[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
THE OBAMA ADMINISTRATION'S GREEN ENERGY GAMBLE: WHAT HAVE ALL THE
TAXPAYER SUBSIDIES ACHIEVED?
=======================================================================
HEARING
before the
SUBCOMMITTEE ON REGULATORY AFFAIRS,
STIMULUS OVERSIGHT AND GOVERNMENT SPENDING
of the
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
SECOND SESSION
__________
MAY 16, 2012
__________
Serial No. 112-146
__________
Printed for the use of the Committee on Oversight and Government Reform
Available via the World Wide Web: http://www.fdsys.gov
http://www.house.gov/reform
_____
U.S. GOVERNMENT PRINTING OFFICE
74-453 PDF WASHINGTON : 2012
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
DARRELL E. ISSA, California, Chairman
DAN BURTON, Indiana ELIJAH E. CUMMINGS, Maryland,
JOHN L. MICA, Florida Ranking Minority Member
TODD RUSSELL PLATTS, Pennsylvania EDOLPHUS TOWNS, New York
MICHAEL R. TURNER, Ohio CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina ELEANOR HOLMES NORTON, District of
JIM JORDAN, Ohio Columbia
JASON CHAFFETZ, Utah DENNIS J. KUCINICH, Ohio
CONNIE MACK, Florida JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
ANN MARIE BUERKLE, New York GERALD E. CONNOLLY, Virginia
PAUL A. GOSAR, Arizona MIKE QUIGLEY, Illinois
RAUL R. LABRADOR, Idaho DANNY K. DAVIS, Illinois
PATRICK MEEHAN, Pennsylvania BRUCE L. BRALEY, Iowa
SCOTT DesJARLAIS, Tennessee PETER WELCH, Vermont
JOE WALSH, Illinois JOHN A. YARMUTH, Kentucky
TREY GOWDY, South Carolina CHRISTOPHER S. MURPHY, Connecticut
DENNIS A. ROSS, Florida JACKIE SPEIER, California
FRANK C. GUINTA, New Hampshire
BLAKE FARENTHOLD, Texas
MIKE KELLY, Pennsylvania
Lawrence J. Brady, Staff Director
John D. Cuaderes, Deputy Staff Director
Robert Borden, General Counsel
Linda A. Good, Chief Clerk
David Rapallo, Minority Staff Director
Subcommittee on Regulatory Affairs, Stimulus Oversight and Government
Spending
JIM JORDAN, Ohio, Chairman
ANN MARIE BUERKLE, New York, Vice DENNIS J. KUCINICH, Ohio, Ranking
Chairwoman Minority Member
CONNIE MACK, Florida JIM COOPER, Tennessee
RAUL R. LABRADOR, Idaho JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee BRUCE L. BRALEY, Iowa
FRANK C. GUINTA, New Hampshire
MIKE KELLY, Pennsylvania
C O N T E N T S
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Page
Hearing held on May 16, 2012..................................... 1
WITNESSES
Mr. Jim Nelson, President and CEO, Solar3D, Inc.
Oral Statement........................................... 4
Written Statement........................................ 7
Mr. Greg Kats, President, Capital-E
Oral Statement........................................... 15
Written Statement........................................ 17
Mr. Craig Witsoe, CEO, Abound Solar, Inc.
Oral Statement........................................... 30
Written Statement........................................ 32
Mr. Brian D. Fairbank, President and CEO, Director, Nevada
Geothermal Power, Inc.
Oral Statement........................................... 38
Written Statement........................................ 40
Mr. Michael J. Ahearn, Chairman of the Board of Directors, First
Solar, Inc.
Oral Statement........................................... 46
Written Statement........................................ 48
Mr. John M. Woolard, President an CEO, Brightsource Energy, Inc.
Oral Statement........................................... 51
Written Statement........................................ 53
APPENDIX
Chairman Issa's Opening Statement, for the Record as agreed to by
unanimous consent.............................................. 98
Elijah E. Cummings, Ranking Member, A Member of Congress from the
State of Maryland, Opening Statement........................... 100
THE OBAMA ADMINISTRATION'S GREEN ENERGY GAMBLE: WHAT HAVE ALL THE
TAXPAYER SUBSIDIES ACHIEVED?
----------
WEDNESDAY, MAY 16, 2012,
House of Representatives,
Subcommittee on Regulatory Affairs, Stimulus
Oversight, and Government Spending,
Committee on Oversight and Government Reform,
Washington, D.C.
The subcommittee met, pursuant to call, at 9:31 a.m., in
Room 2154, Rayburn House Office Building, Hon. Jim Jordan
[chairman of the subcommittee] presiding.
Present: Representatives Jordan, Buerkle, DesJarlais,
Guinta, Kelly, Kucinich, Issa, Gowdy Cummings, and Norton.
Also Present: Representative Mulvaney.
Staff Present: Alexia Adrolina, Majority Assistant Clerk;
Michael R. Bebeau, Majority Assistant Clerk; Will L. Boyington,
Majority Staff Assistant; Molly Boyl, Majority Parliamentarian;
Lawrence J. Brady, Majority Staff Director; Drew Colliatie,
Majority Legislative Assistant; John Cuaderes, Majority Deputy
Staff Director; Adam P. Fromm, Majority Director of Member
Services and Committee Operations; Linda Good, Majority Chief
Clerk; Tyler Grimm, Majority Professional Staff Member; Peter
Haller, Majority Senior Counsel; Christopher Hixon, Majority
Deputy Chief Counsel, Oversight; Mark D. Marin, Majority
Director of Oversight; Kristina M. Moore, Majority Senior
Counsel; Laura L. Rush, Majority Deputy Chief Clerk; Jeff
Solsby, Majority Senior Communications Advisor; Rebecca
Watkins, Majority Press Secretary; Michael Whatley, Majority
Professional Staff Member; Jaron Bourke, Minority Director of
Administration; Lisa Cody, Minority Investigator; Ashley
Etienne, Minority Director of Communications; Chris Knauer,
Minority Senior Investigator; Adam Koshkin, Minority Staff
Assistant; Dave Rapallo, Minority Staff Director; and Donald
Sherman, Minority Counsel.
Mr. Jordan. Let me thank all our witnesses for being here.
You know how this works; you have to listen to us give a bunch
of speeches before we get to your important testimony. So bear
with us and we will get to you as quickly as we can.
Before we do opening statements, I would ask unanimous
consent that our colleague from South Carolina, Mr. Mulvaney,
be allowed to participate in today's hearing. Without
objection, so ordered.
We will start with opening statements. We anticipate the
Chairman from the full Committee and the Ranking Member of the
full Committee, I think, joining us, so we will probably have
four opening statements.
President Obama's 2009 stimulus directed nearly $90 billion
of taxpayer funds toward green initiatives. The President told
the American people that ``green jobs would be a major force
not just for environmental conservation, but for economic
recovery as well.'' The President said that we will harness the
sun and the winds and the soil to fuel our cars and run our
factories, and he promised that our Country would create
millions of green jobs which would help us compete in the
global economy.
However, three years into this gamble, available evidence
demonstrates these efforts have wasted vast sums of taxpayer
money and have failed to achieve the stated goals. Today's
hearing is a continuation of the work done at the full
Committee and this Subcommittee seeking to ensure that the
American people know how their money is being spent.
Four of the companies testifying before this Subcommittee
today, Abound, First Solar, Nevada Geothermal, and
BrightSource, cumulatively received $5 billion in loan
guarantees from the Department of Energy, one-third of the
entire loan guarantee portfolio. I want to thank each of these
companies for testifying today. I know many of you had to
travel great distance, and we appreciate you being here.
Alternative energy certainly has a place in our economy,
and we hope that all these companies succeed. But the best way
to get cheap energy to American consumers is to let the market
forces work, not to allow bureaucrats in Washington to select
who wins and who loses.
I also want to thank our other witnesses for appearing
today, especially Mr. Nelson, the CEO of Solar3D. Jim has shown
that billions of taxpayer dollars are not necessary to advance
green technology.
When taxpayers lost over half a billion dollars on
Solyndra, the Obama Administration said that it was just one
bad apple and the rest of the portfolio was strong. It is
becoming increasingly clear that Solyndra was just the tip of
the iceberg in a sea of taxpayer risk.
Too often this Administration takes liberties with the
American people's money based on the flawed assumption that
Government knows best. Today is about understanding what
happens when the Federal Government tries to play venture
capitalist.
With that, I would yield to the gentleman from Ohio, my
good friend from Cleveland, Mr. Kucinich.
Mr. Kucinich. Thank you very much. Good morning, Mr.
Chairman, members of the Committee, and to our guests who are
testifying in a moment. I am grateful for today's hearing
because I think it will serve to dispel some misconceptions
about the Department of Energy's Loan Guarantee Program and
President Obama's energy agenda.
Recognizing that energy independence is critical to
America's future, Congress created the Loan Guarantee Program
in 2009 to support innovative energy projects that involve more
risk than is typical for project and corporate debt financing.
While my friends in the Majority would have you believe that
the well publicized bankruptcies of Beacon Power and Solyndra
threatened to tank the Department of Energy's entire loan
guarantee portfolio, in reality, the Department of Energy's
1705 Loan Guarantee Portfolio Program is doing better than
Congress expected when it established the program.
When Congress created the 1705 Program, we appropriated
about $2.47 billion in credit subsidy costs as an insurance
fund to cover potential losses stemming from defaults by
companies and projects receiving loan guarantees. That means
that Congress prepared for losses to reach about 15 percent of
total loan guarantees provided by the Program. In reality,
actual losses are about 3 percent. That means that the
Department of Energy's rigorous and thorough due diligence
process for choosing among applicants resulted in safer choices
than Congress had anticipated.
My friends on the other side of the aisle have singled out
for scrutiny Federal support for renewable energy technologies.
I note that they have not raised questions about the last 100
years of subsidies to promote the development of fossil fuel
technologies, and I have not heard of any committee
investigation into subsidies for the nuclear energy industry
either, even though, in February 2010 a single nuclear project
received $8.33 billion in subsidies.
Now, investing in energy independence is critical to
America's national security, its economic growth, and future
job creation. If we fail to support these emerging renewable
energy technologies, our Country will fall behind countries
like Germany and China. If anything, we do not do enough for
renewable energy, especially when compared to support for oil
and gas.
I have a chart that I would like put up, if we can do that.
There we go.
[Slide.]
Mr. Kucinich. This chart attached to my statement, Mr.
Chairman, shows how much greater is the ongoing support for the
oil and gas industry compared with renewable energy technology.
So what I am wondering is why my friends have devoted four
hearings, including today's, to criticize renewable energy
companies who have received Federal support, as Congress
intended, in a well managed program and has returned better
results than Congress even anticipated.
So I think we should be helping to preserve America's
leadership and a technology that will only become more
important, not less, in the future. Impugning the reputation of
these companies before the television cameras will not be
productive.
With that, I want to thank my friend for calling this
hearing and I yield back the balance of my time. Thank you.
Mr. Jordan. Anyone wish to make an opening statement on the
Majority side?
[No response.]
Mr. Jordan. Our Chairman is not yet with us, so we will
proceed. Members who may have seven days to submit opening
statements and extraneous material for the record.
We now want to welcome our panel of witnesses. We first
want to introduce Mr. James Nelson, who is the President and
CEO of Solar3D, Incorporated. We also have with us Mr. Gregory
Kats, who is the President of Capital-E; Mr .Craig Witsoe is
the President and CEO of Abound Solar; and Mr. Brian Fairbank
is President and CEO of Nevada Geothermal Power; and Mr.
Michael Ahearn is the Chairman of the Board at First Solar;
and, finally, Mr. Woolard is the President and CEO of
BrightSource Energy Company.
The Committee rules require that we have witnesses sworn
in, so if you would just stand and raise your right hands, we
will get this done here.
Do you solemnly swear or affirm that the testimony you are
about to give will be the truth, the whole truth, and nothing
but the truth? If so, answer in the affirmative.
[Witnesses respond in the affirmative.]
Mr. Jordan. Let the record show that all witnesses answered
in the affirmative.
Again, thank you all for being here. You guys, I think,
understand the rules. You have five minutes. We will be a
little lenient, but as close to five as you can do it, because
we do want to get to questions, and the goal is to try to get
out of here by noon if we can today, because I know that I have
something I have to be to at 12. So we are going to go right
down the line.
Mr. Kucinich. If you have to leave, I will----
[Laughter.]
Mr. Jordan. I would trust the good gentleman from Ohio,
even though I disagreed with some of his statements in his
opening statement.
We are going to go right down the line. We are going to
start with Mr. Nelson. You get your five minutes. Then we will
just go right through and then we will get to questions. So,
Mr. Nelson, you are recognized for your five minutes.
STATEMENTS OF WITNESSES
STATEMENT OF JIM NELSON
Mr. Nelson. Thank you. The Government's green energy policy
includes two parts: support for basic research with the aim of
developing new green energy technologies, and two is making
loan guarantees to promote the adoption of green energy
technologies. Supporting research is an important role of
government, but the loan guarantee program is a wasteful
mistake because it doesn't work.
Having spent most of my career developing strategy for
companies large and small, I have learned one important thing,
and that is that it is economics, not government policy, that
drives behavior. And it is economics, not government policy,
that will drive enthusiastic adoption of green energy.
My company, Solar3D is a technology development company in
Santa Barbara, California. We are developing an advanced
technology, a new three-dimensional solar cell that will reduce
the cost of solar energy by about 50 percent. Our objective is
similar to that of the ill-fated Solyndra: to develop a new
solar technology that can change the economics of the industry.
However, our manner of execution is very different.
We have been supported by private investment in our company
since the establishment in August 2010. We are not dependent or
depending on government funding. We certainly do not expect
such support will be necessary to facilitate commercialization
of our new technology.
Our go-to-market strategy will be to partner with a company
that has the know-how to manufacture products similar to ours.
While the 3D solar cell is a unique concept, our engineering
approach has been to design a product with existing equipment,
methods, and facilities in mind. We lease our facilities and we
are able to pay the University of California for the use of
higher level clean rooms and labs for our initial work in
designing our new technology. These measures keep our capital
costs low. We keep our staff lean and hiring key personnel for
full-time work and then we use consultants to keep our
operating costs low.
By contrast, Solyndra's unique technology attracted a $535
million loan guarantee, but there were many problems that
happened as a result of their execution strategy. One is that
they had to use all new machines. A second one is that they
built a brand new 300,000 square foot facility, complete with
whistling robots. Three is that, even when the award was
granted, it was clear that their operation was failing. And,
finally, it was reported that bonuses were paid to the
executives, despite the poor performance.
The Department of Energy's loan guarantee to Solyndra was
an embarrassing example of the current system. The investment
was undoubtedly scrutinized and rejected by nearby Silicon
Valley venture capitalists, organizations abundantly more
qualified to identify good investments than government
committees. There was no urgent strategic need for the U.S. to
have Solyndra rush its product to market. The decision to fund
Solyndra's attempt to commercialize does not stand up to
reason.
However, politics ultimately trumped reason. The
bureaucrats awarding the financial aid were beholden to their
political supervisors who had promised Americans that they were
going to fix the U.S. economy by creating millions of green
jobs, something that could not possibly happen in any time
frame worthy of consideration. The price of Solyndra's failure
was borne by the American people.
At Solar3D's current level of development, our company has
a much better chance than Solyndra ever did of creating a game-
changing technology. We have reached this point on the
principles of free enterprise of risk or return, without the
use of government aid. In the end, we will become commercial
for less than $10 million, with the hope of creating a
technology that will change the landscape of solar energy. It
will be an example of the amazing American economic system at
work.
Government has a legitimate role in supporting basic
research. ARPA-e, the program that awards small tranches of
money for basic research and development in alternative energy,
will receive $250 million in funding this year, which is only
half of what we lost on the Solyndra project alone. This
program can and should be expanded. Its objective is to fund
innovative technologies that will improve the economics of
alternative energy, which is ultimately the only path to
widespread adoption of clean energy.
The loan guarantee program should be retired permanently.
The path to commercialization requires brains, discipline, and
grit. It is rarely aided, and often impeded, by government
involvement. Our Government should trust the free market forces
that have made American great.
Ultimately, our Country's investment in renewable power
must help us become more globally competitive. Job creation and
other ancillary goals are byproducts of renewable energy growth
and are worthy objectives, but simply come as a result of
successful businesses. The most important reason to invest is
to get control of and reduce the cost of power generation in
our Country.
The desire for more jobs and employment is a political and
social desire, not a business desire. A simple review of the
DOE website reveals that about $16.6 billion has been put out
in guarantees in the 1705 Program and has created 2400 jobs.
That is $6.3 million per permanent job. It is not an economic
program.
Businesses are not made successful by more jobs. People get
jobs by being competitive in the free enterprise system, by
preparing themselves to be employed and to be better than the
existing candidates. Renewable energy should be the same, by
being great and productive in renewable energy. We need to
produce the best products for the lowest price in the world,
and that means that we need to get better operationally through
the discipline and grit of the free enterprise system.
[Prepared statement of Mr. Nelson follows:]
Mr. Jordan. Thank you, Mr. Nelson. Appreciate that.
Mr. Kats, you are recognized.
STATEMENT OF GREG KATS
Mr. Kats. Thank you very much for the opportunity to speak
on these important issues today. The hearing addresses several
questions. One, is the DOE Loan Guarantee Program successful
financially? Specifically, does the program meet or fail to
meet its financial objectives? Two, is the DOE loan program
successful in non-financial objectives? Specifically, does it
meet or fail to meet additional objectives, including
strengthening job creation, security, and competitiveness?
The DOE loan program has three parts, two of which were
established in the George W. Bush Administration and one of
which was established in the Obama Administration. Section 1705
of the DOE loan program was established through the 2009
American Reinvestment and Recovery Act as part of a far larger
program to accelerate U.S. investment and employment in
response to the 2008-2009 deep economic downturn.
Federal loan guarantees like 1705 are established to enable
financing of projects that would otherwise probably not receive
financial funding and, like other bank and government
commercial lending programs, assumes a default rate as normal
and expected. In establishing the 1705 Loan Guarantee Program,
for example, the Office of Management and Budget predicted, and
Congress budgeted $2.47 billion to cover expected defaults or
partial defaults.
Defaults in Solyndra and Beacon after some funds are
recouped from both parties are likely to net out to about $300
to $400 million. This is roughly 2 percent of the amount
guaranteed. If there are no more losses, then the program would
have to be viewed as a resounding success.
While it is easy in hindsight to criticize the DOE loan
program, the only fair basis for judging success or failure is
whether the program achieved its financial objectives. Review
of the loan portfolio outstanding suggests total defaults are
ultimately likely to be in the range of $400 to $800 million,
or about one-quarter of the amount projected and budgeted.
Based on a reasonable assessment of outstanding portfolio
financial profile and risks, the DOE loan program can therefore
rationally only be viewed as a big success. There are other
objectives, including security.
The Army and Navy both have net zero programs aimed at
reducing energy use on military bases, with the Navy targeting
50 percent of its bases to have zero net energy consumption by
2020 from a combination of renewable energy and energy
efficiency. Energy is, in the words of Admiral Mullen, about
not just defense, but security; not just survival, but
prosperity. Our national defense infrastructure and systems
hold the potential, in Admiral Mullen's words, to help stem the
tide of strategic, security issues related to climate change
while improving operational effectiveness.
The wind and solar innovation and industries were largely
developed here in the United States, but our major competitors,
including China and Germany, have, through sustained Federal
domestic subsidies and purchases, rapidly expanded the size and
strength of their domestic wind and PV corporations. Today, of
the top 10 global wind and PV manufacturers, only one of each
is located in the United States. We should be deeply concerned
about the security implications of the U.S. losing its global
competitive leadership in these critical industries.
Broad public support for expanded Federal investment in
renewable energy reflects this understanding. China and Germany
are out-investing us. Given the strategic and security
importance of clean energy industries, weakening Federal
support for the U.S. wind and PV and other clean industries
undermines U.S. competitiveness and security. For security and
financial reasons, the DOE should use the 85 percent of its
1705 funds that are still unused and still available in the
Treasury to fulfill its purpose of funding and supporting
additional U.S. clean energy technologies and companies.
Defaults in the 1705 program to date have been far below
projected. We expect, over time, to be a total of only one-
quarter of what is budgeted. The clear financial success, the
employment and security benefits demonstrated by this program,
demonstrates that the DOE should ramp up its loan guarantee
efforts and provide loan guarantee support for roughly another
$30 to $40 billion of U.S. clean energy projects and companies.
The DOE 1705 Loan Guarantee Program provides an important lift
to U.S. clean energy investment growth, both strengthening job
creation and supporting the strength of U.S. clean energy
industries. But our main trading competitors, including China
and Germany, are out-investing us.
Given the strategic, security and employment importance of
U.S. clean energy industries, weakening Federal support for the
U.S. wind and solar industries undermines U.S. competitiveness
and security. If the U.S. military is forced to import the
technology it needs to achieve its mission, a shift into clean
energy, it will weaken U.S. security.
For financial security, employment, and competitiveness
reasons, the DOE should use the 85 percent of its fund unused
and still available to backstop U.S. energy companies and
projects. And given the clear success of its loan program to
date, based on rational measures of financial performance and
on other measures, including security, employment, and
competitiveness, the largest risk is that DOE slows its loan
guarantee program.
Failing to make substantial additional loan guarantees to
expand U.S. strength in renewable and clean energy, strengthen
U.S. job competitiveness, and security, would be an irrational
and costly failure. The losers would be U.S. industry, U.S.
military, U.S. taxpayer, and the U.S. workers. The only
beneficiaries would be China and our other international
competitors.
Thank you.
[Prepared statement of Mr. Kats follows:]
Mr. Jordan. Thank you, Mr. Kats.
Mr. Witsoe.
STATEMENT OF CRAIG WITSOE
Mr. Witsoe. Mr. Chairman, members of the Subcommittee, my
name is Craig Witsoe. Since November of last year I have been
the CEO of Abound Solar, an emerging U.S. technology company
that manufactures solar panels in Colorado. We have an R&D
facility in Colorado, as well as a factory, and we also have a
planned site in Indiana that would be our second U.S. factory.
Abound is very much an American story. Our company stemmed
from advanced photovoltaic research started in the late 1980s
at Colorado State University. Early funding came from the
National Science Foundation, as well as the National Renewable
Energy Lab.
In 2007, Abound was formed as a startup company to
commercialize this very innovative research. Abound produces a
thin-film Cadmium Telluride, or CadTel, solar panel, using
proprietary advanced manufacturing processes known as closed
space sublimation. This technology, invented by Abound, allows
fabrication of all critical photovoltaic semiconductor layers
into one continuous piece of equipment.
At scale, CadTel can be produced at lower cost per watt
than the crystalline-silicon modules produced by many Chinese
companies today. Abound is one of only three companies in the
world to have significant CadTel experience. First Solar also
uses CadTel and, actually, seven months ago General Electric
announced that it would also use CadTel as its technology of
choice for a new solar module factory in Colorado. And, of
course, all three of these companies are American firms.
Crystalline-silicon are much older technology used by
Chinese companies is what they are using to dominate our
markets. Actually, crystalline-silicon was invented in America
by Bell Labs in 1954. Now, fortunately, many believe that
America can still win in the long run with new technologies
like CadTel. In fact, within recent weeks, Abound, along with
First Solar and GE, has been solicited to collaborate with the
U.S. PV manufacturing consortium, SEMATECH and NREL, to help
accelerate U.S. advancement of this critical technology for the
future. This is not unlike SEMATECH's initiative started in
1987, which helped recapture the U.S. lead in semiconductor
manufacturing.
Abound has attracted more than $300 million in private
investment. In 2009, Abound also applied for additional funding
to expand and upgrade our capacity through the 1705 DOE loan
program. The DOE review lasted nearly two years, involved
several technical and financial third-party consultants, and
the loan was finalized in December 2010.
To date, Abound has drawn down about $70 million out of the
potential $400 million loan. Funds were used to complete and
start up two production lines in Colorado. With these funds,
our company made significant progress, nearly doubling the
efficiency of our panels from 45 watts per panel up to now 85
watts per panel today. Abound has not drawn down any additional
funds under the program since August of 2011 and does not plan
to draw down any more funds.
Abound's technology and business made very solid progress
until about the second half of last year, when module prices
fell 50 percent as a result of unprecedented discounting by
Chinese solar panel companies. Abound believes that, at scale,
our CadTel modules can compete with any other global company.
But with a reported $34 billion in subsidies behind Chinese
module makers, it is very hard when the competition is a
country and not just a company.
Extreme price actions by Chinese companies believed to be
selling these solar panels below their cost has hurt many
American solar manufacturing companies, including Abound.
Instead of matching Chinese price levels, which would have
caused us to sell our panels at a loss, Abound, in February of
this year, made a very difficult decision, and that was to shut
down our current generation module production in order to
accelerate development of a next gen 85 watt module.
Now, while this very difficult action resulted in the
temporary elimination of 180 full-time and 100 temporary jobs,
we do believe that this very competitive next generation module
can create even more jobs for America in the future.
Abound's technology progress has been made possible by $300
million of private investment and $70 million drawn down from
the DOE loan. Today China dominates the global solar module
market using low-cost labor, enormous government backing, and
U.S.-invented crystalline-silicon technology. But while this
American invention has turned into Chinese industry, we believe
that the U.S. can still win in the future by developing and
scaling newer technologies like CadTel. At scale, our solar
panels can be built by American workers with good paying jobs,
at lower cost per watt than competing crystalline Chinese
panels made with low-cost labor in China.
Today technology startup companies come with significant
risks. We know that. The recent aggressive price actions from
Chinese companies do threaten to prevent innovative companies
like Abound from achieving needed scale to win. Even with long-
term superior technology, this dynamic has made the solar
market very difficult for Abound and other module suppliers.
The technology advances we have made can be critical
elements to the U.S. regaining a competitive position in the
global market. As we work to launch our next generation of
solar module with the use of private financing, we are
determined to continue to advance this U.S. technology to help
turn American inventions into American industry.
Thank you.
[Prepared statement of Mr. Witsoe follows:]
Mr. Jordan. Thank you, Mr. Witsoe.
Mr. Fairbank.
STATEMENT OF BRIAN D FAIRBANK
Mr. Fairbank. Good morning, Mr. Chairman and members of the
Subcommittee. It is my pleasure to appear today as a
representative of Nevada Geothermal Power and the Blue Mountain
Facility, and to speak with you about the many good things
occurring at Blue Mountain both in terms of what is occurring
at the power plant and also in the Winnemucca, Nevada region
and beyond. These positive things are a result of the hard work
of Nevada Geothermal Power and the Blue Mountain employees, the
support of civic leaders and ordinary Nevadans, the dedication
of trusted lenders, and, of course, the assistance of the
Department of Energy Section 1705 Loan Guarantee Program.
By way of introduction, I am the President and CEO of
Nevada Geothermal Power, Inc., which is the ultimate corporate
owner of the Blue Mountain Faulkner 1 geothermal power
facility. I am a geological engineer by training, with over 30
years of geothermal engineering exploration and assessment
experience. I am the past President of the Canadian Geothermal
Energy Association and currently serve on the board of the
Geothermal Resources Council based in California.
My geothermal experience has taken me around the world and
has included, by way of example, participation in the discovery
of Canada's Meager Creek geothermal area in the late 1970s;
geothermal resource exploration and evaluations throughout
North America and Central and South America; participation in
the development of a national power plan for Kenya and
consultation on their geothermal plants; and extensive
geothermal experience throughout the Basin and Range geologic
province of Nevada.
Before delving into the specifics of the Blue Mountain
facility, I think it worthwhile to briefly describe the nature
of geothermal power and why we are so optimistic about its
future as a clean, reliable source of energy in the United
States.
Geothermal power is a unique source of renewable natural
energy that is a product of heat generated by and stored in the
earth. The earth's core is continually producing enormous
amounts of heat, primarily by means of decay of radioactive
materials, and secondarily by energy left over from the earth's
formation.
Heat generated in the earth's core is conducted upward in
the crust. Under certain geological conditions, such as the
emplacement of shallow magma chambers around young volcanoes or
thinning of the crust in rift belts, such as occurs in Nevada,
rock and water and the earth's shallow crust is sometimes
heated to a very high temperature. Surface manifestations of
the underlying geothermal energy range from shallow hot
groundwater, hot springs, or fumaroles.
We are all familiar with some of the famous examples of
geothermal energy in action, such as volcanoes, Mount St.
Helens comes to mind; the Old Faithful geyser in Yellowstone
National Park; and other hot springs areas.
Advances in technology now allow us to harness the heat
stored in the rock and water, and convert it to electrical
power that can be used to power our cities and industries
without any of the pollution or negative side effects caused by
other sources of energy. This is not a simple task, but one
that we are committed to.
Geothermal power plants are base load, operating nonstop
365 days a year at around 95 percent availability. Other
sources of natural energy, such as wind power, solar power, and
hydroelectric power, all operate at lower capacities. And
because geothermal plants require no fuel to operate, they are
unaffected by fluctuations in prices, produce minimal harmful
emissions, and have a very small surface footprint. Geothermal
energy is, thus, a natural, clean, renewable, and efficient
source of power, the potential of which we have only just begun
to tap.
NGP's team consists of outstanding dedicated individuals
who are true experts in their respective fields. Our technical
leaders have over a century of combined experience in energy
and in the geothermal energy communities, and are universally
respected for their expertise and commitment.
Relating to this morning's project focus and the DOE loan
guarantee, NGP Blue Mountain ILLC is the registered owner of
four Federal geothermal leases covering eight sections of land
and additional private geothermal leases covering nine sections
of land, for a total of 17 square miles. Our leases include
both the geothermal production rights and surface rights
necessary for the power plant and well field activities. The
leases are situated with no competing geothermal leases in the
area and no known environmental or other impediments to current
or future drilling and plant operations.
The Blue Mountain geothermal resource represents the first
new discovery of a geothermal site in the Western United States
in 20 years. Today Blue Mountain is one of the largest binary
cycle geothermal plants in Nevada. The Blue Mountain project
was helped by the DOE Loan Guarantee Program, which backs a
loan by John Hancock. The facility's operating capacity is
sufficient to service the Hancock loan through its remaining
term. No taxpayer dollars have gone toward servicing the
Hancock loan.
But our strategic plans for Blue Mountain are more
ambitious than merely producing power to meet our loan
commitments. We continue to work actively with independent
engineers to understand and utilize the geothermal resource at
Blue Mountain. We remain bullish on the future geothermal
resource potential and are working on a plan to construct new
northern injection wells and one new production well to achieve
a targeted 52 megawatts on a gross basis, or 41 megawatts net
to the grid.
These growth plans are possible only because of the solid
foundation that has been put in place by the hard work of
Nevada Geothermal Power employees and the financial support of
our lenders and, of course, the loan guarantee put in place by
DOE.
Thank you for the opportunity to speak with you today about
NGP's Blue Mountain prospect. I am enormously proud of our
accomplishments at the Blue Mountain geothermal site and look
forward to many years of clean energy production at this
facility.
I would be happy to answer any questions the members of the
Subcommittee might have.
[Prepared statement of Mr. Fairbank follows:]
Mr. Jordan. Great. Thank you, Mr. Fairbank.
Mr. Ahearn.
STATEMENT OF MICHAEL J. AHEARN
Mr. Ahearn. Chairman Jordan and members of the Committee,
my name is Mike Ahearn. I am the Chairman of the Board of First
Solar. Thank you for the opportunity to appear before the
Committee today to offer my perspective on the Department of
Energy's Loan Guarantee Program.
First Solar is the lowest cost solar module manufacturer in
the industry, one of the largest solar module manufacturers in
the world, and the global leader in developing and constructing
utility-scale photovoltaic power plants. We have produced 6
gigawatts of solar modules, representing an estimated $15
billion or more solar power installations. We are headquartered
in Tempe, Arizona, and our global R&D and U.S. manufacturing
centers are located in Perrysburg, Ohio.
In addition to our 1,800 associates in the U.S., our
manufacturing and project development activities support more
than 7,000 additional U.S. supply chain and construction jobs.
Last year alone we spent more than $1 billion with U.S.
suppliers in 35 States for everything from glass to steel
components. We trade on the NASDAQ and we are currently the
only renewable energy company listed in the S&P 500.
First Solar's success reflects over two decades of
entrepreneurial struggle, innovation, and effective public-
private partnership. Our core thin-film semiconductor process
technology was developed in the early 1990s in partnership with
the National Renewable Energy Laboratory. In 1999 we formed
First Solar and committed venture capital funding to
commercialize the technology. A project we thought would
require two years and $40 million ended up requiring six years
and over $100 million of venture capital, as we encountered and
eventually solved a number of problems typical of startup
technology companies.
After solving the core commercial problems, we grew
exponentially. Between 2005 and 2009, aided by generous market
subsidies in Europe and technical assistance from NREL, Sandia
National Laboratory, and Brookhaven National Laboratory, we
scaled our annual production volume fiftyfold, from 20 to over
1100 megawatts; expanded our workforce tenfold, from 200 to
over 2,000 associates; reduced our manufacturing costs by
nearly 70 percent; and established ourselves as the global
industry leader.
In 2008 we decided to expand beyond manufacturing and
selling solar modules to become the first company to engineer
and construct large PV power plants for the utility market.
Photovoltaics to that point had been largely relegated to
smaller distributed generation systems and were generally
considered too costly to compete with wind and geothermal
power. To meet the cost and performance requirements of
utilities, we vertically integrated our business into the
design, engineering, and construction of solar power plants,
and, in parallel, we implemented a number of R&D programs and
initiatives to reduce costs, improve plant reliability, and
effectively integrate large solar plants onto the grid.
With now over 2 gigawatts of power plants completed or
under construction, we have demonstrated our ability to meet
the exacting standards of the utility industry. Our advanced
technology, innovative system designs, and economies of scale
have enabled steep cost reductions and accelerated construction
cycles. Our plant monitoring and control capabilities have
validated the reliability and grid compatibility of our power
plants.
By consistently delivering on our promises, we have earned
the business of some of the most respected companies in the
electric utility industry, including APS, Exelon, GE, NextEra,
NRG, PG&E, Sempra, Southern California Edison, Southern
Company, and Mid-American. These accomplishments have enabled
us to launch a major initiative to expand to new markets across
the globe without the need for expensive solar subsidies.
Our success story came close to ending in early failure.
The financial sector meltdown and economic downturn in 2009
jeopardized the entire market for renewable energy, including
First Solar's efforts to enter the utility market. The timely
and effective intervention by Congress through the American
Recovery and Reinvestment Act, by the Treasury Department
through the Section 1603 Program, and by the DOE through the
Loan Guarantee Program helped to ensure near term liquidity in
the project finance market and fostered the develop of more
robust private project finance markets. These initiatives acted
as both an interim lifeline and a bridge to the future, and for
that we are sincerely grateful.
In recent months, the European solar subsidies that
historically supported the industry have declined sharply,
impacting First Solar and the rest of the industry. However,
largely because of our successful expansion into the utility
market, we remain financially strong and well positioned to
execute through the current market environment.
I am aware that questions have arisen regarding the DOE's
Loan Guarantee Program, including questions about First Solar's
applications. First Solar worked diligently and transparently
with the DOE to ensure that sound results were achieved for
each of these projects.
I would like to thank the Committee again for the
opportunity today, and I welcome the chance to answer your
questions.
[Prepared statement of Mr. Ahearn follows:]
Mr. Jordan. Thank you, Mr. Ahearn.
Mr. Woolard. Last one. Go right ahead.
STATEMENT OF JOHN M. WOOLARD
Mr. Woolard. Good morning, Mr. Chairman, Mr. Ranking
Member, and members of the Subcommittee. My name is John
Woolard. I am President and CEO of BrightSource Energy. I have
two decades of experience in the energy and environmental
sectors as an executive, an entrepreneur, and an investor.
BrightSource designs, develops, and deploys large-scale
concentrating solar thermal technology to produce high-value
steam for electric power, petroleum, and industrial-process
markets worldwide.
Our technology is very different from solar photovoltaic,
or PV energy, the kind you typically find on rooftops. Our
projects, thousands of mirrors, called heliostats, continuously
track the sun through the day and we focus light onto a solar
receiver which sits on top of a tower. We generate power
similar to traditional power plants like coal or natural gas by
creating high temperature steam to turn a turbine to generate
electricity. Our technology has been tested and proven in the
field to the satisfaction of several independent engineering
firms at two smaller scaled facilities.
Our partners and investors include some of the world's best
known companies. Our investors include private equity firms,
strategic investors such as Chevron, BP, Alstom, and Google and
NRG as project investors. We now employ more than 400 people in
our Oakland and worldwide offices, and we have one of the
largest portfolios in the United States of signed utility-scale
power purchase agreements.
First, I am pleased to report on the Ivanpah project, with
construction management by Bechtel, that is on schedule and
within budget, and we expect to deliver power to the grid by
early next year. Ivanpah will generate and sell power to
Pacific Gas & Electric and Southern California Edison under 3
of 13 power purchase agreements that we have signed with those
two large utilities. In total, the Ivanpah project will cost
about $2.2 billion to build, and at 392 megawatts will produce
enough power for 140,000 homes each year.
We procure from a supply chain that stretches across 17
States. The majority of the materials used to build the project
are procured domestically and we estimate that approximately 70
percent of the project's value will be captured in the United
States.
The project is creating 1400 construction jobs at peak. The
project will generate $250 million in earnings for these
construction workers and, over its 30 year life, will produce
$650 million in earnings for workers on the site, including the
90 permanent jobs required to operate the plant.
In addition to the supply chain, investment, and labor
wages created, the project will also generate $350 million in
State and local tax revenues over its lifetime.
Large energy infrastructure projects typically use project
finance to provide the funds that they need for construction.
Consistent with this model, the Ivanpah project company is
jointly owned by NRG, Google, and BrightSource. These equity
investors have collectively committed $598 million to the
project company. Under the DOE guaranteed loan, the project
company is the borrower and has contracts with the two largest
investor and utilities in California to sell all of the
project's power at a fixed price for 20 or 25 years. These
future cash payments back the loan repayment.
BrightSource first applied to pre-qualify for a DOE loan
guarantee in December of 2006, proposing to use a project
finance structure. In April 2011, four and a half years after
we first applied, our loan guarantee transaction closed. During
that period, BrightSource funded well over $2 million of
independent review by world-class engineering, finance, and
legal firms selected by and operating on behalf of the DOE.
The loan guarantee program served an important role in the
market, allowing our technology and project to achieve
meaningful scale, to drive down cost, validate our technology,
and enable a new industry to succeed, in short, creating the
necessary conditions to allow commercial financing. Going
forward, we expect to finance all of our future projects
commercially.
At BrightSource, we are proud of our company and we are
proud of the Ivanpah project. I appreciate the opportunity to
address the Subcommittee and welcome any questions you may
have. Thank you.
[Prepared statement of Mr. Woolard follows:]
Mr. Jordan. I thank the gentleman.
I thank all of you for your testimony today.
Mr. Woolard, do you agree with Mr. Kats and Mr. Kucinich
that the 1705 program is working had has worked well? Yes or
no?
Mr. Woolard. I believe that the project works very well for
project financings where you have a large utility----
Mr. Jordan. And do you think it worked well in your
particular case? I think on page 5 of your testimony, ``the
DOE's review process was extremely thorough and marked by
thoughtful analysis.'' So you thought it worked well in your
situation, their agreement to give you, how much money did you
get, by the way, from the Department of Energy in the loan
guarantee?
Mr. Woolard. I fully agree with that statement. We got $1.6
billion, and it was a very thorough analysis.
Mr. Jordan. Thorough and thoughtful analysis is your
statement here. And do you believe you received the loan
guarantee, there was any political influence at all involved in
that decision, or was it based completely on the merits of the
project, the Ivanpah project, and your particular company,
BrightSource?
Mr. Woolard. I believe it was completely on the merits of
the project. We started the application in 2006 and went
through a four-year cycle.
Mr. Jordan. Okay, okay. Well, this is where I am confused,
because you guys gave us 30,000 documents on Friday and
contained in those documents, I am going to put the first email
up, if I could, was an email. Because today you are telling us
it was thorough and thoughtful analysis and there was no
political influence, and yet we have this email correspondence
between you and Matt Rogers. Matt Rogers, Senior Advisor to the
Secretary of Energy for the Recovery Act, so this is the guy
who decides things.
You say in this email, I think it is interesting the very
first thing you say is please don't distribute this, we
wouldn't want the taxpayers to know what is going on with our
money. But down in this email, the last sentence you say
Department of Energy's credibility is thin and I am currently
trying to put off communications with people on the Hill.
So which is it? Today you say they are thorough and
thoughtful and it is a good program and great analysis, but in
this email, when you are trying to get the money, you say their
credibility is thin. Which is it?
Mr. Woolard. I never said they were fast. So as we went
on----
Mr. Jordan. No, no, no, this is not about timing, this is
about credibility. You used the word credibility in this email.
Mr. Woolard. No, it is very much about timing, if you allow
me to explain. We had actually invested quite a bit of money at
BrightSource in moving the project forward, and we had a
conditional commitment and the transaction had been
contemplated to close in September of 2010----
Mr. Jordan. January 4th, 2010.
Mr. Woolard. Yes, September 2009.
Mr. Jordan. Well, let's move to the second thing, because
you just said it was completely based on the merits of the
project. Can you see the big print up there where it says also,
that last paragraph, next to last paragraph that starts with
also? Can you read that first sentence for me?
Mr. Woolard. Also, Darby at PG&E, that sentence?
Mr. Jordan. Yes.
Mr. Woolard. Also, Darby at PG&E talked directly to Obama
about the program's challenges and the bad situation it puts
him in.
Mr. Jordan. Now, who is the Darby in that, is that the head
of Pacific Gas & Electric?
Mr. Woolard. Yes. Peter Darby was the CEO of PG&E----
Mr. Jordan. And they had a vested interest in getting this
thing approved because you were providing them with the
required commitment for green power, right?
Mr. Woolard. Yes. PG&E was very dependent on----
Mr. Jordan. And is the Obama in this sentence, in your
email sent to the guy who is making the decision, is the Obama
the Obama I think it is, the President of the United States?
Mr. Woolard. Yes. I had been told----
Mr. Jordan. So wait a minute, now. So just a minute ago you
told me there was no political influence in deciding this, and
yet in an email you sent to the guy who is making the decision,
you reference the President of the United States, who just had,
according to this email, had a direct conversation with the guy
who cares pretty deeply about this thing getting approved. So,
again, which is it?
Mr. Woolard. For our project----
Mr. Jordan. Was it based on the merit and were they
thorough and thoughtful, or were they no credibility and based
on politics?
Mr. Woolard. Our project, I can assure you, was based on
the merits as I went through the process.
Mr. Jordan. So then why did you think it was necessary to
tell the guy who makes the decision that a guy who you know
pretty well, who must have communicated to you directly, talked
directly with the President of the United States?
Mr. Woolard. Mr. Chairman, with all due respect, what I
believe----
Mr. Jordan. I am just trying to clear up the confusion.
Mr. Woolard. I would like to help. What I believe that
Peter Darby was saying, I don't know, was that he had many
projects under this loan guarantee program, I believe a
significant portion of many of his projects was dependent on
this, and it had----
Mr. Jordan. But the key is you thought it was important
enough to cite in an email to the guy who is in charge of
making the decision, and one month after this email you got the
conditional approval.
Let me go to the next email, if I could. This was amazing
to me. I mean, this is just amazing. This is another email from
you to Jonathan Silver, Executive Director of the Loan
Guarantee Program, and the email you start off please see below
a draft of the email our chairman, John Bryson, who is now the
Commerce Secretary, chairman of your board, is preparing to
send to the White House Chief of Staff Bill Daley.
So you are asking the guy who is in charge of making the
decision, now you are past the conditional, this is the final
guarantee. You are asking the guy to proofread an email that
your chairman is going to send to the White House chief of
staff. And you say there was no political involvement? I mean,
this is amazing.
The person who makes the decisions, this is not some kid
asking their mom to proofread their homework; this is the
taxpayer dollars by the guy who is going to decide and you are
saying, hey, can you proofread this, even though you are going
to make the decision, because we want our chairman, who is
going to be the next Commerce Secretary, we want him to send a
letter to the White House chief of staff? And then you just
said two minutes ago that there was no political involvement in
the decision to give your company $1.6 billion of taxpayer
money.
Mr. Woolard. I believe that everything we did in our
project was fully on its merits. It is a very solid project.
Mr. Jordan. I think it would be interesting to see what Mr.
Nelson thinks. Do you think it is customary for a company to be
able to say to someone who is going to decide whether they get
a loan guarantee or not, hey, proofread this letter that our
chairman is going to send to the White House Chief of Staff,
that we are going to send to Bill Daley? That is unbelievable.
Mr. Woolard. I believe that the letter that was
contemplated to be sent was all around the program itself and
making sure that the program----
Mr. Jordan. Well, you read this letter; we need guidance
and support from the White House. You know, that is amazing.
Dear Bill, we need a commitment from the White House to
quarterback the loan closure between OMB and DOE by March 18th.
Mr. White House Chief of Staff, can you approve this by a
certain date, we need this? Unbelievable.
Let me just put up one last thing, because I know I am out
of time and I want to get to the Ranking Member.
Let me put up, because we have the Chairman of the full
Committee here. I want to put up what the Secretary said to us
just two months ago in questions that I asked him. Mr.
Secretary, how about John Bryson, former chairman of the board
at BrightSource, now the Secretary of Commerce, did that in any
way influence your decision to give a loan guarantee to
BrightSource? The Secretary said no. Did the White House ever
talk to you about any of these respective companies involving
these individuals? Did someone from the White House, chief of
staff, someone from the White House call you? And the Secretary
said no.
Mr. Chairman, I think we have to have the Secretary back in
here because certainly his response to those direct questions
certainly doesn't square with emails we got in a batch of
30,000 documents on Friday from BrightSource, and I think it is
important----
Mr. Issa. Would the gentleman yield?
Mr. Jordan. I would be happy to yield to the full Committee
Chairman.
Mr. Issa. I will commit to you today that we will invite
the Secretary back to clarify the record, along with letters to
the Administration asking to waive the normal presidential
exclusion of conversations, since it is clear that there was
direct conversation leading to a form of favoritism for
BrightSource. We will ask the President to give us the records
of those conversations with PG&E and others.
Mr. Jordan. I thank the Chairman.
Mr. Chairman, I would just ask this, too. To my knowledge,
this is the first time we have had any direct link to the White
House in the 1705 program, is that correct?
Mr. Issa. To my knowledge, this discovery is the first.
Mr. Jordan. I have gone over time and I will be generous
with the time to the Ranking Member, the gentleman from Ohio--
--
Mr. Issa. Mr. Chairman, if I could ask unanimous consent
just to place my opening statement in the record and to include
clarification as to the Ranking Member's slide he used in his
opening statement. I would like to, if you will, the gentleman
from Ohio is my long-time friend, but I think we can shed light
on the fact that those ratios, if stated effectively, including
the fact that the oil industry only receives a 6 percent credit
under 199, where any other manufacturer, such as those in your
district, Mr. Kucinich, receives a 9 percent. If you discount
where they get 3 percent less, rather than the same amount as
every other manufacturer in America, I believe we can provide
additional charts that will fairly reflect other views.
Mr. Kucinich. Reserving the right to object, I would be
happy to have you submit that and we will then, of course,
engage in a colloquy through the record where we will respond
to what you are submitting. Withdraw any objections and just be
delighted to----
Mr. Issa. I look forward to it. Thank you.
Mr. Kucinich. Okay.
Mr. Jordan. If I could just have one last question for Mr.
Woolard before yielding to the gentleman.
So, Mr. Woolard, I just want to be clear for the record.
You stick by the statement you said just a few minutes ago,
that there was no political influence exercised in the decision
by the Department of Energy to grant you $1.6 billion in a loan
guarantee?
Mr. Woolard. Yes, sir. To the best of my knowledge, this
project was judged on its merits through its process.
Mr. Jordan. Okay, great.
Yield now to the gentleman from Ohio.
Mr. Kucinich. I don't often share the concerns and
objections of my colleagues on these kinds of matters. Matter
of fact, my opening statement made it very clear I have a
different point of view. But I have to say this issue of
potential political influence on these loans ought to be looked
at. That is why I am going to submit to the record a letter to
Secretary Chu from Governor Arnold Schwarzenegger that supports
BrightSource Energy's project application.
Mr. Issa. If the gentleman would yield.
Mr. Kucinich. I----
Mr. Issa. I would join with you in encouraging that. As you
know, my former governor was the author of those mandates that
created the very opportunity for these businesses to have a 20-
year guarantee with coerced forcing of public utilities,
whether it penciled out or not, to have renewables.
Mr. Kucinich. Well, reclaiming my time. I just want to say
that, let me ask the Chair----
Mr. Jordan. Without objection.
Mr. Kucinich. Would the Chair then invite our friend,
Governor Schwarzenegger to this Committee to explain why he
supported the same BrightSource Energy project that the Obama
Administration supported? So we either have here a case of
bipartisan influence or bipartisan agreement, and the result
could be good. We may actually have here one of those
extraordinary moments where we have leaders on both sides of
the aisle that agree and support a project that should have
been supported.
Mr. Issa. If the gentleman would yield. I will personally
call my dear friend, Governor Schwarzenegger, former governor,
and invite him. I suspect that if he can get away from his busy
schedule of new movies, that he will honor us with his
presence. But I will personally call him.
Mr. Kucinich. That would be great. Thanks, Mr. Chairman.
I would like to now go to my questions. And I think that,
based on the clock, I probably have five minutes here.
Mr. Issa. I would ask unanimous consent the clock be reset
to at least six minutes.
Mr. Kucinich. Thank you very much, Mr. Chairman. See how
Democrats and Republicans get along, not only on this panel,
but also with our energy policy.
[Laughter.]
Mr. Kucinich. Now, the Majority published a report in which
they concluded ``The Committee identified many cases where the
DOE disregarded their own taxpayer protections, ignored lending
standards and eligibility requirements, and, as a result,
amassed an excessively risky loan portfolio.''
Bloomberg Government came to a different conclusion.
Bloomberg recently studied DOE's 1705 Loan Guarantee Program.
The title of that report is Beyond Solyndra: An Analysis of
DOE's Loan Guarantee Program. I ask unanimous consent that it
be placed in the record.
Mr. Jordan. Without objection.
[The information follows:][This report can be found on-line
at: http://about.bgov.com/2011/12/01/bgov-study-solyndra-
failure-obscures-low-risk-energy-guarntees/]
Mr. Kucinich. Bloomberg concluded that the 1705 DOE loan
portfolio is ``composed of predominantly lower risk projects.''
Question to Mr. Kats. Is the Majority's report correct or
is Bloomberg Government? And did DOE amass an excessively risky
portfolio or is the portfolio composed of predominantly low
risk projects?
By the way, I want to ask that the slide showing the
distribution of projects within the entire portfolio, could we
put it up on the monitors?
Finally, Mr. Kats, I need brief answers. I have a whole
bunch of questions I have to go through in the next five
minutes. So could you give me an answer?
Mr. Kats. I think Bloomberg is pretty clearly right. The
default rate, by the time you assume all defaults come in at
one-quarter of what is budgeted. That is the bottom line.
Mr. Kucinich. Okay, the slide shows the vast majority of
projects funded through 1705 were power generation projects.
What is the difference between the risks associated with power
generation projects, as compared to manufacturing projects, Mr.
Kats?
Mr. Kats. Power generation projects are typically based on
long-term contracts with a utility or some other entity;
whereas, a manufacturer, it is higher risk because it goes into
the company. In some cases the companies have long-term
contracts; sometimes they don't. So, again, the power
generation contracts are very low risk because you have long-
term agreements to buy the power generated from the funded
assets.
Mr. Kucinich. So as I understand it, one reason why the
portfolio can be considered low risk is because most of the
projects that receive 1705 loan guarantees are for power
generation, and DOE required these companies to have long-term
agreements in place with nearby utilities to purchase the power
once built. This means the projects have a guaranteed income
stream, which greatly limits any risk of default, is that true?
Mr. Kats. Exactly.
Mr. Kucinich. Okay.
Now, Mr. Woolard, do you already have agreements in place
to sell power to major utilities once the projects are
completed? Brief answer.
Mr. Woolard. Yes, sir. All power is sold for 20 years.
Mr. Kucinich. And you did that because DOE required that
you have those agreements before you received any Federal loan
guarantee, is that correct?
Mr. Woolard. I believe that the loan guarantee depended on
those long-term power purchases.
Mr. Kucinich. Some may ask why the Federal Government
should do anything that could cause loss of taxpayer dollars,
as any loan guarantee program can.
Now, Mr. Kats, why did Congress design the 1705 Loan
Guarantee Program to choose projects that would have some
degree of risk associated with them?
Mr. Kats. Because these are projects that are probably
otherwise unable to get funding.
Mr. Kucinich. Would it have been possible for DOE to
accomplish the goal of the law, to spur technological advances
to renewable energy technology, without incurring any risk of
losses?
Mr. Kats. No, because if it had gone for risk-free
projects, those would have been projects that would have gotten
private sector funding.
Mr. Kucinich. Okay, so you have Congress appropriating
$2.47 billion as a kind of insurance fund to cover project
losses. That is about 15 percent of the total amount of loan
guarantees. Now, detractors of this program like to point to
the bankruptcy of Solyndra to discredit the entire program, but
the actual amount of losses is much lower.
I am going to ask staff to put up the slide showing
projected losses compared to much smaller actual losses.
[Slide.]
Mr. Kucinich. Now, Mr. Kats, if Congress set aside money to
cover project losses, and then one or several companies ended
up causing losses, would you say the entire program is a
failure or that it is working as designed?
Mr. Kats. No. As a venture capitalist and as a PE investor,
it is very clear that when you make a portfolio of investments,
you hope that many will succeed; you expect a few to fail. What
is impressive about this DOE loan program is how few have
failed. The actual defaults are about 2 percent; that is, by
the time you anticipate all of the defaults coming through,
only one-quarter of the defaults that were budgeted and
projected will occur. So by any reasonable measure this has
been a very successful program that should be extended and
expanded.
Mr. Kucinich. So do you expect a default rate of the 1705
loan guarantee portfolio to exceed the 15 percent threshold
that Congress itself anticipated?
Mr. Kats. No, it will be much less than that, perhaps one-
quarter.
Mr. Kucinich. So you expect it to be about a quarter?
Mr. Kats. Correct.
Mr. Kucinich. Okay. And a quarter of?
Mr. Kats. A quarter of the 15 percent. In other words----
Mr. Kucinich. Okay, so the program, as I said in my
testimony, you said in yours, the program is performing better
than expected in financial terms. But how is the program
performing in terms of policy? Are the 1705 program financings
spurting technological advances or not?
Mr. Kats. Absolutely. These are breakthrough technologies.
We have heard from the CEOs here. For the U.S. military, this
is one of their most important strategic objectives.
Mr. Kucinich. Mr. Ahearn, what do you say?
Mr. Ahearn. The projects that we are building currently
would not have been financed and would not be under
construction if it were not for the loan guarantee----
Mr. Kucinich. Is the program performing in terms of policy,
yes or no?
Mr. Ahearn. As relates to the types of projects that Mr.
Woolard and I and Mr. Fairbank are discussing, yes, it is
performing.
Mr. Kucinich. Well, the whole point of this hearing it
seems to me is that my colleagues, my friends on the other side
of the aisle seem to believe the Federal Government should not
invest in green energy technologies. One expects my friends to
be pro-business, but on this Committee we seem to have some
confusion about that.
Mr. Kats, Ahearn, Willard, in the one second that remains,
what is the risk of doing nothing? What would it mean for your
industry and the economy in the long run if my colleagues got
their wish and there was never a 1705 loan guarantee?
Mr. Ahearn. Make the Chinese very happy and the U.S.
military very unhappy.
Mr. Kucinich. Mr. Ahearn?
Mr. Ahearn. Well, maybe I differ slightly on some of these
points----
Mr. Kucinich. I am out of time.
Mr. Ahearn.--the bridge has allowed us to advance the
private markets.
Mr. Kucinich. Mr. Woolard?
Mr. Woolard. I believe that we would lose U.S.
competitiveness worldwide because building things up in our
backyard is important.
Mr. Kucinich. Okay, thank you.
Mr. Chairman, thank you. Appreciate it.
Mr. Jordan. I thank the gentleman.
I am confused again. Now, which is it? Is this loan
guarantee program so great and these companies are so wonderful
this is apple pie, and yet Mr. Kats says they couldn't get
funding in the private sector? It can't be like this is so
wonderful, but we need the taxpayers and we need political
influence to make sure the taxpayer money gets put at risk. Mr.
Nelson didn't have any of that and he was able to--again, I am
confused. It is so wonderful. And is the standard only a couple
of companies, only 2 percent, 4, whatever the number is, are
going to fail? Is that really the standard we want?
Mr. Kucinich. Would the gentleman yield?
Mr. Jordan. I would be happy to yield.
Mr. Kucinich. I think that you have a witness who has
presented he didn't need help, and we have other witnesses who
say that without this we wouldn't be able to be competitive. So
maybe both things are true.
Mr. Jordan. Yield now to the gentleman from Tennessee, Mr.
DesJarlais.
Mr. DesJarlais. Thank you, Mr. Chairman. And thank the
witnesses today.
I think maybe only in Congress can we come out and testify
that the results are better than we thought they would be or,
in other words, we are not failing as bad as we expected. We
look at this questioning today and I look at it from the
standpoint of the taxpayers, as we all should.
Mr. Ahearn, when you started your testimony, it sounds like
First Solar is a pretty good solid company?
Mr. Ahearn. Yes, sir, it is.
Mr. DesJarlais. It is doing well?
Mr. Ahearn. Yes.
Mr. DesJarlais. Okay. And without the Government help or
the taxpayers' help you don't think the company would be doing
this well?
Mr. Ahearn. I think we would be doing very well. Without
the help we would not have been able to enter the U.S. utility
market with these projects.
Mr. DesJarlais. Okay. Now, you said that the company is
traded on NASDAQ?
Mr. Ahearn. Yes.
Mr. DesJarlais. How did it rank last year in terms of other
companies on the S&P?
Mr. Ahearn. I am not sure I understand what the ranking
criteria would be, but if you are referring to the stock price,
the stock price declined last year, in line with the industry.
Mr. DesJarlais. Okay. In 2008 it traded at over 300 shares,
is that right?
Mr. Ahearn. Yes.
Mr. DesJarlais. Okay. And currently trades about $17?
Mr. Ahearn. Yes.
Mr. DesJarlais. If I told you it was the worst performing
S&P stock in 2011, would that surprise you?
Mr. Ahearn. It would be out of line with the strong
fundamentals of our company, but I don't know the statistics on
the stock price.
Mr. DesJarlais. And you are Chairman of the Board and
former CEO?
Mr. Ahearn. Yes.
Mr. DesJarlais. Okay. Do the executives at First Solar have
a lot of confidence in the company's performance?
Mr. Ahearn. Yes, they do. We all do. We feel like we have
been built a fundamentally extremely strong company that has
got a great platform to expand our markets and our business.
Mr. DesJarlais. Do you know in 2008, or starting in 2008,
about how much money that First Solar executives pulled out of
the company, in other words, selling their own stock?
Mr. Ahearn. No, I don't.
Mr. DesJarlais. Two point one billion dollars. And I think
you yourself pulled out roughly $400 million? Is that right?
Mr. Ahearn. I don't know the dates, but I did sell stock
over an extended period of time, that is correct.
Mr. DesJarlais. Okay. Well, this program that we are trying
to decide whether it is good or bad, 22 of the 26 prospects on
these loan guarantees were rated basically as junk. So when you
say the company is doing well, your executives clearly didn't
have the confidence; they were pulling their own money out.
Yet, you think it is okay for the taxpayers to invest in this?
Mr. Ahearn. Well, with all due respect, I disagree with the
statement that the executives didn't have confidence. We have a
deeply committed team. There is a lot of money still invested
on the part of that team and we are focused and growing, and we
are fundamentally strong. So I disagree----
Mr. DesJarlais. Okay, so if it is $300 a share to $17 for
the executives, I guess you just got out as good timing?
Mr. Ahearn. Look, I sold my shares over a multi-year period
under transactions that were fully and properly disclosed----
Mr. DesJarlais. Okay. Well, that is your business. Let's
move on.
Did First Solar pressure the Department of Energy to
approve its three loan guarantee projects by promising that the
loan guarantees would enable First Solar to build a new
manufacturing plant in Arizona that would create new jobs?
Mr. Ahearn. No, we did not.
Mr. DesJarlais. Could we put up slide three?
[Slide.]
Mr. DesJarlais. Does that look familiar?
Mr. Ahearn. I have seen this email, yes.
Mr. DesJarlais. Okay. Would that insinuate that maybe they
were pressuring them to move forward on this project to----
Mr. Ahearn. No, it would not, not at all. These projects
were all evaluated independently on their own merits. The
manufacturing facility, which we hope to build at some point in
Mesa, was in no way connected with the applications or the
projects.
Mr. DesJarlais. What is the status of the plant in Arizona?
Mr. Ahearn. It is on hold.
Mr. DesJarlais. Okay. So you are saying that that wasn't
used to entice the DOE to package these loan guarantees, to
push them to approve it? You didn't promise that it would
create new jobs?
Mr. Ahearn. We did not promise. The loans were not
packaged. It was not part of the process. The loans were
evaluated specifically on each project's fundamentals.
Mr. DesJarlais. So the plan is not producing solar panels
for the Department of Energy loan guarantee projects, they are
not producing those that First Solar promised? You are saying
they didn't promise that?
Mr. Ahearn. Did not promise that, no.
Mr. DesJarlais. Okay.
That is all I have for now. I yield back.
Mr. Jordan. [Remarks made off microphone.]
Mr. Kelly. I thank the Chairman.
Dr. DesJarlais, I think your questioning is right in line.
You know, one of the things that I think comes into play
when we have these hearings is that there is a question about
respect for the people that come in and testify, and I want you
to understand that we do have the utmost respect for you. But I
also want you to understand that the most basic responsibility
I have serving in Congress is respect of the hardworking
American taxpayers that fund all these projects that you are
talking about.
And I get confused sometimes as to where is it that we are
really looking to protect and who is it that we are looking out
for. And I have to tell you, coming from the private sector, I
never had the luxury of having the Government underwrite loans
for me; I have always had to provide my own capital, had to
provide my own character, had to provide everything from the
private sector comes from yourself.
And that is what concerns me, Mr. Ahearn, I have to tell
you. Your SEC filings, and maybe we can put up a slide. Can we
put up a slide that shows--I think it is slide 17, maybe.
[Slide.]
Mr. Kelly. Because Dr. DesJarlais asked you about the
performance of your company. You are saying you have such great
confidence in your company and how well your company is doing,
and I look at it and it goes from $303 a share, I believe. You
know what it traded at yesterday? It was $15 a share. So I
don't know. I am not questioning your investments; I am just
questioning when you say you think it is doing quite well and
you have great confidence in the company. Why would you sell so
much of your own stock in it? Why would you cash in on it?
Mr. Ahearn. Well, let me give you the reasons why I think
it is so fundamentally strong.
Mr. Kelly. No, no, don't give me that. Really, I look at
the chart, I don't think you are fundamentally strong at all. I
think your shareholders are the ones that tell you in the
marketplace you are doing a terrible job. But whenever you sell
your own shares of stock, and the people that are on your
executive board sell your shares of stock, August 7th, 8th, and
9th you sold almost 700,000 shares of stock in a three-day
period.
Now, you are voting with your feet. You are getting the
heck out of a situation, saying I have to get out of this. But
what I would really like to do, I would like these hardworking
American taxpayers to put money into my company. I am the CEO,
I know what is going on, I have been there from its birth. I am
watching this thing grow and I have so much confidence in that
company that I am going to cash out. I am going to take my
money and run and I am going to ask these hardworking American
taxpayers just keep funneling money in, because someday,
somewhere out there this dream is going to come true.
The hopes and dreams of a company that someday, this is the
hockey stick, it is flat and someday it is just going to go off
the charts. Now, we don't know when that day is coming, but
some day it is going to be there. Now, I have to tell you I am
not going to be there to watch it, I am going to cash out now.
I am taking my money and I am running. But I want you folks out
there that go to work everyday, get up everyday, go to work,
pay your taxes, clothe your kids, put food on the table, I want
you to continue to fund this project because, you know what,
some day this is going to be great.
I can't believe we sit here and we listen to this, and the
question that comes up is who in the world is funding these
projects. It is not the DOE. This is not the DOE's money. This
is hardworking American taxpayers' money. And I am so sick and
tired of hearing about disrespect. We don't have respect for
green energy, we don't have respect for these folks that put
everything on the line. When you are getting out of something
as quick as you can and asking taxpayers to go in deeper and
deeper and deeper, what message does that send?
Mr. Ahearn. I started this company in 1999 and spent over
10 years of blood, sweat, and tears----
Mr. Kelly. And we started our company in 1953.
Mr. Ahearn.--and investment----
Mr. Kelly. Yes, I understand. But I didn't have taxpayers
bail me out. I have to tell you, this is disappointing. You
tell me it is okay for you to sell $450 million in--$450
million you pulled out, is that right?
Mr. Ahearn. If I may----
Mr. Kucinich. Would my friend yield?
Mr. Kelly. This is just a yes or no question.
No, not right now, Mr. Kucinich.
Mr. Ahearn. I don't have the numbers, so I don't know.
Mr. Kelly. SEC filing. I do have the numbers. I do have the
numbers. And to sit here and listen to this week after week,
month after month, and then go back out and listen. When I go
back home, when I see people paying as much for a gallon as gas
as they pay for a gallon of milk, when I see people working two
jobs to put food on the table and clothes on their kids' back,
when I see people that worry about whether they are going to
have a job next year, and then we are telling them, don't worry
about it, we are looking out for you.
No, the respect, the respect comes to the American
taxpayer. That is who the respect comes from. I have no respect
for a situation where the chief executives take their money and
run, and ask the American taxpayers to continue to fund a
project--$300 a share to $15 a share and you guys are doing
well? I don't know where in the heck you define well, what
dictionary you look it up in, but this is absolutely abysmal
and this is why the American people have a great deal of
wonderment now and the lack of trust in the people they send to
represent them. The DOE made a horrible, horrible decision, and
continues to do that.
Mr. Kucinich, I apologize for not yielding back to you, but
it hard to yield back when I have to go back home and walk in
Western Pennsylvania and watch people who can't make their
house payments, can't make their car payments, can't put food
on the table, can't educate their kids, and we find out that we
are pouring money down an open hole and the chief executive
officers bailed out and asked the taxpayers to put more money
in.
Mr. Kucinich. I ask unanimous consent for the gentleman to
have another three minutes, and I would ask the gentleman just
to yield briefly to me.
Mr. Kelly. My time is up, so----
Mr. Kucinich. Unanimous consent so you can have three more
minutes.
I share your passion for what happens with taxpayers'
dollars that are involved in investments, but I think what
would be helpful is if we could have the witness respond for a
couple minutes and explain your position on this and address
the concerns that Congressman Kelly has raised.
Mr. Ahearn. Thank you. Thank you very much.
Mr. Jordan. The gentleman may respond.
Mr. Ahearn. The first point I would make is that the DOE
loans that we are talking about in this case were not made to
First Solar. This was not First Solar's private capital,
corporate capital funding. These loans were made to three
projects that First Solar is supplying product to that are
owned by sophisticated utility investors with utility off-
takes. So these are projects not funding First Solar. This is
not the same kind of situation that Solyndra or Abound or these
manufacturing loans.
First Solar's corporate funding is provided by equity
funding, which initially came through our venture capital
company starting back in 1999. We took the risk that you are
talking about should be taken by venture capital and not
taxpayers, we took that risk. We were successful and able to
bring the company public.
As a public company, there is typically a replacement of
venture capital money for institutional money. It is a very
normal thing for venture capitalists, once they take a company
public, to sell stock over time, get the proceeds so that they
can go recycle that back into early stage companies. That is
what happened here. The sales by me and other people on the
team have absolutely no reflection on our conviction and belief
in the company and its fundamentals.
And if I could just, on the fundamentals of the company,
look, we have guided to $3.5 billion of revenue this year, net
income on a gap basis of around $315 million, operating cash
flow of around $1 billion this year. We have pointed out that
we have multi-year visibility into demand that will continue to
drive strong profits and cash flow, and we are now expanding
into emerging markets without the need for subsidies, taking
what we have demonstrated with the benefit of the DOE Loan
Guarantee Program and deploying that through exports into other
markets.
What happens to the stock price day-to-day is subject to
all kinds of things beyond our control, not the least of which
are short interest investors. So I can't control that; I can't
speak to it. I can control the fundamentals and I am telling
you they are very sound.
Mr. Jordan. The gentleman from Pennsylvania wish to
respond?
Mr. Kelly. No. And I understand everything you are saying,
but I am talking about your personal money. When you are
pulling money out, you are selling 700,000 shares, and I get
it, I get it, believe me. I get it. Venture capitalists will
always take a risk that is underwritten. The lower the risk,
the more money they put in; the higher the risk, the more
interest they want. These are loans that there really is no
payback. This is a loan from a DOE that really is kind of, it
is a gift, it is free money. It really is, it is free money.
You don't have to qualify the same way I have to do.
Listen, believe me, I have been every day of my life. I
have had to actually go out and borrow money, put up my own
collateral, have my own skin in the game. So I don't want to
get with this stuff. I just came from Disney World, by the way.
There is a fantasy land down there too. It is not like this
one; you actually have to pay your own way there, you don't get
it for nothing.
But I have to tell you when you tell me that, as a CEO, if
Steve Jobs had done that, if Bill Gates had done that, what do
you think these people would think of that? Jobs is getting out
of it, must be a good investment; I would like to get back in.
Gates is getting out of it. These guys aren't pulling out. So I
just wonder what was the reason for you selling 700,000 shares
in a three-day period. Why? And the other thing is, why don't
you buy it back now at $15 a share? It has to be a real
bargain.
Mr. Ahearn. I think I----
Mr. Kelly. Just think what you could buy with the $450
million that you got.
Mr. Jordan. If the Ranking Member of the full Committee is
ready, I will go to him. If he wants to wait, I can go to Mr.
Mulvaney and come back to Mr. Cummings.
Mr. Cummings. I am ready. Thank you very much.
Mr. Jordan. Go right ahead.
Mr. Cummings. First of all, this question is for our loan
guarantee recipients on the panel. Each of your companies
received loan guarantees for projects you are currently
advancing. I believe it is legitimate and appropriate for
members of Congress and the taxpayers to ask what you are doing
with the money, and I am sure you would agree with me. Can each
of you articulate, or a few of you, for this Committee why you
believe that a loan guarantee provided by the Government to
your projects is a good bet? In other words, what are the
taxpayers getting in return for their investment? Because I
don't want people to look at this on CSPAN and think they are
not getting something out of it, that is, the taxpayers. Would
one of you or two of you try to answer that as best you can?
Yes, sir.
Mr. Ahearn. I would be happy to, yes. In the case of First
Solar, there are three loans that have been made to projects,
large power plant projects in California that are owned by
sophisticated energy companies. These loans have been
investment-grade rated, so the taxpayers, first of all, will
receive a return of all of that money, $3 billion; they will
make a profit in addition to that that totals roughly $1
billion. The funding is allowing for roughly 1200 construction
jobs over the life of the projects; it is further enabling the
industry, the renewable energy industry in the U.S. to continue
to grow and become profitable and export-oriented, which will
in turn create more jobs So this will prove to be a very
prudent and timely----
Mr. Cummings. So it really does have a multiple higher
effect, does it not?
Mr. Ahearn. Yes, it does.
Mr. Cummings. Mr. Fairbank, could you answer that same
question?
Mr. Fairbank. Yes, sir. We received $98.5 million loan from
John Hancock, backed by the DOE loan guarantee and the 1705
criteria. There was a job criteria. We did create a significant
amount of new jobs. And another part of the criteria was to
allow companies to obtain senior debt financing. We had
borrowed money to construct the plant in a mezzanine level and
we used a good part of the money to put in place senior debt
financing and replaced some of the mezzanine debt.
Mr. Cummings. Let me just ask this. If DOE followed a
mandate from Congress when it created the Loan Guarantee
Program, then each of the products under your stewardship has
some risk associated with it.
Mr. Woolard, can you explain why it is so difficult to find
financing in the private sector when bringing innovative
technology to scale?
Mr. Woolard. Sure. We received our early backing as a
company from venture capital, who financed the company. We then
brought corporate investors in, including Chevron, British
Petroleum, and others. And as we looked at scaling up, the
first thing we did was de-risk everything with a demonstration
facility and grew that from a 6 megawatt facility that we did
in Israel to a 30 megawatt facility for Chevron. And then to go
to the large-scale power plants that had been proven. There was
not technology risk, but to do it at the size and scale that
was needed, the loan guarantee enabled that transition.
I would like to answer your first question as well----
Mr. Cummings. Please do.
Mr. Woolard.--on what the project is doing well for the
taxpayer. We have a $1.6 billion loan guarantee that enabled a
$2 billion project. There are 1700 jobs onsite today. But, more
importantly, behind this there are 10 more projects that we
have contractual commitments or power purchase agreements to
build. That will be $10 billion that will be commercially
financed. So this enables the transition from a loan guarantee
program to commercial financing, and I think that is very
important.
Mr. Cummings. Would you have been able to do all of what
you just said without the guarantee?
Mr. Woolard. No. We would have likely done a smaller. We
wouldn't have been able to do it at the scale that allowed us
to commercialize.
Mr. Cummings. You know, the reason why I am asking these
questions is because I think it is very easy to demonize
programs, and then a lot of times we don't hear of the other
side of it, and that is the benefits that the taxpayer gets,
the benefits that, it is a situation where the government is
working with private industry. We always talk about creating
jobs, and all three of you have talked about jobs being
created. But you also are talking about innovation, am I right?
Mr. Woolard. Yes, sir, there is quite a bit of innovation
enabled.
Mr. Cummings. In what sense? How so? Could you just talk
about that for my last 10 seconds?
Mr. Woolard. Well, we built solar thermal projects in the
1980s that used an older technology called parabolic trough. We
were then able to move to a higher efficiency, higher
performance technology because of this program; it enabled that
technology shift.
Mr. Cummings. Thank you very much.
One other thing, Mr. Chairman. I ask that my opening
statement be submitted into the record, please.
Mr. Jordan. Without objection.
Mr. Cummings. Thank you.
Mr. Jordan. Thank you.
Mr. Jordan. We now turn to Mr. Mulvaney, who has been
patiently waiting. The gentleman from South Carolina is
recognized.
Mr. Mulvaney. Thank you, Mr. Chairman. Thank you for the
opportunity to be here today. And thank you also to the Ranking
Member, Mr. Kucinich, for allowing me to participate.
Gentlemen, I will be honest with you. On several levels
this hearing has been very difficult for me to sit and watch.
As somebody who comes from the private sector, it is not easy
for me to sit here and watch you have to defend things that
ordinarily wouldn't be any of our business.
Mr. Ahearn, what you do with your investment capital and
the company you have built for the last 13 years, and what you
might want to do to take care of your family and reward
yourself for the work that you have put in should be none of
our business. And I desperately want it to be none of our
business.
But recognize the fact that you are not here today because
of what you do. You are not here today because of stock that
you sold or any of you here because of what industry you
participate in. You are here because you have asked us to be
here. You have brought this on yourselves. And I hate to tell
you that, but it goes beyond the loan program. I mean, we would
be silly, we would be foolish to think that representatives of
your industry, even if not yourselves as individuals, have
spent time walking up and down the halls of these buildings in
Washington for the last decade asking us to make people buy
what you sell.
We have requirements, Mr. Chairman, that we have to
purchase a certain amount now of our energy from renewable
resources. It is a Federal mandate.
You have asked us to do that. I wish that you hadn't. I
wouldn't have supported it, but you asked us to come in and
say, look, to the American people, you have to buy what these
people are selling. I am completely sympathetic to Mr. Kelly,
who would like very much for the Federal Government to go and
tell people they have to buy X number of cars and have to buy
it from him. But he didn't get to do that. When I was building
houses I didn't get that. When I was rolling burritos at a
restaurant, there was nothing that said people had to come to
my restaurant and buy my product.
Beyond that, the loan program is simply on top of that. Not
only is the 1703 program, the government guarantee program, and
remember, I think this is lost on a lot of people who are
participating or watching this, 1705 program is different in
that ordinarily, under the old program, you all would have to
pay the credit subsidy cost.
But under the stimulus program, under the 1705, you didn't
even have to pay that; the taxpayers had to pay that. So a
little skin in the game that you all would have under the 1703
program isn't even there under the 1705 program; it is
effectively a free program to you folks. And that is why we are
here.
We are not here because we don't like you as private
businessmen. We are not here because we don't want you to be
successful. To the contrary. I want you gentlemen to be
successful. I want you to grow your companies. I want the stock
to go back up to $300, Mr. Ahearn, because I know it not only
benefits you, but it benefits every one of your employees who
probably has a retirement program that buys that stock. But you
have to be here today when you ask us to get involved in your
business, and you have to be here today when you ask us to make
people buy what you sell. And I encourage you to consider that
the next time you come walking up and down the hallways and
say, I think it would be great if we took that renewable
component from 10 or 15 to 20 or 25 or 35 percent. Wouldn't it
be great if we had to have more electric vehicles? That would
be great because we make some of that stuff too.
I am tired of people coming to the government as part of
their business plan and saying, look, if we can figure out a
way to make the government buy our stuff, that will really help
us. And, conversely, if we can make the government make what
our competitors sell illegal, that would be even better. We see
that every single day and, quite frankly, gentlemen, as
somebody who came from the private sector, I am sick of it. I
wish you would compete on your own merits and that we would
compete on our merits in my business.
Mr. Ahearn, I hear what you are saying, you are saying low-
cost producer, you are down to $0.73 of kilowatt hours, a
tremendous success for your company. Please stop asking us to
help you do that. As bad as I feel for what you have had to go
through here today, Mr. Ahearn, explaining your stock
purchases, you have brought every single bit of it on yourself.
We know it; we have to do it. Mr. Kucinich does. Everybody
up here knows we just filled out our financial disclosures.
What we have to tell everybody in the Country every single
investment that we make that is worth more than $1,000. We have
to do that every single year. We choose to do that to ourselves
when we run for these offices. And what you gentlemen have
endured today, and will endure, because it is not going to get
easier, it is going to get worse. What you have brought upon
yourselves today you have brought upon yourselves by coming
here and asking us to help you.
Mr. Chairman, I know that was not going to be my line of
reasoning, but it took my five minutes, and I appreciate the
opportunity.
Mr. Jordan. I thank the gentleman. And, to the gentleman's
point, we have with us Mr. Nelson, who did exactly what the
gentleman described. He didn't come ask for help and his
company is succeeding and we applaud that.
We will turn now to the gentleman from the full Committee,
the gentleman from California, Mr. Issa.
Mr. Issa. Thank you, Mr. Chairman.
Mr. Woolard, on September 2nd, 2010, your name appears as
the CEO of BrightSource, along with Peter Darby as the Chairman
of PG&E, holding at BrightSource Energy in Oakland, California,
a fund-raiser for friends for Harry Reid. Do you remember that?
Mr. Woolard. Yes, sir, I do.
Mr. Issa. So the Senate Majority leader was pretty
important to you, important enough for you to hold it in your
corporate offices?
Mr. Woolard. With PG&E we have been asked to do this. We
also have some projects in Nevada as well.
Mr. Issa. Yes, I know. Let me ask a question. First of all,
did you speak to, when was the last time you spoke to the
Secretary of Commerce, Bryson?
Mr. Woolard. It would have been before he was appointed
Secretary of Commerce. I have not spoken to him since.
Mr. Issa. So it was during the time, though, that he was
the chairman?
Mr. Woolard. He was chairman of our company----
Mr. Issa. Right.
Mr. Woolard.--until he was nominated to Commerce, which
would have been the middle of last year.
Mr. Issa. Okay, now, my understanding is it takes a while
to get vetted, it takes a while to get nominated; it doesn't
happen overnight. So my question is when he was the chairman,
you were the president, and he wrote his email to Mr. Daley,
that was two months before he got the job. Weren't they already
in discussions? Wasn't he essentially lobbying for your
organization as the heir apparent, the person they were looking
at to be Secretary of Commerce and, at the same time, lobbying
for you?
Mr. Woolard. No, sir, I don't believe he actually sent that
email. We basically decided that was not appropriate to send
and ultimately that email was never sent.
Mr. Issa. So were there other emails that were sent during
that period of time to the White House or others at the White
House?
Mr. Woolard. No, sir, there was nothing, to my knowledge,
that was sent.
Mr. Issa. So this is just a draft that still was hanging
around?
Mr. Woolard. Exactly. We decided that it was not
appropriate and did not send it.
In addition, we were very careful with every organization
that John worked with; he was very, very careful from that
perspective.
Mr. Issa. Well, it is interesting. The Secretary is the
founder of the Natural Resource Defense Council, right? And
that group, while he was heading a public utility, that group
actually produces and participates in lawsuits that drive up
the cost of energy, don't they?
Mr. Woolard. They are an intervener in a lot of siting
issues with renewables.
Mr. Issa. So it is sort of amazing. They drive up the cost
of energy, particularly conventional energy, through a series
of lawsuits and incumbent utilities get paid a markup on
whatever their costs are, even if those costs are driven up by
an organization that is founded or participates with people who
are insiders. So I do find it interesting that he now is
supposed to be in charge of making America competitive, but in
fact has driven up the cost.
Mr. Woolard and, for that matter, each of you on the panel,
your company would not exist today if not for the loans and the
mandates, is that correct? At least as we know it.
Mr. Woolard. No, sir, I think it would be fair to say that
we would not be doing as much business in the United States. We
would be working in other countries, other jurisdictions more
heavily without the loans or the mandates.
Mr. Issa. Mr. Ahearn, would you say the same thing, that
your Malaysia factory would still be selling in Europe and you
would still be in business and you would still be an S&P 500
listed company if not for domestic mandates and guarantees?
Mr. Ahearn. We would still be a successful company, but we
would not be in the financial condition, sound financial
condition we are in, and we would not have successfully entered
the U.S. utility market. We would be a smaller company without
this.
Mr. Issa. Isn't it true that if not for a waiver as to the
carcinogens that are in your PVs, that in fact you wouldn't
even in the European Union at all? The Union did a waiver for
your technology to be fielded.
Mr. Ahearn. No, that is not true. The product isn't
carcinogenic. There is a elemental material, cadmium, that is a
stable compound.
Mr. Issa. But it needed a waiver in the European Union for
you to field it, didn't you?
Mr. Ahearn. It didn't, no.
Mr. Issa. It didn't? And you didn't rely on a single study
that you paid for in order to convince people of that?
Mr. Ahearn. No, we didn't.
Mr. Issa. You didn't pay for it or it wasn't heavily relied
on?
Mr. Ahearn. I don't remember paying for one, nor that a
single study would have been relied on. But I think what that
is referring to is the European Commission undertaking analysis
about how to regulate photovoltaics and all the various sub-
technologies, and this question did come into play about what
do you do with Cadmium-Teluride because there is cadmium in it,
so forth. Brookhaven National Laboratory and then several
comparable groups in Europe had done studies. We also funded
studies and I think there was----
Mr. Issa. Studies or a study?
Mr. Ahearn. Multiple.
Mr. Issa. Multiple studies. If you could give our Committee
copies of those studies, because we were unable to find the
quantity that you are referring to.
Mr. Ahearn. Yes. I would be happy to.
Mr. Issa. Okay, Mr. Chairman. Thank you. I hope there will
be a second round.
Mr. Jordan. Yes, there will. Thank you, Mr. Chairman.
The gentleman from New Hampshire, if he is ready to go, we
can go to him. The gentleman is recognized for five minutes.
Mr. Guinta. Thank you very much, Mr. Chairman.
Thank you all for being here today. I want to talk to Mr.
Fairbank about your loan guarantee. My understanding is your
loan guarantee was about $98.5 million, is that accurate?
Mr. Fairbank. That is correct.
Mr. Guinta. Okay. Can you tell me what it means when a
generation facility is placed in service and online?
Mr. Fairbank. That means the power plant is up and running
and operating at at least 20 percent of its capacity.
Mr. Guinta. Okay. Can you tell me when the Blue Mountain
project was placed in service?
Mr. Fairbank. It was placed in service in October 2009.
Mr. Guinta. And when did Nevada Geothermal receive its loan
guarantee?
Mr. Fairbank. We received our loan guarantee on September
3rd, 2010.
Mr. Guinta. So a full year after you were online and
operational?
Mr. Fairbank. That is correct. And I guess the process from
when we submitted our application until we got the guarantee,
that was a 10-or 11-month process.
Mr. Guinta. Okay. What was the reason that you wanted the
loan guarantee when you first started the process?
Mr. Fairbank. We were wanting to have permanent financing.
We actually had worked with John Hancock to work on a loan from
John Hancock, and they made the application to DOE.
Mr. Guinta. So you had an existing either line of credit or
loan from John Hancock?
Mr. Fairbank. No, sir.
Mr. Guinta. What money did you use to get this online?
Mr. Fairbank. We actually had a facility on commercial
terms with a senior investment bank in New York to construct
the project. They withdrew that commitment through the summer
of 2008 and we needed to scramble to obtain a mezzanine debt
loan from TCW, which was a $180 million facility. At the time
we thought of that as a bridge loan and we wold be borrowing,
we thought, $70 million, and then we thought we would go back
to the banks for the remainder of the money that we needed to
build the plant.
As it happened, several months after that, as you know, the
banking crisis was--none of these banks were operating, so we
ended up borrowing $180 million from TCW to build the plant.
That is how we built the plant.
And then that wasn't in any way any permanent financing, it
was, originally we thought of it as a bridge loan. It was a
very expensive interest rate and we used it for construction.
So we used a John Hancock loan that was used by the DOE loan
guarantee to pay back a portion of that loan.
We also hadn't finished our work. We had built the plant,
as I think you were pointing out, and that is only a portion of
the project. We had not finished our work on the well field. So
a portion of the funds were also to be used to finish the well
field.
Mr. Guinta. Okay, so you did you have financing, albeit not
permanent and at a high interest rate.
Mr. Fairbank. That is correct.
Mr. Guinta. You then could not get, through normal
channels, a bank loan.
Mr. Fairbank. We may or may not have been able to get
through normal channels a bank loan----
Mr. Guinta. But you mentioned that was around the time of
the banking crisis, so I am inferring from that that your
position would be that you couldn't get access to----
Mr. Fairbank. Oh, when we were wanting to build the plant?
Mr. Guinta. Yes.
Mr. Fairbank. We actually were forced into that loan
because we had started with our EPC contract and they were
given a limited notice to proceed, and if we hadn't acquired
the rest of the money that we needed to finish the plant, we
wouldn't have been able to hold schedule relative to the PPA
and we wouldn't have been able to hold the cost, so that the
EPC contractor had guaranteed a delivery time and a cost.
Mr. Guinta. Okay, but you did have that financing in place
and you did actually get the plant up and running because the
plant was operational back in October of 2009. So I guess my
point is why would you then get a loan in September 2010, a
year later? To me it sounds not like a loan, it sounds like a
bailout of your business plan.
Mr. Fairbank. It wasn't a bailout of the business plan, it
was putting in place senior debt financing, which is one of the
primary goals of the 1705 program.
Mr. Guinta. Could you get that financing anywhere else?
Mr. Fairbank. We utilized the program that was there. The
banks were----
Mr. Guinta. Could you get the financing from the private
sector?
Mr. Fairbank. It is possible we might have been able to; it
is a bit speculative whether we would have or not. I am sure
that we would have found a way.
Mr. Guinta. Did you try?
Mr. Fairbank. We----
Mr. Guinta. Or did you just choose to go solely into the
1705 program?
Mr. Fairbank. Well, we went to the market----
Mr. Guinta. Yes.
Mr. Fairbank.--and we had, my recollection was, four
commercial bankers, investment houses make proposals. John
Hancock made the best proposal, so we basically went with John
Hancock to see if we couldn't put together a commercial loan,
and John Hancock made the application to DOE because that
program was available and it was a great assistance for them to
be able to do that. I don't know if Hancock would have done it
without the loan guarantee; they said they might. But obviously
the DOE loan guarantee helped them make their decisions.
Mr. Guinta. Well----
Mr. Fairbank. And we weren't involved with that; we weren't
the applicant for the DOE loan guarantee, that was John
Hancock. We were involved peripherally.
Mr. Guinta. But you were the recipient of the money.
Mr. Fairbank. We were the recipient of the John Hancock
money, that is right.
Mr. Guinta. And you knew that they were going for 1705?
Mr. Fairbank. Yes, sir.
Mr. Guinta. Okay. So you have the plant in place, you file
the application. You say that you had an opportunity in the
private sector, but for whatever reason you opted not to
utilize those loans, probably because this one was a better
rate. You then repaid existing dollars. So the point of this is
that the stimulus, whether you agree or disagree with it, the
point of it was to create jobs. What jobs did this create? This
was repaying an existing loan for an existing plant that was
already in operation.
Mr. Fairbank. It was operating at 22 megawatts at the time
that we received loan, so we had placed it in service, but it
wasn't operating at its full capacity, so we had to finish the
well field. And I think it has been very transparent in our
Part 1 application for the loan exactly where the money was to
be spent. A portion was to pay down the TCW facility and a
portion was to finish the well field. The jobs that----
Mr. Guinta. I just don't see how the business practice for
the Department of Energy----
Mr. Fairbank. The number of jobs----
Mr. Guinta. Excuse me. Reclaiming my time, sir. I don't see
it as a good practice for the Department of Energy to use
taxpayer subsidized loans to provide to an entity that already
has an existing facility.
Mr. Fairbank. Well----
Mr. Guinta. That is my personal point of view, but I don't
think taxpayers in this Country want DOE providing taxpayer
loans to a company to pay back a loan on an existing facility.
But my time has expired. The Chairman has been very
gracious. I appreciate it and I yield back.
Mr. Jordan. I thank the gentleman.
Mr. Fairbank. I didn't hear a question there, so I will
just not address that.
Mr. Jordan. Okay, great.
Gentleman from California is recognized.
Mr. Issa. Thank you, Mr. Chairman.
And just following up on the gentleman's statement, I share
his situation, which is if DOE had said, look, we will give you
X amount of additional money, but you can't pay back your own
associated parent company, you would have still taken the
money. Bottom line is money flowed to a loan repayment to
yourself, effectively, as part of it, something that is, as I
understand it, is prohibited by DOE, but I am not going to ask
you if it is prohibited for DOE to do it, because they
obviously did it, as they did so many things that were wrong in
the case of these loan guarantees.
Mr. Woolard, I just want to make sure the record is clear.
When I asked about your strong support for Senator Reid and
obviously we went over these letters earlier that show that
there was direct political influence with the chief of staff
and the President, I wasn't implying there is anything wrong in
these contributions. I mean, ultimately most of the energy
companies, including all the public utilities in California,
have historically supported me; it is not the money. I just
wanted to make it clear that Senator Reid was very important to
you, as he obviously was to Mr. Fairbank.
I want to go back, though, to Mr. Ahearn. I want to make
sure I get your statement correct, that is why I asked to go
first this round. You said that you had multiple studies, but
isn't it true that by your own PowerPoint, which we have, when
it says risk, we are almost completely relying on the Vasilis
and his team. That is what that is, is multiple studies done by
one person, isn't that true?
Basically, your support for your risk, which is our
research ultimately proves, if it proves unpersuasive,
essentially this carcinogen incorporated and you say not a
risk, you had to convince the commission and his multiple
studies were a big part of how you convinced them; and a risk
was you wouldn't be selling in Europe if his studies, which you
did pay for, hadn't helped bolster your case.
Now, isn't that a more accurate statement, rather than your
saying that there were multiple studies and you didn't remember
if you pay for it? You did pay this organization; you relied
heavily on it in your own PowerPoint statement, isn't that
true?
Mr. Ahearn. I respectfully--I need to break that down.
Mr. Issa. Okay, did you----
Mr. Ahearn. I don't think that is true, no.
Mr. Issa. Did Vasilis receive money from your company for
any or all of these studies?
Mr. Ahearn. Not to my knowledge.
Mr. Issa. Okay. Were you almost completely reliant on his
studies?
Mr. Ahearn. I would say no.
Mr. Issa. Okay, you say no. So the fact that your own
PowerPoint shows that as a risk?
Mr. Ahearn. I don't know the context of this slide or where
it was made. I am happy to----
Mr. Issa. Well, it was made by you folks and delivered
under our discovery.
Mr. Ahearn. I just don't know the period of time or what
that was prepared----
Mr. Issa. Oh, I apologize. We got it from a whistleblower,
you didn't give it to us. But are you saying that you don't
believe it is yours?
Mr. Ahearn. No, no, not at all. I am just saying I can't--
that particular quote, without the context, I am not sure what
it means.
Mr. Issa. Okay.
Mr. Ahearn. But I would be happy to give you more----
Mr. Issa. We would be happy to get more of these in
discovery, since we had to get this from a whistleblower, who
basically says, look, you were reliant completely on this
individual. The whistleblower informs us that you did pay, so
we look forward to getting that right. And what we are seeing
is you needed this to work to get into the European Union, and
you needed the money to be where you are today.
I am going to ask one question because I have been waiting
to ask this for a long time, ever since they berated General
Motors, Ford, and Chrysler when they came in. What kind of jet
did you fly in on today?
Mr. Ahearn. I flew in yesterday.
Mr. Issa. Yesterday.
Mr. Ahearn. On a Challenger.
Mr. Issa. A Challenger 604, 605?
Mr. Ahearn. Three hundred.
Mr. Issa. A 300. Oh, one of the new superminis. Pretty
efficient. That was a nonstop flight from, I assume, Tempe?
Mr. Ahearn. Yes.
Mr. Issa. Okay. I just think that if you are so concerned
about--and I know it is more efficient than the big birds, but
is that really environmentally sensitive?
Mr. Ahearn. And let me point out that that has nothing--
First Solar did not pay for that; First Solar had nothing to do
with that.
Mr. Issa. Okay. Well----
Mr. Ahearn. That is something I did on my own.
Mr. Issa. We are not going to ask him if he used the money
he took out of the company. Staff already has better questions
that I do; I wouldn't ask that.
Let me just ask one more question. Your production
facilities, do they use your solar panels for the energy that
they produce in order to manufacture?
Mr. Ahearn. Not for the energy----
Mr. Issa. Okay. Is it true you looked at California and
made a decision not to come into California because of two
major factors, the regulatory environment and the cost of
energy?
Mr. Ahearn. I don't know that that is the case. I think we
looked at a number of places and----
Mr. Issa. You ruled out California, the very place that has
the mandates that help many of your companies succeed because
we mandate that we buy your much higher, much subsidized cost;
it drives up the rate payer cost dramatically and makes
manufacturing in California undesirable. So you decided not to
manufacture in a high-cost area. Basically, I see you are in
Ohio, which is a low-cost energy area. You are in Tempe,
Arizona, a low-cost energy area; they even use coal for some of
their electricity. So is it fair to say that energy costs
determine somewhat, in addition to labor costs, where you
manufacture?
Mr. Ahearn. I would say it would be one of a number of
factors.
Mr. Issa. What puts you in Malaysia?
Mr. Ahearn. We wanted to have a base of manufacturing in
Asia, as well as Europe and North America, as we were building
up the company, and at the time, when we assessed the risk
returns of the various Asian locations, having never done
business in Asia, we thought Malaysia was a moderate risk,
reasonable place to be located.
Mr. Issa. I am going to close, but just noting that if
these figures are still correct, Germany, 560 jobs; Ohio, 280;
Malaysia, 1680. It sounds like you are not an American company
particularly, you simply have a small presence in Ohio and
another one in Arizona, that, in fact, we put an awful lot of
money into putting you into manufacturing in other countries
outside America and that, in fact, the loan program
dramatically made it possible for you to have overseas jobs,
not to have American jobs. Is that reasonably correct, that the
majority of the jobs that you provide are not in America and
that the loan program facilitated that as much as anything?
Mr. Ahearn. Well, I would disagree respectfully with the
overall characterization.
Mr. Issa. Not the characterization, just the numbers.
Mr. Ahearn. In sheer numbers, most of our full-time are
outside of the U.S.
Mr. Issa. Okay, so jobs created with loan guarantees,
stimulus and others, basically not American.
Mr. Ahearn. All those jobs are American, all the jobs
directly created with the loan guarantee.
Mr. Issa. Okay, so those jobs wouldn't be there except for
these loans, but those other jobs would be is your assertion?
Mr. Ahearn. The manufacturing offshore would be, but the
R&D, the engineering, the hub of our business is here that is
supported by those. But sheer numbers I agree with you.
Mr. Issa. Thank you, Mr. Chairman. I yield back.
Mr. Jordan. I thank the Chairman.
The gentleman from Ohio is recognized, Mr. Kucinich.
Mr. Kucinich. I want to thank my friend from California for
his defense of American manufacturing. Also, it seems that the
Majority is raising a new point of view with respect to the use
of corporate jets, which I find interesting.
Mr. Issa. Dennis, you have warned me down over the years.
Mr. Kucinich. I know. We are finally happening.
I also want to ask unanimous consent--I am glad that my
friend from California, less recently from Cleveland, pointed
out that Senator Reid didn't do anything wrong here. Matter of
fact, I have unanimous consent the record of contributions from
PG&E to some of the most outstanding members of Congress, some
of the absolutely best equipped to analyze business members of
Congress who are included in this list, and I just would ask
that that be submitted.
Mr. Jordan. Without objection.
Mr. Kucinich. And I would also ask any member of the
Committee wants to join me on H. J. Res. 100, which would end
all corporate contributions, basically turn Federal elections
into public financing. H. J. Res. 100. Any of you want to join
in?
Mr. Issa. Would the gentleman yield?
Mr. Kucinich. Of course.
Mr. Issa. I assume when you say corporate you mean PAC
money. You don't mean corporate. Because corporate money has
been banned before you and I were born.
Mr. Kucinich. Right. All private money. That is what I
mean.
Mr. Issa. Thank you.
Mr. Kucinich. Thank you.
Okay, now, the question. Mr. Woolard, your January 4th
email to the DOE official you reference the fact that ``a large
group at NYC focused on this transaction and DOE ability to
execute.'' This email continues: ``Things are not good and
there is a sizeable group of private equity investment banks
writing a letter to Chu about the status of the program and
inability to get loans through.''
I need quick answers. Mr. Woolard, did this investment
group have their own money invested in the project?
Mr. Woolard. They did not represent our project; it is a
group called U.S. PREF----
Mr. Kucinich. Did they have their own money invested?
Mr. Woolard. In multiple projects, quite a few.
Mr. Kucinich. Why were they frustrated?
Mr. Woolard. It was private sector money that was coming in
as the highest at-risk layer of money, the equity tranch. But
the process at DOE was slow and things had died.
Mr. Kucinich. So the DOE review process was drawn out, is
that what you are saying?
Mr. Woolard. It was very--it took a lot longer than
anybody--than had ever been expected or been represented.
Mr. Kucinich. So why did these private equity investors, in
fact, send a letter to the Secretary and, if so, what did it
say?
Mr. Woolard. I believe what the result of what this group
was they came down and talked directly to everybody from
members, anybody who would listen to them, it was a large
group, and they said that the program was not executing. They
had private capital ready to deploy in the riskiest tranch, but
they needed----
Mr. Kucinich. So would the private investors, utility
company purchasers and your all, have reason to be critical of
DOE's being too thorough in their review of your applications?
Mr. Woolard. That was basically, the theme was that it had
taken a very long time. We took four years for a two-year
process.
Mr. Kucinich. Well, okay, the email also says this: ``Darby
at PG&E talked directly to Obama about the program's challenges
and the bad situation it puts him in. DOE credibility is thin
and I am currently trying to put off comms with Hill until we
talk.''
Now, Mr. Woolard, I assume that Darby refers to Peter
Darby, former CEO of PG&E, correct?
Mr. Woolard. Yes, sir.
Mr. Kucinich. And didn't California recently pass a law
requiring utilities to begin purchasing renewable energy in
2014 and that as much as 33 percent of any utility's energy
needed to be renewable by 2020?
Mr. Woolard. Yes, sir. The relevant law at the time was 20
percent, and then it has been increased.
Mr. Kucinich. Isn't it also the case that securing a
purchaser of the energy to be produced at your project was
imperative to DOE's evaluation of BrightSource's loan guarantee
application?
Mr. Woolard. Both BrightSource and other loan guarantee
recipients were critical. PG&E could not meet the RPS
standards.
Mr. Kucinich. So what would happen if the DOE continued to
drag it out, drag out the due diligence?
Mr. Woolard. PG&E was at significant risk with the
regulators because they wouldn't have been able to deliver----
Mr. Kucinich. Well, would they have faced sanctions from
the State if they didn't meet the renewable energy standards?
Mr. Woolard. I believe so.
Mr. Kucinich. So ultimately BrightSource was awarded a
conditional commitment in February 2010 and a loan guarantee
more than a year later, in April 2011, correct?
Mr. Woolard. Correct.
Mr. Kucinich. So after all the DOE due diligence, do you
believe that your DOE loan was awarded on its merits or because
of a conversation PG&E's CEO had with the President?
Mr. Woolard. No, I believe it was all done on its merits.
It was a very thorough process and it started back in 2006,
actually.
Mr. Kucinich. Okay, Mr. Ahearn, the Majority's recent
report refers to First Solar's loan guarantee as a scheme
characterized by failure to prove innovativeness. In March
2011, however, Arizona Governor Brewer praised First Solar's
projects, stating the company's ``presence in Arizona has been
a great engine in driving our renewable energy sector
forward.'' Senator McCain praised First Solar's decision to
build in Arizona and a top bundler for the Senator's
presidential campaign served on First Solar's board of
directors since 2010.
Do you believe First Solar's political connection had any
bearing on the application process?
Mr. Ahearn. Absolutely not.
Mr. Kucinich. Do you believe that your DOE loan guarantee
application was awarded on its merits?
Mr. Ahearn. Yes, each of them underwent a very rigorous
detailed process.
Mr. Kucinich. Now, members of Congress, including members
of this Committee, have sent nearly 500 letters to Secretary
Chu in support of green technology projects in their districts,
both Democrats and Republicans, supported Abound Solar's loan
guarantee application. Members of Congress also supported
Nevada Geothermal's loan guarantee projects.
Mr. Witsoe, Mr. Ahearn, do you believe these members of
Congress were requesting special treatment of your companies?
Mr. Ahearn?
Mr. Ahearn. No, I think they were doing what their
constituents expect.
Mr. Kucinich. Mr. Witsoe?
Mr. Witsoe. No, not to my knowledge.
Mr. Kucinich. So, Mr. Chairman, I don't really think that--
so you think they were awarded on the merits, Mr. Witsoe?
Mr. Witsoe. I know we used the loan to build our new
technology.
Mr. Kucinich. Awarded on the merits?
Mr. Witsoe. We doubled efficiency.
Mr. Kucinich. On the merits?
Mr. Witsoe. Yes.
Mr. Kucinich. On the merits?
Mr. Ahearn. Yes.
Mr. Kucinich. Okay.
So, Mr. Chairman, this broad scandal we are talking about,
I don't know, I don't see it. I think we actually have a system
here that is trying to work and we should stop beating each
other up on it. But we should invite, yeah, I think it would be
good to have the private equity people in here too. Thanks very
much.
Mr. Jordan. I thank the gentleman.
If we could put back up that email that the Ranking Member
just cited, the January 4th, 2010, email from Mr. Woolard to
Mr. Rogers.
[Slide.]
Mr. Jordan. Mr. Witsoe, do you have any communications with
the Department of Energy where you reference conversations with
the President of the United States?
Mr. Witsoe. No, not that I know of.
Mr. Jordan. Mr. Fairbank, do you have any communications
with the Department of Energy concerning your loan guarantee
program where you reference the President of the United States?
Mr. Fairbank. None whatsoever.
Mr. Jordan. Mr. Ahearn, do you have any?
Mr. Ahearn. Not to my knowledge.
Mr. Jordan. Mr. Nelson, do you have any?
Mr. Nelson. No, sir.
Mr. Jordan. Imagine that, you don't have any.
Read this paragraph: Also, Darby at PG&E talked directly to
Obama, not the President, not the President of the United
States; Obama, about the program's challenges and the bad
situation it puts him in, the President himself, I assume that
is referring to, DOE, Department of Energy's credibility is
thin and I am currently trying to put off communications with
the Hill until we talk.
Now, if that is not political influence, I don't know what
is. Think about this. This was about a $15 billion program,
right? You all are competing for some of that money. Mr. Nelson
is not.
It is amazing to me. Mr. Nelson, how did you do it? We have
just had, now, two hours of the shenanigans that went on. How
in the heck did you make it? How are you doing it?
Mr. Nelson. We have a group of committed private citizens
who love renewable energy, see the future, and have committed
the funds to our management team and our technology.
Mr. Jordan. But you guys are actually, so Mr. Nelson is
dealing with private investment, he is making it; you guys,
though, decided to compete for this available dollars. Do you
think it is an unfair advantage for BrightSource to be able to
talk directly to the White House?
Put up the other email. Put up the other email, the one--
yes, this one. Put up the one right here, where----
[Slide.]
Mr. Jordan. Now, Mr. Woolard has said under oath today that
they did not send this. Is that correct, Mr. Woolard?
Mr. Woolard. That is correct.
Mr. Jordan. But just the fact, well, let me ask you, Mr.
Witsoe. Did you ask the people at the Department of Energy if
they would proofread a letter that your chairman of the board
was thinking about sending to the White House chief of staff?
Did you guys do that?
Mr. Witsoe. No, we did not.
Mr. Jordan. Mr. Fairbank, did you have a letter that you
sent to the Department of Energy, the people who were going to
decide whether you get the loan or not, did you have a letter
that you asked them to proofread before your chairman sent it
to the White House chief of staff?
Mr. Fairbank. We didn't do anything like that.
Mr. Jordan. Okay.
Mr. Ahearn, did you guys ask the Department of Energy to
proofread any correspondence you were thinking about sending to
the White House chief of staff, pretty important guy?
Mr. Ahearn. Not to my knowledge, no.
Mr. Jordan. So do you think that potentially put you at a
competitive disadvantage when you are trying to secure a loan
guarantee program and help your company and help your projects?
Mr. Woolard. You know, my view, going through the process
we did, it wouldn't have mattered, honestly. I mean, this was a
rigorous, very objective----
Mr. Jordan. But at least it raises the concern if a
potential competitor for a scarce amount of dollars is citing
conversations with the President of the United States in
correspondence with the people making the decision, that at
least raises some whistles and some alarm bells, right?
Mr. Woolard. I can understand the appearance.
Mr. Jordan. Mr. Fairbank, do you think that raises some
concern?
Mr. Fairbank. We received bipartisan support with----
Mr. Jordan. No, no, that is not my question. Do you think
correspondence from a potential competitor for a finite amount
of money, where they cite conversations with the President of
the United States, where they send a letter and ask them to
proofread it and them to edits to it, do you think that maybe
raises some concern?
Mr. Fairbank. I don't want to get involved with that.
Mr. Jordan. Mr. Witsoe? Might potentially, maybe? Do you
think maybe a taxpayer would say that might put Mr. Witsoe's
company at a little bit of a disadvantage to Mr. Woolard's
company? Do you think so?
Mr. Witsoe. I can only comment that Abound had a fair
process, and I think that is for you folks to----
Mr. Jordan. Mr. Nelson, do you think it puts you at a
little bit of a competitive disadvantage?
Mr. Nelson. No, I don't. I think ultimately I don't blame
any----
Mr. Jordan. That is an even better answer. That is an even
better--we are back to Mr. Mulvaney's point. We shouldn't have
had this goofy program going on in the first place. If you
don't think it puts you--you can make--I didn't expect that
answer, I will be honest with you, Mr. Kucinich. I didn't
expect that. But that is even better.
Mr. Nelson. I don't blame any of these gentlemen, who I
have a lot of respect for, for working within the rules to get
every competitive advantage they can, including getting
government money. The problem is not in their approach; the
problem is in the rules.
Mr. Jordan. Exactly right. Exactly right.
Mr. Woolard, here is what I want to know. So you didn't
send the correspondence to the White House. What happened in
the course of applying and going through this process? What
took place that led you and your company to believe it was okay
to ask the people who are deciding, hey, can you edit this
because we want to send this from our chairman, who is going to
be the next Commerce Secretary, to the White House chief of
staff?
Mr. Woolard. Mr. Chairman, I don't, frankly, as I go back
through the last several years, I don't remember what exactly
transpired and would have made something okay or not.
Ultimately, we decided it was not smart to send and it was not
appropriate to send, and did not. We wanted to make sure
everything was clearly done on its merits, which I believe it
was, and that was ultimately the goal, and we wanted to make
sure it was a very clear and unambiguous process.
Mr. Jordan. And I want to be quick here because I am over
time. But I just want to be clear. When an email to the senior
advisor to the Secretary of Energy uses this kind of language,
Also, Darby at PG&E--not Mr. Darby, not the CEO--Darby at PG&E
talked directly to Obama. When you use that kind of language,
this is not, Mr. Rogers, I know you work for Secretary Chu and
this is an important thing. The CEO of PG&E has had the ability
to talk directly to the President of the--this is casual, hey,
we talked to Obama. This sounds like this was pretty common;
you had some kind of relationship with folks at the White House
where you can use this kind of language in correspondence to
the people who were making the decision about $1.6 billion of
taxpayer money.
Mr. Woolard. Actually, I think it is important to read the
language there, and I think it is important to note that Mr.
Darby was talking about the program. And at that point in time
the DOE program was not getting loans out, it was not
functioning. The program itself, nothing to do with
BrightSource's loan guarantee, but the program was not getting
loans done and it was putting not just us, but many of his
projects at risk.
Mr. Jordan. Let me ask you this. To the other email, the
draft that you asked them to proofread, whose decision was it
not to send that correspondence to Mr. Daley?
Mr. Woolard. At the end, it was John Bryson and I said that
is not appropriate and did not do it.
Mr. Jordan. And do you think, I am just curious for our
panel, do you see any concern, confusion, misstatements
possibly when you look at how the Secretary of Education, Mr.
Chu, responded to my questions two months ago, where I asked
him directly did the fact that John Bryson at BrightSource, now
the Commerce Secretary, have any influence on your decisions to
grant BrightSource a loan guarantee of $1.6 billion, when I
asked him did he have any correspondence with the White House,
did any of that influence you, and I specifically mentioned the
chief of staff, do you guys think that there is any concern or
confusion there?
Mr. Nelson? Do you think at least it was worth looking
into?
Mr. Nelson. Yes, I think it is, although I have no basis to
believe that it actually happened. But if there is some
malfeasance in that regard, I would look into it.
Mr. Jordan. Mr. Witsoe?
Mr. Witsoe. I don't have any knowledge of it.
Mr. Jordan. I figured you guys would take that.
Anyone else want to comment?
[No response.]
Mr. Jordan. I didn't think so. I didn't think so.
We will turn next to the gentleman from Maryland, the
Ranking Member of the full Committee, Mr. Cummings.
Mr. Cummings. I yield a minute to Mr. Kucinich.
Mr. Kucinich. I thank the gentleman. A couple things here
very quickly. Going back to the memo from Mr. Woolard to Matt
Rogers, the paragraph that reads, ``Also, Darby at PG&E talked
directly to Obama about the program's challenges and the bad
situation it puts him in.'' Now, is this memo talking about the
bad situation Darby is put in or the bad situation President
Obama was put in?
Mr. Woolard. As I read it, it is clear PG&E was in a bad
situation.
Mr. Kucinich. Okay. So this does not say the President was
in a bad situation, this is about PG&E and Darby?
Mr. Woolard. Right. In fact, I believe concurrent with this
there was a public report out starting to discuss their bad
situation relative to the loan guarantee program disclosure.
Mr. Kucinich. Okay. This comes up with a new aphorism, that
familiarity breeds investigation.
I also want to thank my friends from this side of the aisle
for exploring the mythologies of free market capitalism.
Mr. Cummings, thank you.
Mr. Cummings. Mr. Chairman, you have announced your
intention to hold a follow-up hearing and you committed to
inviting Governor Schwarzenegger, and I would invite you to
consider asking both Wall Street investors who wrote Secretary
Chu and the former CEO of PG&E and ask them why they believe
this project was so important. Would you do that, sir?
Mr. Jordan. I will take that up with, the Chairman of the
full Committee committed to that. I will take that up with
Chairman Issa.
Mr. Cummings. Thank you very much.
Gentlemen, I have been listening to you very carefully. I
want to go back to something Mr. Nelson said. I believe that
all of you are honorable people simply trying to carry out a
business in a very competitive world. And as I sit here and I
listen to you, I am convinced that, if I were you, I would feel
like I was being beaten up on for simply trying to do what was
best for your businesses.
And while we are sitting here going through this, there are
people all through these United States that both parties claim
they want to see become employed, millions upon millions of
them hoping and praying that they can get a job. And part of
the stimulus bill was to try to get folks employed and I, for
one, believe that it was quite effective in doing that; I don't
give a damn what anybody says. I wish we had more jobs.
But one of the things that it also was to do, and I quote
from the law, was to provide investments needed to increase
economic efficiency by spurring technological advances in
science and health, and to invest in transportation,
environmental protection, and other infrastructure that will
provide long-term economic benefits.
The reason why I am getting into this is one of the things
that we wanted to do was be innovative. I have said from many a
podium that while we may go through our economic problems, we
have to be--and the President said this--we have to be
innovative, create jobs and be innovative. That is what the
United States is all about. That is why we are the Country that
we are.
Mr. Nelson, I applaud you for saying what you said. You
said you believe these guys; these are great guys basically is
what you were saying. Maybe there is something wrong with the
rules, but these are great guys being competitive.
I want to ask you, Mr. Ahearn, talk about innovation with
regard to the stimulus and jobs. Can you talk about that with
regard to your company?
Mr. Ahearn. Yes, I sure can. Well, one way to think about
it, these three projects we are talking about are the power
equivalent of an average size nuclear plant. We have built
something here that has never been done anywhere in the world.
In order to build solar plants of that size and magnitude, we
have had to solve a lot of problems that had never been solved
before. We now have, even though they are not completely
constructed, we have people coming from all over the world to
see what we have done and we have begun negotiations and
discussions with potential customers in markets all over the
world.
As those markets take shape, the innovation and the job
creation in the U.S. for our business and for our value chain
will accelerate because the creation of goods and services that
are exported into these countries to meet their power needs
will begin to open up and grow massively. And we are really
keyed by getting solar off the rooftop, into big utility scale
power plants, and that did require, and still does, the
solution of a lot of pressing problems, and it can only be
done, some of this can be done in a laboratory; some of it can
only be done in the marketplace, at the project, encountering
and solving problems. So that is the big piece.
It directly created an average of 1200 construction jobs,
which is not trivial. It kept our factory and our supply chain
here in the U.S. running in a stable fashion, and will for
several years. But the future, I think, is the export and the
innovation that allows us to break into new markets, and this
has been instrumental.
Mr. Cummings. You know, Mr. Ahearn, I often say our
children are our living messages that we send to a future we
will never see, and listening to what you just said----
Mr. Chairman, I just ask that I get two additional minutes
like Mr. Guinta got.
Mr. Jordan. Go ahead.
Mr. Cummings. You know, the things you are talking about
are things that I take it will have spinoff into a time when we
are probably dead, in other words, what you are doing now. Is
that a fair statement?
Mr. Ahearn. Absolutely. And there are lots of follow-on
effects to this. One thing, with our success, we have put down
a marker in the marketplace where Mr. Nelson and others are now
competing to try to beat us. So you have a whole new wave of
R&D opening. Silicon Valley is full of startup solar companies
that were funded to try to beat First Solar. That is literally
the motto that some of them have. And that is really what I
think our Country has been all about, is competition and
innovation spurred by success and by market opportunities. It
is a global marketplace and the hub of the activity and the
innovation will always be in the United States.
Mr. Cummings. Mr. Woolard?
Mr. Woolard. In terms of innovation?
Mr. Cummings. Innovation, yes. And the value of innovation.
See we are talking all this stuff here today, but the big
picture is innovation and jobs, and how does the United States
stay competitive. You know, we hear a lot of talk, but we don't
always walk the walk. And what I am saying to you is you are
the guys who are like on the front line, like in the trenches,
like having to make decisions, difficult decisions, putting
your butts on the line every day.
So I am just so glad that you are here and that you are the
innovators. I just want to just get an idea. While we are
talking all this stuff, the Chinese are running, just moving
rapidly, and I just want to make sure we stay focused on what
we need to stay focused on, and that is the United States being
number one. I don't want to be number two. I don't want to be
number three. We are better than that. And sometimes I think we
get mired in stuff that distracts us, and then get mired in a
culture of mediocrity and failure, and I think we need to be
very careful with that.
I think my time is up, unfortunately.
Mr. Jordan. Mr. Nelson, do you want to be number one? Do
you want to have the best company you can possibly have?
Mr. Nelson. Yes, sir.
Mr. Jordan. Okay, good.
Mr. Woolard, just real quick. The email, the proofread
email that you sent and you asked them to take a look at, and
you said that you did not send that to the White House chief of
staff, Mr. Daley?
Mr. Woolard. Yes, sir.
Mr. Jordan. You know for certain, you clearly remember that
you did not send that email?
Mr. Woolard. I would not have sent it; I believe it would
have been from John, and I don't believe John----
Mr. Jordan. Well, which is it, he didn't send it or you
don't believe he sent it?
Mr. Woolard. To the best of my knowledge, he did not send
it.
Mr. Jordan. So you know that you didn't send it, even
though you are the one who asked for them to proofread it, and,
to the best of your knowledge, you think Mr. Bryson, now
Commerce Secretary, didn't send it.
Mr. Woolard. Yes, sir.
Mr. Jordan. Okay. Did you communicate with the White House
in some other fashion? Did you send them another letter? Did
you call them? Did you go to the White House and meet with them
about this issue?
Mr. Woolard. I have never met with Mr. Obama.
Mr. Jordan. Do you know if Mr. Bryson did while he was
still CEO? Did he meet with, did he discuss this on a phone
call? Did he or you discuss this on a phone call with the White
House chief of staff?
Mr. Woolard. I certainly never have and----
Mr. Jordan. You did not?
Mr. Woolard. I did not.
Mr. Jordan. And Mr. Bryson, to your knowledge?
Mr. Woolard. To the best of my knowledge didn't.
Mr. Jordan. Okay. Just wanted to be clear.
The gentlelady from New York is recognized.
Ms. Buerkle. Thank you, Mr. Chairman, and I apologize.
Quite ironically, I have been chairing a subcommittee hearing
for veteran affairs, making sure that the heroes of this
Country who have served our Country in service and sacrifice
are getting what they need, and our hearing today was on
prosthetic devices. So I apologize for not being here for most
of this morning's hearing.
I want to just talk for a few minutes here. A few weeks
back, in March, Secretary Chu was here and talked to us about
the loan guarantee program, and he praised the work that was
being done by the Department of Energy. And three days after
his appearance right in this very room the Secretary put out a
memo, and the memo had to do with scientific integrity. And he
stated in the memo, he laid out a very commendable framework
for the Department of Energy and specifically he stated the
Department's mission relies on objective, reliable, accurate,
and accessible scientific and technical information. The
Department of Energy is committed to ensuring a culture of
scientific integrity. And I think we can all agree that that is
a very laudable goal.
In November of 2011 the Department of Energy responded to a
letter from Chairman Issa, and I believe he referenced that
earlier while he was here, with an explanation of the
Department of Energy's awareness of the risks associated with
Cadmium-Telluride. In that letter, as their source, they cited
Professor Vasilis Fthenackis. Now, my understanding, and I am a
nurse and I spent most of my professional career in healthcare,
both with hospitals and as a nurse, my understanding is that
cadmium is a highly toxic carcinogen and could pose serious
public health risks if not handled properly.
So, Mr. Ahearn, my question is for you, at least this first
question is. Did you or First Solar, or anyone on First Solar's
behalf, ever pay Professor Fthenackis, or any organization with
him or that he was affiliated with, for research related to
Cadmium-Telluride? And that is just a yes or a no, sir.
Mr. Ahearn. As you have phrased that question, I think the
answer would be yes.
Ms. Buerkle. Thank you. Now, on the screen you are going to
see a slide here from a First Solar PowerPoint presentation
related to the company's use of Cadmium-Telluride. The
highlighted portion of the slide states that a risk for First
Solar is its reliance solely on the research of Professor
Fthenackis. So my question again to you, Mr. Ahearn, is did you
or anyone on First Solar's behalf influence or recommend
specific lines of research by Professor Fthenackis in any
fashion? And again that is just a yes or no.
Mr. Ahearn. Well, the answer is no, but I think it is
incomplete without further explanation, if you would allow me.
Ms. Buerkle. Sure. Go ahead.
Mr. Ahearn. So Professor Fthenackis was employed by
Brookhaven National Laboratory, which is charged by the
Department of Energy with assessing the environmental health
and safety aspects of all photovoltaic technologies. Before we
invested, and even after, in First Solar, Brookhaven and the
National Renewable Energy Lab conducted their own independent
assessment of the use of cadmium.
At some point after that, Vasilis Fthenackis and Brookhaven
associated with Columbia University and formed a life cycle
study center, and we contributed money, I am just not sure the
entity or how it was done, to the Columbia University Center,
but not with influence on any of their specific programs or
research.
Ms. Buerkle. Thank you. Perhaps you could comment, then,
the risk here on this first slide: We are almost completely
reliant on Vasilis, and that is Professor Fthenackis, and his
team. So--go ahead.
Mr. Ahearn. I think this might relate to the European
activities. So in the U.S. the independent assessment and
validation work around cadmium had been done by Brookhaven and
NREL. In Europe, at one point, there had not been any
comparable independent government agencies or work done to
assess Cadmium-Telluride because it hadn't been introduced to
the market, so we wanted to broaden the scope of research and
interest the relevant agencies in Europe in conducting these
kinds of assessments on Cadmium-Telluride. So I believe that is
what this is referring to.
Ms. Buerkle. Did you or anyone on First Solar's behalf at
any time request that this research undertaken by the professor
be kept confidential or otherwise not disclosed?
Mr. Ahearn. Not to my knowledge.
Ms. Buerkle. On the screen you are going to see another
slide.
And I see that I am running out of time here, so I will
make this quick, Mr. Chairman.
On the screen you are going to see another slide from the
First Solar presentation, again related to a risk matrix,
stating successful future studies establish Cadmium-Telluride
photovoltaic desired outcomes. It sounds to me like you are
trying to state goals for your company and you are trying to
really compromise the objectivity of scientific reports, and
that, of course, is of grave concern to us. Given this evidence
and this slide, Mr. Ahearn, the Department of Energy's
dedication to relying on credible and objective information
seems to have been compromised by your campaign and I just
would ask whether you agree or disagree with that.
Mr. Ahearn. I disagree with that. These look like they are
dated back in 2006, and if you would permit me to explain, I
think I can explain this.
Mr. Jordan. Quickly.
Mr. Ahearn. Okay. So the issue we faced in Europe was what
will competitors likely do relative to First Solar, because we
had the lowest cost technology. And our area of vulnerability
would have been around the use of cadmium. So I think these
slides are going to how do you anticipate a competitive attack
and how do you get the scientific community engaged properly to
get Cadmium-Telluride recognized as a proper technology in
Europe. So it was back in that earlier time frame.
Ms. Buerkle. Thank you.
And I yield back my time.
Mr. Jordan. I want to thank the gentlelady. I know she has
to run. I have run too.
And I promised you guys we would be out by 12 and we are
actually--I know this is hard to believe--we are going to be
close. We have two left. Mr. Kelly has agreed to chair for the
final two questions from our members. Mr. DesJarlais will go
first, then Mr. Kelly will close out the hearing and get the
final round.
I want to thank all our witnesses for being here and for
making the trip and the sacrifice it takes to come here and
testify. We appreciate it. I think it has been a very good
hearing. And as the chairman indicated, we plan to follow up
with Mr. Chu and get some clarifications to his statements
under oath back in March. But I want to thank our witnesses.
With that, I will turn the chair over to Mr. Kelly, and Mr.
DesJarlais is recognized.
Mr. DesJarlais. Thank you, Mr. Chairman.
In the spirit of trying to stay on time, I was listening to
Mr. Cummings', the Ranking Member's, comments about the
integrity of the panel sitting here, and really what we are
here for today is to look into whether or not the taxpayer
money was spent wisely in this area, in these investments. And
I guess I might agree that it may not be any of your faults
that these things didn't go like you wanted, but I would
question whether or not it is a failure in government, once
again meddling probably where it doesn't belong, trying to
invest in the private sector when we have a shining example in
Mr. Nelson of what the American spirit and free enterprise can
do if you leave it alone, if the Federal Government would
simply stay out of the way.
For all the taxpayers sitting here watching today, I am
sure that they are not very pleased with the way we, the
Federal Government, invested their money in this case, and in
many cases in business. So clearly maybe not shame on you,
shame on us for not doing our homework better, loaning money in
areas where clearly the risk was very high. And I guess I would
wonder, for all you sitting there, if you had to invest all
that money out of your own pocket, whether you would have taken
the same path, and that is only a question you can answer.
But this is the frustration we face here in the Federal
Government and looking after the taxpayer money, trying to
reduce this deficit and the spending problem that we have. We
are asking right now, or a lot of people in Washington are
asking to take more of the taxpayers' money, and I would
challenge whether anybody watching this hearing today would
agree that the Federal Government needs another dime of
taxpayer money until it can learn to manage it better than what
we have seen in this hearing today.
So that is just one man's opinion, but I thank you all for
joining us today and I yield back.
Mr. Kelly. [Presiding.] Thank you, doctor.
Mr. Woolard, some of the questions have been was there any
political influence that was involved in these loans. Let me go
to slide number 9.
[Slide.]
Mr. Kelly. This is from Manley Shafer from BrightSource to
Doug Schultz at DOE Loan Program, and it says the team is at
the White House, in the Vice President's office at 10:00
tomorrow. So why at the White House and why at the VP meeting
if it is not politically influenced? Why not just the DOE?
Mr. Woolard. I believe--I am trying to make sure I have the
dates accurate--this was in March----
Mr. Kelly. It is March 8, 2011.
Mr. Woolard. Yes. So we had--whenever we had correspondence
on the Hill, we talked to the members of Senate about policy,
we talked to Carol Browner sometimes, in the Administration, in
the White House, about broader policy issues.
Mr. Kelly. Okay. So you can see why--these are your own
emails, so it comes up as, okay, there is no political
influence being shown, we are not trying to go that way, but we
are going to go to the White House, then we are going to meet
with the Vice President, but this is really just a briefing
just to keep them abreast of what is going on.
Mr. Woolard. Well, we met with Lindsay Graham and others as
well, and we met with----
Mr. Kelly. Well, I understand that. People come to my
office everyday too. In fact, Mr. Ahearn's people were in our
office last week, very nice people, and their concern was the
respect shown to you folks. And I know this is like getting a
root canal without Novocaine. I understand that. But it comes
down to this is taxpayer money, and because of what Mr.
Mulvaney said--I am a General Motors dealer. General Motors has
gone through more scrutiny than anybody, and I get told on the
sales floor all the time I would never buy a guy from you guys
again because you took the bailout. Well, actually, the
dealership didn't get it, it went to the corporation; the
corporation is no longer the corporation; dada dada. But you go
through all that stuff all the time.
Mr. Ahearn, I looked at your resume and looked at your
background. You are pretty astute when it comes to investing,
there is no question about that. What happened at the end of
the summer, in August of 2011, that all of a sudden the market
started to drop, the shares for the company started to just go
off the cliff?
Mr. Ahearn. The core issue is that the subsidy programs
that were creating the market for solar, which are, for the
most part, in Europe, began to shrink pretty drastically as a
function of the fiscal problems in Europe and a variety of
dynamics, and that was coupled with a massive oversupply of
Chinese panels coming on the market. So basically the market
space started to dry up, and that really impacted all the
industry stocks across the board.
Mr. Kelly. So all of them were tumbling?
Mr. Ahearn. They are all tumbling, yes.
Mr. Kelly. And we look at Europe today and we look at--
really, subsidies are driving--they just don't have enough
money to continue to fund what they have been funding.
Mr. Ahearn. That is correct.
Mr. Kelly. Okay. And the same thing really is pretty much
going to happen here; we are running out of money to do the
things that we think we should be doing, so you run out of
capital and there is no infusion.
Mr. Ahearn. That is right. And that is why I think I agree
with your overall point that we have to be in markets that are
not subsidy dependent, and I think we are fortunate we had some
time and ability to lower our cost, but we need to move, now,
strongly into markets that do not require these types of
subsidies, which is what we are doing now.
Mr. Kelly. Okay. And the energy market--and I know. I am
from Western Pennsylvania and I know what is going on in
Western Pennsylvania. Around the rest of the Country, you look
at all the fossils that are very much abundant and very much
affordable and very accessible, so we are watching that go
away. And I know that I probably would have gotten rid of my
stock then too. Even though you had the loan guarantees coming
in. You know, usually when you get the loan guarantees, it is
like, okay, we have the money, we are going to be okay. But if
you see the market kind of tanking, you say, you know what, it
is time for me to get the heck out of here; I am going to take
my marbles and run. So I understand why you did that. That is a
smart investor.
Mr. Nelson, one of the Administration's top justifications
for the 1705 loan program was there just wasn't enough private
capital. So what do you guys know that nobody else knows? Why
didn't you go after that low hanging fruit that was out there
with the government money?
Mr. Nelson. Well, the bottom line is that I believe in the
long run it is economics, not government policy, that is going
to drive widespread adoption of green energy, and our whole
point of view is to reduce the cost of green energy so it is
affordable for people, and that is our approach. Ultimately, we
change the economics and don't rely on government funding.
Right now we have plenty of private funding to do what we
need to do and we anticipate that we will come up with a
product that will actually be competitive and close to grid
parity so it will be widely demanded, and that people that we
want to do business with will accept us as a partner.
Mr. Kelly. Okay. And, again, your background, Mr. Ahearn's
background, you folks are venture capitalists. You were with
Bain for a while, so you understand a little bit about
investing and turning companies around and making them good
enough.
Mr. Nelson. My wife would say just a little bit.
Mr. Kelly. Just a little bit. Well, you know what? I am
interested in that because, really, there is an old saying out
there: if it not market ready, no amount of subsidy will affect
it; and if it is market ready, it doesn't need subsidize at
all.
Mr. Nelson. Well, that is the bottom line. We have talked a
lot about innovation. Mr. Cummings talked articulately about
innovation. The fact is that funding innovation is a really
important part of the government's function in this. But that
is different than the loan guarantee program; that funds
commercialization. And commercialization should be a private
function and it should happen with good projects. When you have
a project that isn't economically viable or which costs
substantially more than economic alternatives, no amount of
government subsidy will ever bring that into widespread
adoption.
Mr. Kelly. Probably not a good investment.
Mr. Nelson. That is my feeling.
Mr. Kelly. Okay. I wonder, because I am looking at JPMorgan
Chase and I see the DOJ is going to do an investigation because
they had a $2 billion loss; $20 billion profit. And the people
that we really come down on them is people who run $16 trillion
in the red, that make investments everyday, that if the
shareholders in that company, which is the American taxpayers,
they should be demanding also a look into what in the world are
we doing with this money and where are we investing it, and at
the end of the day what do we come up with.
So I think we are done for the day.
I want to thank you sincerely. And I know how difficult it
is, but Mick made a good point: you can't follow this trend and
then be upset because people hold you responsible for it. I
want you to understand I have deep respect for what you do. I
have done--my own life has been very much through hard work and
sweat equity and everything else, a lot of skin in the game. So
I understand. I know it is difficult. But when that money is
put out there and they dangle that carrot in front of you,
sometimes it is a Judas goat that you probably shouldn't follow
because it really does come down hard on you.
I appreciate your comments, Mr. Nelson. I read your
background. I know exactly what works, what doesn't work, and I
do agree. This is science that sometimes is just way ahead of
the market. It is not economically viable right now. There will
be a time sometime in the future, but maybe right now is not
the right time. We haven't had a really positive ROI on it.
So, with that, this hearing is now adjourned.
[Whereupon, at 12:01 p.m., the subcommittee was adjourned.]