10/10/2011 04:29 pm ET | Updated Dec 10, 2011

The Right's War on Innovation

The ugly media circus and congressional investigation of Solyndra were scripted and planned long before the solar company filed for bankruptcy.

I know, because in March, at the Eco:Nomics Conference, I watched Kim Strassel of the Wall Street Journal editorial page spend two days trying to get executives from companies like Dow Chemical, DuPont, and Ford to admit that federal support for innovation and competitiveness was unworkable, arguing that the American public would never tolerate the failure of some of these projects.

They didn't give Strassel what she wanted, but the opportunity to tell that story did present itself on the final day of the conference when Kleiner Perkins partner Ray Lane shot back, "That depends on what you write, Kim. The public will be just fine if you tell the truth."

But of course telling the truth was not the game plan. When Solyndra filed for bankruptcy, the pre-scripted media circus rolled out. The strategy was simple. The very first time that a clean-energy innovator stumbled, and fell back on its Department of Energy loan guarantee, opponents of clean energy would pounce -- with absurd congressional investigations, manufactured scandals in the media, and political theater on Capitol Hill -- all to undermine public support for clean-energy technology and the important role of the federal government in supporting that innovation.

It's important to understand what the Solyndra bankruptcy actually represents -- that without failure and without bold risks, we cannot innovate.

The DOE loan guarantee program unblocked hundreds of billions of dollars of private investment in new, clean-energy technologies. That's hundreds of billions of dollars in investments to create jobs and compete with China's clean-tech industry -- dollars that would never have seen the light of day without federal backing.

To match these private dollars, the DOE loan guarantee program was budgeted to lose $2.5 billion total upon the failure of some of these projects and companies -- just as private bankers set aside loan reserves. So far, the DOE program has used less than 20 percent of this budget -- hardly the sign of a reckless program that didn't do adequate diligence.

Loan guarantee "calls" are particularly likely for manufacturing projects like Solyndra. Imagine that there are three promising new companies with technologies that might enable the U.S. to compete with China for dominance in the solar-panel manufacturing market. There are two risks: That the technologies might not work is an obvious one. But even if all three technologies work, one is likely to come out as the cheapest. That winning technology will take off, with enormous benefits to the U.S. economy, but the two companies with the "also ran" technologies might well fail.

Since private investors cannot guess which of the three technologies will win the race, it's hard for any of the companies to find investors willing to take the plunge. Federal loan guarantees make it possible for private investors to back all three companies -- even knowing that in the end, only one company will win out in the market. Manufacturing is precisely the area in which the U.S. is failing to compete with China and Europe -- it's the key to both environmental sustainability and economic recovery.

So failures are part of the plan -- and failures are essential to innovation. If anything, the Obama administration didn't make enough manufacturing loan guarantees in 2009 and 2010.

Clean-energy naysayers and opponents of the loan guarantee program are essentially acting as if the failure of the company that made Stanley Steamers back in 1924 was a sign that Ford and GM were bad investments, and that America should have stuck with horses. But federal innovation programs could work better -- except that conservatives in Congress have deliberately crippled these by not allowing them to behave like businesses. (For example, the Department of Defense, which needs highly specialized military biofuels for aviation to get off imported oil, is not allowed to purchase biofuels from a factory that has benefited from federal loan guarantees -- even though such a factory can only sell specialized biofuels to the Department of Defense -- it has no other customers. This is equivalent to General Motors deciding that it won't buy parts from suppliers that it has helped to meet GM's technical specifications. Insane.)

Then, of course, conservatives turn around and complain that government isn't businesslike! Their real fear is that if they let government be businesslike, people would come to trust government.

But why did they care so much? After all, the federal loan-guarantee program was expiring only a few weeks after Solyndra's banktupcy. Why make this a cause celebre? Because, as the right knew when it made its plans to jump on the first DOE loan-guarantee call, it could use the Solyndra case to do a lot of collateral damage:

  1. By conducting investigations, it sends a strong signal to financial and technology professionals that going to work for the government is dangerous -- so the nation will have a much harder time holding and attracting qualified public servants.
  2. By giving Solyndra a black eye, it attempts to undermine public confidence in the whole solar industry. For those dependent on Koch brothers campaign spending, keeping America addicted to oil for another decade helps feed their own addiction -- to oil and coal company funding.
  3. The attack on Solyndra also attempts to undermine public support for the whole idea that the federal government should help the U.S. compete with China -- because for the right, losing to China is a small price for weakening Washington. In fact, the congressman in charge of the investigation in the House, Cliff Stearns, made it clear that he doesn't think the U.S. should compete with China, telling NPR, "We can't compete with China to make solar panels and wind turbines."
  4. They hope that giving the DOE's energy-innovation efforts a black eye will hurt the president's chances of winning re-election. Weakening the American economy is the core far-right strategy for defeating Obama and, in their eyes, it's a small price to pay.

As icing on the cake, anti-clean energy members of Congress hoped to kill some of the most exciting loan-guarantee candidates that were still in the pipeline. They succeeded, sadly.

A potential loan guarantee for Solar Strong, a privately funded initiative to put solar panels on 166,000 units of military housing at 124 bases in 33 states, would have unlocked a billion dollars in investment and provided jobs for thousands of veterans while doubling America's solar-rooftop capacity. But in the aftermath of Solyndra, DOE officials, swamped by responding to the congressional witch hunt, couldn't put Solar Strong over the top.

Tragic? Not if your only goals are to defeat Barack Obama and keep the nation addicted to fossil fuels.