In Monday night's debate, President Obama promised once more to develop the energy sources of the future.
When any administration, Democrat or Republican, decides to develop energy projects, taxpayers had better watch out. Government gets into the business of picking winners and losers, leading to cronyism and wasted taxpayer dollars. This is the question of "industrial policy" -- of whether government should support business ventures in new technologies that are unable to secure private financing. Government appears to be worse at this than are private markets.
Mitt Romney argued against industrial policy in a May speech in California: "[T]he president doesn't understand when you invest like that in one solar energy company, it makes it harder for solar technology generally," he said, "because the scores of other entrepreneurs in the solar field suddenly lost their opportunity to get capital. Who wants to put money into a solar company when the government puts half a billion into one of its choice?"
In addition to putting taxpayer money at risk, industrial policy is also undesirable because it creates opportunities for political influence on what should be decisions on the merits. Take BrightSource Energy, an Oakland, Calif., company that received $1.6 billion in Energy Department loan guarantees. Emails specifically refer to Vice President Biden's involvement in the $1.6 billion Energy Department loan guarantee to BrightSource for its proposed Ivanpah solar power project in the Mojave Desert in Southern California.
An email from BrightSource Energy's subcontractor, Bechtel Systems & Infrastructure, dated Dec. 2, 2009, said that Biden met weekly with Energy Secretary Steven Chu to discuss Energy Department loan guarantees.
Bernard Toon, Biden's former chief of staff when he was a senator, was a principal vice president and manager for Bechtel. In an email to BrightSource CEO John Woolard dated Dec. 3, 2009, Toon wrote, "Calls are in to Biden's staff and I will be approaching the political affairs office at the White House tomorrow as well, as this project could benefit two [Democratic] Senators who are in cycle and whose races will be tough next year -- [Barbara] Boxer [of California] and the Majority Leader, Sen. [Harry] Reid [of Nevada]."
Both won re-election in 2010 -- Reid only narrowly.
Vice President Biden's involvement in BrightSource Energy was not an isolated incident. The Republican-controlled House Energy and Commerce Committee has published emails that specifically refer to Biden and his staff as advocating for Solyndra, a solar panel company that received $528 million in government loan guarantees before declaring bankruptcy in September 2011.
Solyndra was rushed through in September 2009 precisely because Biden wanted to appear at an opening ceremony at the plant on Sept. 4, even though Kevin Carroll, chief of the Office of Management and Budget's energy branch, wrote in an email, "I would prefer that this announcement be postponed ... this is the first loan guarantee and we should have a full review with all hands on deck to make sure we get it right."
Despite (or because of) the government's help, government-supported energy companies have had a notoriously unsuccessful track record. Of the 33 energy loan guarantees made since 2009 under the Energy Department's programs, I calculate that 30, or more than 90 percent, have shown signs of trouble. "Trouble" ranges from missed production goals to actual bankruptcy filings. A report by the House Oversight and Government Reform Committee published in March stated that 27 of 33 loans were judged by ratings agencies as "junk" or BBB, a low investment grade, because of their low credit quality.
American voters have a clear choice: Do they want greater government support of shaky renewable energy projects, and the attendant cronyism? Or should such projects be left to private companies?