The Who’s Who of Renewable Failures

Energy can neither be created nor destroyed. Its demand with humans will never be lost, from toasters to rollercoasters. But energy technologies and companies prove much more mortal. I cover some of the struggling technologies in another article.

In the green fuel sector, the failure of certain companies can be a political bomb. Solyndra, the first profile, is a dirty word nowadays. An observer of the fall of Fisker, our second profile, was most worried about the fallout to other electric vehicles (EVs).

And then some believe that, at least in popular energies, we should allow failure to weed out the losers.

Let’s take a look at some of the newsworthy crashes in renewable energy business and what they told us.

 

Failure: Solyndra

Tech: CIGs Solar Thin Film

Leaders: Brian Harrison, CEO & Bill Stover, CFO

Lifetime: 2005-2011

Solyndra is the elephant in the room. It’s usually the first example anti-renewable critics take up, and for an obvious reason. It received a $535 million loan as part of the stimulus, which aided green tech.

It started in 2005, received aid in 2009, and got visited by Pres. Obama. The controversy in hindsight was whether the rifts were starting to appear early on.

There are a few guesses at why it failed.

The leadership lacked people familiar with utilities who made reckless decisions after getting their government grant.

The CEO’s lawyer Miles Ehrlich blames China for making their competitor technology, traditional silicon solar cells, cheaper. While Bill Bathe, chief executive of U.S. Energy Services, sees it as something inherent to the age of the industry.

“There used to be 50 car companies in this country, but very few survived,” said Bathe to the Los Angeles Times. “For consumers, this is an exciting time, but for investors, this is still a very high-risk stage. You may hit a home run or be part of the experiment that delivers no payout.”

Others see it as intrinsic to the tubular design of their product, which may allow wind to pass through and snow fall off, but has other disadvantages.

“It was really a stupid idea when you got down to it,” Brad Ives, Vice Chancellor of UNC Chapel Hill’s Finance and Administration office, said. “The key thing with solar cells is you want the most surface area exposed to the sun. And with the cylinder, you weren’t directly gathering the sun because it was wrapped around a pipe, you had to have a mirror to reflect the sun. Rolling stuff out flat and making it cheaply was a lot better.”

Or maybe it failed spectacularly because it wasn’t allowed to fail before. The presidential administration wanted it to be a representative success, and the DoE extended a loan in late 2010. (More about these developments at The Washington Post during and after the fall.)

The good news for solar industry overall is that Solyndra was unusual. In technology and business certainly, in politics perhaps, but the verdicts differ. The FBI’s four-year investigation puts blame primarily on the company, no individuals named or charges brought. But others suspect more foul play from politicians.

“The actions of certain Solyndra officials were, at best, reckless and irresponsible or, at worst, an orchestrated effort to knowingly and intentionally deceive and mislead the Department,” the Office of Inspector General said.

Solyndra’s fall may reflect some of the issues with so-called cutting-edge technology, in conception and deployment. It may reflect the fault in ignoring the possibility of natural failure of these technologies. The FBI report and others point more towards human failures: greed and deceit.

 

Fisker

Tech: Electric cars

Leaders: Henrik Fisker and Niedzwiecki

Lifetime: 2007-2011

This political talking point at one point has a $529 million loan and Leonardo Di Caprio going for it. The loan fortunately went down to $192 million after failing checkpoint deliveries and producing its first car in Finland, not the US.

Fisker’s fatal flaw was its manufacturing. To keep costs down, they wanted to use “off-the-shelf” parts in its cars. But this cobbling together meant reliance upon and forced adaptation to its suppliers.

This is the opposite of the more successful approach of Tesla. Tesla breeds research, development, and patents from within. Sometimes they even sell it off.

What did the failure look like? A horrible review by Consumer Reports. An embarrassingly public fire and subsequent recall of a cooling fan. Seeing battery-supplier A123 fall away. Filing for bankruptcy.

But compare it to one of its suppliers, A123, maker of lithium phosphate batteries originally for electric cars. Solyndra 2.0, some where calling it when it too went bankrupt.

“There was accompany called A123 that everybody thought was incredible, it was poised to go public and it collapsed right at the end after having several hundred million dollars put into it,” said Ives. “A123 ended up being a cost issue with some technical problem. The batteries weren’t quite as good as they thought they were going to be and they cost too much.”

So what saved it?

Chinese company Wanxiang Group bought A123 but passed on Fisker. The company now also provides batteries to utilities and power plants. These deals are in California as well as Japan, China, and Spain. They are rebuilding their car batteries too, more in hybrids now.

An extensive review of its rebound can be found on Slate.

A123 was able to repurpose its technology and continue to take advantage of environmental limits.

Even without its leadership, Fisker’s business model and design was not worth saving.

 

Failure: KiOR

Tech: Biofuel

Leader: Vinod Khosla

Lifespan: 2007-2014

This company was its billionaire owner’s part in a “war on coal.” It created “biocrude” mostly from wood. Even former Secretary of State Condoleeza Rice believed in Khosla’s dream, joining the board (but doing little else) from 2011 to 2013.

The Washington Post even considers Khosla “one of the gods of high-tech venture capital.”

Let’s start with the science. Their key was “catalytic cracking” to break down wood and make cellusolic biofuel, meaning from inedible parts of plants. This is straight hydrocarbons, foreign from ethanol.

But when KiOR went public, possible yield was greatly overstated—and before fuel was being made. The CEO at the time warned management, and left.

Multiple people on the inside grew concerned, unlike with Solyndra. However, they were not heard. The CEO in 2011 was one, and left from being ignored. A hired engineer filed a whistleblower complaint, which was dismissed. Even the chemical engineer who had brought catalytic cracking to Khosla knew something was wrong.

“Vinod is a very visionary man,” O’Connor said about Khosla to Fortune Magazine. “Maybe too visionary.”

Combined with yields a third of promised, there were technical problems in the factory. Neither issue was resolved. Unable to find a buyer, KiOR closed.

Biofuels have not been doing well in the US. The valley of death between startup and commercialization has claimed far more than investors and even the EPA have expected. Oil prices at a low and less-than-friendly environmental policies do not help.

Some, like Fortune Magazine, see this failure rooted in Khosla’s ego. The governor of Mississippi, where the factory was located, sees their bankruptcy claims as near criminal. A class action lawsuit** does charge it as criminal.

Lack of transparency seems to have been the real killer here, for whatever reasons. One may also fault the very investment in biofuels. Whether this industry itself will continue is a question up in the air.

 

Failure: Peabody Energy

Tech: Coal

Leaders: Glenn L. Kellow, CEO and president

Lifetime: 1883-2016

This failure is a little different. The company is over a hundred years old, and filed for bankruptcy two weeks ago. It isn’t just a coal company—it’s America’s top coal company.

A quarter of coal companies in the US are currently in bankruptcy. The next-best filed for bankruptcy earlier this year.

Peabody Energy says they will continue to operate and then rebound*, which worries many about continued pollution for cents per carbon ton emitted. But their problems—natural gas competition, green energy regulations, and a weaker Chinese market—don’t look temporary.

There are more articles at Desmog and The Washington Post about the company’s failure. But it seems indicative of a larger failure: the failure of a fuel.

Somehow, the coal industry did not see change coming. And it is unable to adapt the way natural gas and petroleum companies have. It is too dirty, and too old.

 

Solyndra, Fisker, and KiOR were failures, but their industries will probably go on. Peabody’s failure is the symbol of a dying giant. It may be hard as an investor to find the right bet in the renewables field, but the field itself will continue to grow. Business learn from scandals and closings and the clean fuel industry evolves.