Evergreen Solar Inc., a green energy company that that received millions in state subsidies, announced Monday that it is filing for Chapter 11 bankruptcy. In its short existence, the company has gone from green enthusiast heartthrob, government-backed beneficiary, and, finally, Chinese-backed firm – all without ever turning a profit. More than anything, Evergreen Solar is an example of the pitfalls of a system that allows the government to pick winners and losers in business.
Back in 2007, the Marlborough, Massachusetts-based company was a favorite among investors. Thanks to a patented process, the company is able to produce solar power products requiring significantly less silicon than most competitors.
Seeing a pre-packaged stump speech, newly-elected Governor and green fanatic Deval Patrick enticed the company away from states like New York and Oregon with a $76 million business incentive in 2008 – one of largest Massachusetts had ever seen. Ian Bowles, Governor Patrick's secretary of energy and environmental affairs at the time, called the project “evidence of the momentum that Governor Patrick is building for the clean-energy industry.”
Evergreen Solar said it hoped to hire 90 to 100 people for its Massachusetts-based plant and, true to its forecast, employed more than 800 when the plant reached full capacity.
Unfortunately, every one of those 800 jobs vanished when Evergreen quit operations in Massachusetts earlier this year. Only seven months later, the company announced it would declare bankruptcy.
So what happened to the goose who laid the green job eggs? Maybe it was due to increased global production of solar products, which jumped 139 percent in 2010. Or maybe it was because their silicon-skimping technology looked a little brighter when silicon prices were 10 times what they are today.
The fact is, despite any sort of “momentum” created by Governor Patrick, Evergreen had never turned a profit. Not then, not now, never. In fact, for at least a year Evergreen has been the worst-performing company on the Bloomberg Global Leaders Solar Index.
It isn’t very American to pick what industries succeed where and with what technology. I mean, we aren’t a communist country.
Then there’s China.
The Chinese government spent $33 million to build an Evergreen factory – which will remain open while the company negotiates with Chinese investors.
So, maybe this story will end at a place Governor Patrick never saw it going: with the American government providing $58 million of research & development to the Chinese, thanks to the taxpayers of Massachusetts.
Politicians are not venture capitalists, they aren’t marketers, and they certainly are not innovators. Whether or not a company succeeds or fails, is green or brown, or employs workers in America or China doesn’t matter. What matters is that this all be determined by private investors who know the risks going in and have a stake in the capital, location, and technology needed to either fail or succeed.
If we’re going to have the government bet on businesses, can’t we at least require them to bet on winners? Better yet, maybe we should aim for governments that support competitive markets, where winners are not chosen at random or based on political whim, but are selected from a level playing field where each innovation can make or break a company. In those situations we don’t have governments trying to collect a $58 million debt, with taxpayers holding the empty bag long after the politicians are gone.