Coyote Blog

I saw this at Flowing Data -- this is apparently a chart prepared by some sustainability group at MIT to map solar potential of different sites in Cambridge, MA

Look at all the sites marked "excellent".  I have news for the brilliant folks at MIT.  Even the best, flattest roof facing south in Cambridge, MA still rates a "sucks" for solar potential. (source)

Even with massive state and Federal subsidies, those of us who live in the bright red areas find that roof-top solar PV is still an - at best - marginal investment with very long payback times.  We all hope to change this in the future, but there is no way a city like Cambridge with approximately half the solar insolation we get in AZ is going to have "excellent" roof top solar PV sites.

...you will love this too.  Solyndra used cylindrical solar cells nested inside a u-shaped mirror to concentrate sunlight to get more power per square inch of solar cell.  The problem is that all that extra shaping and mirrors added cost, and only made sense if solar cells were expensive.  After all, if solar cells are cheap, if one wants 20% more output, it's easier to just increase the solar cell area by 20% than to add all the concentrator rigmarole.

Well, dreams die hard, and here is the latest idea -- spherical concentrators.  These things have huge spheres and tracking motors, all for a 35% increase in efficiency.  Methinks that just adding 35% more PV cell area is going to be cheaper, but this could well be yet another flytrap for Obama Administration officials, who are to sexy-looking new technologies like a degenerate wagerer at the track is to a hot tip.

Another solar company which received $2.1 billion in loan guarantees from the Obama Administration has gone bankrupt.  The good news is that it has not spent much of that taxpayer money, and its bankruptcy is probably due more to the bankruptcy of its German parent, which in turn is likely related to the huge cuts Germany has made in its feed-in tariff subsidies.

The big asset possessed by Solar Trust is the Blythe solar project, a planned 1000MW facility that apparently has all of its permitting in place.  The Blythe facility was originally going to be a solar-thermal facility, with adjustable mirrors focusing the sun on a central boiler that would in turn power turbines.   This plan was scrapped last year in favor of a more traditional PV technology, and I know local company First Solar has been hoping to save itself by getting the panel deal (First Solar also has been hammered by the loss of German subsidies).

If we take the cost of this planned 1000MW facility as the stated $2.8 billion (of which 2.1 billion would be guaranteed by US taxpayers), we see the basic problem with solar.   A new 1000MW  natural gas powered electric plant costs no more than about $1 billion.  It produces electricity 24 hours a day.  This solar plant, to be the largest in the world, would produce 1000 MW for only a few hours of the day.  That area of desert gets about 7 peak sun hours per day (the best in the country) so that on a 24 hour basis it only produces 292 MW average.  This gives it a total capital cost per 1000 MW of $9.6 billion, making it approximately 10 times costlier than the natural gas plant to build.  Of course, the solar plant has no fuel costs over time, but solar is never able to close the gap over time, particularly with current very low natural gas prices.

Update:  Apparently the $2.8 billion was just for the initial 484 MW so you can double all the solar costs in the analysis above, making the plant about 20x costlier than a natural gas plant.

Kevin Drum makes a pleas for liberals to, in effect, rally around Solyndra and be proud of the investment.  I am sure Republicans would give the same advice to liberals.  I want to look at a few of his arguments.

First, for libertarians like myself, the argument that Republicans did it too, or the Republicans started it, are a non-starter.  In particular, I actually thought the Obama Administration's attempt to blame Bush for Solyndra was an Onion article, since its almost a caricature of this administrations refusal to take responsibility for anything.  Unlike Republicans, I don't see this so much as an Obama failure as a government failure, and I don't really care if it is of the red or blue flavor.

Second, the fact that private investors put their own money into it is irrelevant.  Private investors poured money into Pets.com too.  Obama was pouring my money into Solyndra, and yes the fact that it is my money makes a difference.

Further, private investors put their money into Solyndra years before the taxpayer did.  It may well have been that they had a reasonable expectation at that time of investment returns.  That is their problem.  Our problem is that by the time Obama put our money into the company, it was pretty clear to everyone in the industry that Solyndra was going nowhere.

Drum and his source, Dave Roberts, attempt to argue that the drop in silicon prices and addition of low-cost solar capacity in China didn't occur until months after Obama's decision to fund Solyndra.  But that is a tortured argument.  In point of fact, everyone in the industry saw this coming - after all, the capacity Roberts describes as coming online in June was under construction months and years before that, and was known to be coming by everyone in the industry.  When I was in a global manufacturing business, we kept up with everyone's plans for capacity additions -- I can't even imagine waking up one day and saying, "huh, a bunch of capacity just opened in China."  (by the way, it is pretty typical of liberals to see prices as a given, rather than as a part of a feedback system where high prices lead to actions that might well lower prices over time).

This timeline is therefore pretty disingenuous

March 2009: The same credit committee approves the strengthened loan application. The deal passes on to DOE’s credit review board. Career staff (not political appointees) within the DOE issue a conditional commitment setting out terms for a guarantee.

June 2009: As more silicon production facilities come online while demand for PV wavers due to the economic slowdown, silicon prices start to drop. Meanwhile, the Chinese begin rapidly scaling domestic manufacturing and set a path toward dramatic, unforeseen cost reductions in PV. Between June of 2009 and August of 2011, PV prices drop more than 50%.

I am sure that this is wildly logical to a journalism major, but someone in business would laugh off the implication that what happened in June was wholly unforeseeable in March.  Want more proof?  The loan guarantee itself is proof.   Years earlier, the company attracted a billion dollars of private capital.  Now it takes a government guarantee to get capital?  And you think nothing had changed with the insider's perception of the opportunity?

A good analogy might be if I invested in Greek bonds today.  And then in 3 months the Greek government defaults and I lose all my money.  I suppose I could craft a timeline that said the default did not happen until months after my investment, but could anyone living right now say that I really had no reason on September 16, 2011 to expect a Greek default?

The real howler in the article is this one:

There was no scandal in the loan process, and there's nothing unusual about having a certain fraction of speculative programs like this fail. It's all part of the way the free market works.

First, I agree there is no scandal here if one defines scandal as something out of the norm.  Republicans want to count political coup on Democrats so they want to say this is fraudulent.  But fraudulent implies that we could find honorable technocrats who could have avoided this problem.  We can't.  This kind of failure is fundamental and inseparable from the act of government trying to pick winners, and would exist no matter what people were in place.

Second, calling this "the way free markets work" is obscene.   Free markets don't use force on investors to make them put money into certain investments.

But more importantly, government loan guarantees go only to those companies who the free market has chosen NOT to fund.  If the free market was willing to toss another half billion into Solyndra, its owners would not have been burning a path back and forth to Washington.  So by definition, every single government loan guarantee in this program is to a company or a technology that the free market, knowledgeable investors, and industry insiders have rejected as a bad investment.  For the program to work, one has to believe that Obama, Chu, and some career energy department bureaucrats have a better understanding of commercializing technologies than do private investors (who are investing with their own money) and industry experts.

Postscript:  I have to also comment on this from the timeline:

February 2011: Due to a liquidity crisis, investors provide $75 million to help restructure the loan guarantee. The DOE rightly assumed it was better to give Solyndra a fighting chance rather than liquidate the company – which was a going concern – for market value, which would have guaranteed significant losses.

The author glosses over it, but this is the $75 million I discussed the other day that dropped the US out of the senior position and guaranteed that the taxpayer would lose everything rather than only a portion of the investment

The notion of giving it more time was absurd.  Even closed with everyone laid off the company is burning a million a week in cash.  How much was it burning when open? And if it was totally clear at this point that the market had fundamentally shifted and the company could not compete, what the hell was the time going to help?  Maybe they were hoping to win the Publishers Clearing House Sweepstakes?  I suppose it could have been to give them time to try to sell the company, but there is no evidence any such discussions were taking place.

In fact, it is pretty clear that the US Government got played with that $75 million investment.  Any private lender who had allowed someone else to grab the senior position for a trivial investment in a company on the express train to chapter 7 would be fired immediately.

And if you want fraud, you might look at Solyndra's summer asset sales.  All the company's assets of any liquidity and value were sold over the summer to Argonaut, who also happens to be the owner of the majority state AND the company who invested $75 million in return for the senior position.  Depending on the sale price for this self-dealing, one could argue that the time the $75 million bought was merely the time needed to loot the company of any valuable assets before it went bankrupt.

Postscript #2:  I have written before about how much expertise about business tends to be claimed by liberal journalists and places like Think Progress.  I had a funny thought trying to imagine the Think Progress business school and what it would teach.  Might be a parody I need to write sometime.

OK, here is the story to date:  Paradise Valley is a small, very wealthy town within the boundaries of Phoenix.  There is no commercial development allowed in the town except for a series of golf resorts, of which there are a number.  The town had one last large tract of unbuilt land, owned by the Wrigley heirs, I believe, that has for years been zoned for a resort.  There was an auction several years ago in which the land was sold for some figure north of $70 million to a group who wants to build a Ritz-Carlton resort, a hotel chain notorious for bringing riff-raff into communities ;=).  The Ritz group unanimously obtained all the town council and planning board approvals it needed to build.

Except now a ballot initiative will be voted on by the town residents in November as to whether to allow them to build a resort on their own land that is zoned for a resort (my previous report, complete with Zillow maps).  This action is consistent with the absolute resistence that every resident's attempt to do a major remodel of their house encounters from various community groups and zoning bodies.

One lesson, of course, is that local participative democracy can be just as much a threat to individual rights as the worst dictatorship  (though this is not a new lesson -- it was in fact learned in Athens when it was first tried).  But a second lesson is just how short-sighted this is.  I am sure residents convince themselves in each such individual effort that they are somehow protecting their property values.  But in sum, the effect of multiple such efforts is to make people reluctant to invest in property in the town, fearful that some citizens group or zoning body will take control of what they can do with their land. 

I live about 4 houses away from the Town of Paradise Valley in the city of Phoenix, though most of my neighbors and even the US Postal Service think I live in PV.  It used to be, about 10 years ago when I moved in, that living outside the PV boundary was considered a negative.  There was a big enormous value gradient between the nearest PV home and mine, based as much on snob appeal of the address as anything else.  Now, however, the gradient is reversing (hurray for my home equity!)  Real estate agents in my neighborhood who used to hide the fact that the homes are not actually in tony PV (shame on them) now use it as a selling point.  My remodel contractor breathed an enormous sigh of relief when he found out that I was, in fact, not in the town of PV.

Help me out, readers.  I seem to remember there was a name for an economic game where the profit maximizing strategy when playing once was different than if one were playing multiple times in sequence.

PS - If you are confused why a town would consider a Ritz to be bringing down the neighborhood, see here, complete with Zillow maps where not a single surrounding home is going for less than $1.8 million. 

Don't buy property in Paradise Valley (a suburb of Phoenix, near Scottsdale) if you actually expect the property to be fully your own.  Even the smallest revisions of your home can require multiple appearances in front of the town council.  By some odd statistical anomaly, property owners with friends in the city government seem to get these changes approved more readily than those without such influence. 

Anyway, things just get worse if you own a lot of land in PV. 

A residents group is preparing to launch a voter referendum against the
planned Ritz-Carlton, Paradise Valley Resort, claiming the project's
residences are too dense....

Scottsdale-based Five Star Development wants to build a 225-room resort
hotel, 15 1-acre home sites, 46 luxury detached homes and 100 patio
homes on about 105 acres northwest of Scottsdale Road and Lincoln Drive.

This really isn't very high density, but this can be a very flaky town.  One thing you have to realize is that I can't remember the last new home I saw go up in PV that was less than 5000 sq ft and 10,000+ sq ft is not at all unusual.  This may be one of the few cases where a town is trying to keep out the Ritz Carlton because its customers will bring down the neighborhood, lol, but that is exactly what is at work here, in part. 

Now I know you think I am exaggerating when I say the locals are worried about a Ritz-Carlton bringing down the neighborhood by attracting the unwashed, but here is the Zillow sales page for the area -- the vacant lot in the lower right is the property in question.

This piece of land has been empty and zoned for a resort for years.  I know it was zoned for a resort long before this sale because I was stuck in traffic court all day and had nothing to stare at but the town zoning map  (don't ever speed when crossing PV).  The buyers purchased this land several years ago (I think from the Wrigley family) after ensuring the zoning was solid.  If the town's residents wanted something else on the lot, they should have bought it themselves.  But it is ever so much cheaper to instead use your political influence to tell other people what they can and can't do with their property.

Another thought:  It is nearly an article of faith among libertarians that devolving government to the smallest possible unit enhances freedom.  Well, here is an example where it does not.  Not state or even city would pass a ballot resolution to change the zoning on one small piece of land.  But it is entirely possible this could pass in a town of just a few thousand people.

I am sure that, since I sort-of live in Scottsdale, you have all been waiting for me to comment on this:

  It started out small, with people all across the country nicknaming this city "Snottsdale."

Then came the reality television show about a local women's book club
where members spend almost no time delving into fine literature but
endless hours discussing Botox, marrying for money and the latest
fashions.

Soon after began the headlines about America's most
famous porn queen buying a Scottsdale strip club and the city's rapid
response: an ordinance that would prohibit dancers from being closer
than 4 feet from clients.

And then--as if all that hadn't been
enough--a guy from Las Vegas carpetbagged into town and opened a
restaurant named after a not-to-be-mentioned-in-polite-company part of
the female anatomy.

I say that I sort-of live in Scottsdale, because I actually live in neighboring Paradise Valley, another suburb of Phoenix, but since almost all the famous people listed in the article as Scottsdale residents actually live in PV, I guess I must count as Scottsdale too.

Anyway, here is my comment:  I think it is freaking hilarious.  Any city that actually spends tax money and chamber of commerce funds to advertise itself nationally as a rich enclave deserves what it gets.  If you try to advertise yourself as the next Beverly Hills 90210, you shouldn't be surprised when the media treats you like, well, Beverly Hills 90210. 

I will say that growing up in Houston and living in Dallas for years has somewhat immunized me to the hijinx of the tacky biologically-augmented nouveau riche.  While those who grew up in the Scottsdale that was the quiet horse town seem to be pretty bent out of shape by the town's new reputation, I don't see many of them complaining about the increases they have had of late in their real estate values.  And if the rich scene is more like Paris Hilton than like a Literary Lions Ball at the Met, well, at least it has some entertainment value.  (Though not too much, since CBS is cancelling their reality show).

The best feature of Scottsdale has to be school functions, because Scottsdale does lead the nation on the hot mom index.  I remember when we first moved here both my wife and I were floored at the women at the first school function we attended.  Heck, I still volunteer to drive the kids to school in the morning.  And don't even get me started about women at the Phoenix Open -- there is a reason the tournament is still a favorite among tour players despite the roudy crowds.

In conclusion, returning to the article, I couldn't have said it better than this:

"Oh, get over it," she said. "So what
if people want to make fun of us? Every city has its own particular
brand of strangeness. For some it may be gangs or drugs or troubled
youth. We just happen to have some over-Botoxed blonds with oversexed
tendencies."