BrightSource Ivanpah Project Following Solyndra Path?

BrightSource Ivanpah Project Following Solyndra Path?
December 28, 2011

U.S. Department of Energy loan guarantees for BrightSource Energy’s Ivanpah solar power project may suffer the same fate as loan guarantees for the failed Solyndra company, government watchdogs fear. Of even greater concern, the BrightSource loan guarantees total $1.6 billion, triple the taxpayer dollars lost in Solyndra.

Financial Difficulties
The Ivanpah project would be one of the world’s largest solar thermal power facilities. However, the levelized costs (production costs on a level playing field after stripping away government subsidies and preferential treatment) of solar thermal power are more than 500 percent higher than those for conventional power generation, according to a 2007 MIT study. As a result, watchdogs point out BrightSource may not find buyers for Ivanpah power and will dramatically raise consumer energy prices even if buyers are found.

BrightSource is $1.8 billion in debt yet is generating only $13.5 million in revenue each year, reported Peter Schweizer, author of the new bestselling book Throw Them All Out, in an online article at BigGovernment.com. In addition, the company is running up an annual operating loss of $71 million per year. Nevertheless, the Department of Energy agreed to the loan guarantee in April 2011.

BrightSource is touting the Ivanpah project as a job creator, but it will cost $1 million to create each job the company forecasts it will create, according to data released by the Department of Energy.

“The federal government is getting ripped off if they are investing in BrightSource in the hope of creating jobs. According to the government's website the $1.6 billion loan guarantee will only create 1,000 temporary construction jobs and a mere 86 operations and maintenance jobs,” said Daniel Simmons, director of state and regulatory affairs at the Institute for Energy Research.

“This is an awful lot of money for such a small return,” he said.

Sweetheart Connections
Similar to the Solyndra scandal, BrightSource appears to be benefiting from cozy connections with the Obama administration. Schweizer reports an investment company run by environmental activist Robert F. Kennedy Jr. is the largest investor in BrightSource and a member of the Department of Energy’s alternative energy grant team is closely connected with Kennedy’s firm.

According to Schweizer, Sanjay Wagle was formerly a partner in Kennedy’s firm, VantagePoint. During Barack Obama’s 2008 presidential campaign, Wagle raised money for the Obama campaign. When Obama won the presidency, Wagle went to work at the Department of Energy and as a Renewable Energy Grants Advisor.

“With the federal government giving BrightSource such a large loan guarantee, the American people have the right to know whether Mr. Wagle played a role in the discussions given his relationship with major investors in the project,” Simmons said.

Simmons says it is difficult to ascertain what role Wagle may have in the Department of Energy loan program and whether his influence factored in the BrightSource loan guarantee. These are reasons why the federal government should be more transparent in its loan programs or eliminate them altogether, he said.

Company Admits High Risk
According to the company’s own statements, investing taxpayer monies in BrightSource was a risky bid from the start.

“Our future success depends on our ability to construct Ivanpah, our first utility-scale solar thermal power project, in a cost-effective and timely manner. Our ability to complete Ivanpah and the planning, development and construction of all three phases are subject to significant risk and uncertainty,” BrightSource admitted in its Securities and Exchange Commission filings.

“The bottom line is that BrightSource Energy got a sweetheart deal and it did so thanks to political connections. This is a company that admittedly has huge problems.” Schweizer wrote in BigGovernment.com.

“Brightsource is just one more example of why the federal government's loan guarantee programs do not make sense,” Simmons said. “Brightsource is backed by some very well-heeled companies such as Morgan Stanley, BP, Google, and Chevron. If Brightsource made financial sense, these companies could surely guarantee or loan Brightsource the needed capital without asking the taxpayer for a handout.”

Alyssa Carducci (ad.carducci@gmail.com) writes from Tampa, Florida.