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Another Bankruptcy Black Eye for the DOE

By Travis Hoium - Updated Apr 6, 2017 at 6:02PM

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Beacon Power is the latest to bite the dust after getting a DOE loan guarantee.

Oh, no! Alert the conspiracy theorists -- another company that received a Department of Energy loan guarantee has filed for bankruptcy. Beacon Power, a company hoping to make flywheels into energy-storage gold threw in the towel Sunday.

Of course, this follows the highly publicized bankruptcy of Solyndra, the solar manufacturer that built a gaudy manufacturing plant on an unstable business. Beacon's loss won't grab quite as much attention, but the government did throw in $24 million in federal stimulus grant money and $43 million in loan guarantees.

Next up: DOE loans on perpetual motion, cold fusion are in trouble
I've written extensively about the difference between manufacturing loan guarantees like this one and power plant generation loan guarantees that SunPower (Nasdaq: SPWRA) and First Solar (Nasdaq: FSLR) recently closed on. What's troubling to point out is the Department of Energy's incredible incompetence in picking manufacturers that had a chance at succeeding.

Solyndra's technology had very little chance when stacked against falling solar costs for LDK Solar (NYSE: LDK), JA Solar (Nasdaq: JASO), and a slew of other competitors. Beacon was trying to build a market in energy storage on technology I would say is suspect at best. And competitors in energy storage like Ener1 and A123 Systems (Nasdaq: AONE) don't provide a dangerous product that requires a vacuum chamber to make sure the flywheel doesn't explode, which it has in the past.

Who is next?
If we assume the DOE is great at investing in losers, who is next? Ener1 is an easy call and probably won't last much longer. A123 Systems might not be far behind unless demand picks up quickly for the company's batteries. And Tesla Motors (Nasdaq: TSLA) should at least get a mention, with losses expected to continue as production ramps up. Tesla isn't near bankruptcy yet and serves an affluent market that the others would dream of selling to, but the DOE ties are there -- and so are the losses.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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