DOE Claims More 'Success' With Another Clean Energy Bankruptcy
Ecotality declared Chapter 11 bankruptcy on Monday.
Compared to other Recovery Act beneficiaries that have failed – like battery maker A123 Systems and electric auto company Fisker Automotive – the deathwatch was short. A July 25th report issued by the Department of Energy’s Inspector General declared Ecotality’s EV Project largely a waste of time and misallocated money.
Then in mid-August Ecotality informed the Securities and Exchange Commission it was in deep financial trouble, with bankruptcy a possibility. A filing showed that the company was unable to obtain additional financing and the DOE had ceased payments to it for the EV Project until the agency could investigate further. DOE also warned Ecotality to not incur any new costs or obligations under the EV Project.
NLPC first raised questions about Ecotality's viability and origins in October 2011.
Monday’s development is another black eye to President Obama’s green energy agenda, but we’ve come to learn that each flop is just another reason for his Energy Department to look on the bright side. DOE spokesman Bill Gibbons told the Washington Free Beacon’s Lachlan Markay in a statement yesterday that stimulus support for Ecotality was “meant to establish the seeds of infrastructure needed to support a growing market for advanced vehicles, [and] the company installed more than 12,500 charging stations in 18 US cities—or approximately 95 percent of their goal.”
The attitude echoes comments made by others from DOE after similar collapses. When Colorado-based Abound Solar declared Chapter 7 bankruptcy in June 2012, DOE deputy director of Public Affairs Damien LaVera wrote a lengthy article defending the agency’s “investments” in solar energy with the attitude of “Hey, they can’t all be winners!”
“Of the $400 million that Abound was originally approved for, the Department only lent the company less than $70 million,” LaVera wrote at the time. “Because of the strong protections we put in place for taxpayers, the Department has already protected more than 80 percent of the original loan amount. Once the bankruptcy liquidation is complete, the Department expects the total loss to the taxpayer to be between 10 and 15 percent of the original loan amount.”
Yes, great job DOE!
Then there was last week’s testimony by former Loan Programs Office director Jonathan Silver, in a hearing about secret email exchanges on private accounts held before the House Oversight and Government Reform Committee. When challenged by Rep. Jim Jordan of Ohio about millions of dollars in squandered “investments” thanks to his agency’s poor judgments, Silver said the losses only represented three percent of the portfolio and one percent of the loan loss reserve set aside by Congress for the stimulus, which Silver said made the program a “success.”
While DOE grant evaluators may be slapping each other on their backs for their great accomplishments, and the superior judgment they think they’ve exercised on behalf of the taxpayers, those of us in the real world wonder if this interminable nightmare will ever end. Nissan North America also appears to be concerned. The all-electric Leaf – which is supposed to be manufactured in much greater quantities now outside Nashville thanks to its $1.4 billion taxpayer guaranteed loan – is somewhat dependent on the chargers produced and deployed by Ecotality. The bankruptcy notice said Nissan loaned the company $1.25 million to continue operations until the process is completed.
Nissan has an interest in not seeing Ecotality’s thousands of “Blink” chargers become glorified lampposts. According to PlugInAmerica.com, at least 5,700 Leaf owners received free chargers through the EV Project, and many more own chargers that were heavily subsidized. In addition Ecotality’s chargers were deployed throughout ten major metro areas in which they were supposed to replicate a system where EV owners could conveniently find spots in their daily routines to repower while they shopped or worked. A large-scale uprooting of the chargers, much like retail chain Costco did a couple of years ago, would be an even greater disaster for DOE and EV manufacturers like Nissan.
Bloomberg reported yesterday that Ecotality said it had installed more than 8,000 home chargers and 4,000 commercial chargers. The DOE Inspector General noted in his July report that the intent of the EV Project was to create a system of chargers that would alleviate owners’ “range anxiety,” meaning that they could drive and not worry whether or not they could make it to their next stop before running out of power. The report reasoned that the purpose of the EV Project was to “develop, implement, and study techniques for optimizing the effectiveness of infrastructure supporting widespread electric vehicle deployment,” an agenda established by President Obama as part of his plan to have one million electric cars on the road by 2015.
So the heavier deployment to homeowners, rather than businesses and public locations, undermined that goal. Worse, the Inspector General criticized how DOE approved reimbursement to Ecotality that allowed the company to use as a “match” the full monthly costs of the electric cars, chargers and Internet service for EV owners who participated in the program – over $550 per month, according to the IG. Because of that generous accounting, Ecotality received taxpayer funds to offset costs it incurred.
“…the vehicles and Internet connections were purchased to satisfy personal needs of consumers, not solely for the project,” the IG reported.
Ecotality’s rollout of the chargers in this fashion were in part the result of weaker than projected (but not unexpected by those who truly understand the laws of economics) adoption of EVs. Now the next unintended consequence is that Nissan and other electric automakers such as General Motors (with the Chevy Volt) and Ford (with a $5.9 billion taxpayer loan for alternative vehicles production) are somewhat dependent on a system of chargers whose maintenance, software updates and repair are now in doubt. Hence the $1.25 million Nissan loan while the car companies and the government figure out what to do next.
The scrutiny will come quickly about Ecotality’s crony capitalism and spending practices, as well as DOE’s foolish decision to award such a huge grant to an obviously incapable and inexperienced company. One example: the company paid steep rent costs (vendors listed at Recovery.gov) – sometimes five figures monthly – for nearly every city in which they had the EV Project. With such poor adoption of EVs, it’s hard to imagine Ecotality representatives or contractors couldn’t work out of less expensive locales – like their homes. And why did Ecotality need to relocate its headquarters from Arizona to some ritzy office digs near the banks of San Francisco bay?
Such answers may be confirmed by a Washington Free Beacon source. Reporter Lachlan Markay quoted an Ecotality executive who blamed the company’s plight on previous CEO Jonathan Read, who “offered no leadership and either directly or indirectly […] squandered or pocketed all the government money.” Read had previously been quoted in a shareholder conference call a few years ago saying he was a “political beast” who would play the political card very hard. His background was in executive management for the Park Plaza hotel chain and Shakey’s International. As Markay reported, “Read boasted about his political connections, and received bonus payments contingent on ECOtality winning DOE support.
DOE has paid $96 million so far to Ecotality in reimbursed costs related to the EV Project. It’s hard to see how much, if any, of that will be recovered for taxpayers in the planned bankruptcy auction. They may be stuck with a bunch of dead-weight chargers that need to be removed as well. But remember, that is all just part of the success story that is the DOE clean energy portfolio.