It's the rule of unintended consequences. You do something with the best of intentions in one area, and it screws things up elsewhere.
That's exactly what appears to be happening with the Department of Energy's (DOE) loan guarantee program and the projects that are now being affected by Solyndra's demise. As executives and DOE officials are marched in front of members of Congress, less risky projects that could provide jobs at relatively little risk to the government are put in jeopardy.
Last week it was First Solar's
Even though the risks of Solyndra's guarantee and the First Solar and SolarCity guarantees are very different, the powers that be don't seem to care.
Risk vs. reward
It's important to make a distinction between high-risk guarantees like Solyndra (which this Fool thinks are a terrible idea) and low-risk guarantees of solar developments. Guaranteeing a manufacturer's investment in essence makes you a debtholder of a manufacturer with lots of risk and very little reward. In a high-technology space like solar, and especially in the very unproven technology Solyndra was using, this risk is very high.
But if the government is guaranteeing a large solar development, the story is different. The government has required 20% equity funding and will guarantee only 80% of the debt. For a solar installation, which can be modeled to predict cash flows within a relatively tight tolerance, the risk of losing money is very low.
But that hasn't stopped the witch-hunt from lumping all solar into the "high risk" category.
This puts manufacturers in a tenuous position. First Solar and SunPower
If these projects aren't built in the United States, that puts a dent in the worldwide demand for solar modules. That affects everyone from low-cost producer Trina Solar
Foolish bottom line
I'm not questioning that a mistake was made with Solyndra. In fact, it was a comedy of errors by the DOE and Solyndra's executive and investors. But the DOE's program needs to be viewed as a portfolio, and the overall impact should be considered. Letting low-risk projects die that could not only provide jobs but also help solar bridge the gap to a more cost-competitive future would be a mistake. And grandstanding isn't helping anyone at this point.
What do you think about the government's handling of Solyndra and its bankruptcy? Sound off in the comments section below.
Fool contributor Travis Hoium owns shares of SunPower, First Solar, and LDK Solar. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his CAPS picks at TMFFlushDraw.
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