REVIEW & OUTLOOK AUGUST 17, 2011 WSJ.com
Another political investment goes bust.
In 2008, Reuters published one of those stories predicting that green power would be cost-competitive with fossil fuels in five years. Headline: "As Energy Costs Soar, U.S. Looks to Solar." Among the prophets was Richard Feldt, then the CEO of Evergreen Solar, who said that "it's not far away" and called for more subsidies. On Monday, Evergreen filed for Chapter 11 bankruptcy.
In the grave-dancing department, let's note that failure is part of the risk-taking and creative destruction that drive growth, and that Evergreen got its start in 1994 with an innovation that reduced the costs of silicon panels. The bankruptcy is notable mainly because the Massachusetts-based manufacturer received so much taxpayer support.
Governor Deval Patrick took a $58 million stake in Evergreen in 2007 with direct subsidies and tax breaks in return for the company building a plant in the state. The goal was "to help Evergreen Solar grow and thrive right here in Massachusetts, and give us a head start toward building a clean energy economy," Mr. Patrick said at the time.
But in January, Evergreen, shedding cash, shut down the Devens plant and fired 800 workers, claiming it was at a competitive disadvantage because U.S. solar subsidies are lower than China's. In a letter to the Journal, the U.S. solar lobby in Washington said the solution was to follow "Chinese policy makers" and make "strategic investments to attract this rapidly growing industry."
Mr. Patrick's economic development secretary, Greg Bialecki, told the Boston Globe that Evergreen's collapse was "a cautionary lesson," but not about the distortions and waste that come with the political allocation of capital. "We knew that it would be challenging to do that kind of manufacturing in the United States. It also probably suggests that Massachusetts can't do it alone—in other words, we probably also need federal policy," he said.
So the Commonwealth subsidies weren't enough for Evergreen to succeed because the federal subsidies weren't enough, even though with the stimulus the Obama Energy Department has become one of the largest venture capital firms in the world. And the federal subsidies will only be enough if Washington emulates the Chinese model of a state-planned economy. As Evergreen's bankruptcy shows, the real story is that the government-as-investor model isn't going to lead the U.S. back to prosperity.
Analyst: Evergreen Solar Bankruptcy is the 'Tip of the Iceberg'