufacturing plant into Indiana. The guarantee was supported by the entire Congressional delegation from that state, Republicans and Democrats, and was offered tax breaks by former Indiana Republican Gov. Mitch Daniels.