Move over, Solyndra: There’s a new fake solar scandal
Cross-posted from Climate Progress.
When Total, the 14th largest oil and gas company in the world, bought 60 percent of leading solar manufacturer/developer SunPower back in June, here’s what the company said:
We evaluated multiple solar investments for more than two years and concluded that SunPower is the right partner based on its people, world-leading technology and cost roadmap, vertical integration strategy and downstream footprint.
What did the pundits on Fox News say about it? Nothing.
But when an editor for Guns & Patriots magazine (yes, you read that correctly) strung together a completely bogus “scandal” about SunPower using disparate pieces of information, the network was all over it — allowing this “bigger than Solyndra” story about a $1.2 billion loan guarantee to take over the prime time airwaves.
Here’s the catch: None of this punditry is based on reality. SunPower isn’t even getting the loan guarantee. Although it was offered a conditional commitment originally, it is simply constructing a 250-MW project using its high-efficiency modules — and it has already sold the project to the massive energy company NRG while establishing an agreement to purchase the power. But that didn’t stop the hopelessly misinformed pundits and “business reporters” at Fox News to jump on the story.
Please be warned: The video segment below is filled with such egregious misunderstanding of the solar industry, you may need a toilet to throw up in. (I know it hurts, but please read on below the video so you can understand why the original story belongs in the toilet.)
So what is the “scandal” exactly? It has to do primarily with SunPower’s debt and stock price, the company’s new manufacturing facility in Mexico, and its supposed relationship with a member of Congress’s family. None of these is relevant to the $1.2 billion loan guarantee to help support the California Valley Solar Ranch Project — a first-of-a-kind 250-MW solar PV project in California. We’ll address all of these individually and tell you why.
Here’s how the story — published at the conservative outlet Human Events and written by Guns & Patriots editor Neil McCabe — weaves together this manufactured scandal:
How did a failing California solar company, buffeted by short sellers and shareholder lawsuits, receive a $1.2 billion federal loan guarantee for a photovoltaic electricity ranch project — three weeks after it announced it was building new manufacturing plant in Mexicali, Mexico, to build the panels for the project.
The company, SunPower (SPWR-NASDAQ), now carries $820 million in debt, an amount $20 million greater than its market capitalization. If SunPower was a bank, the feds would shut it down. Instead, it received a lifeline twice the size of the money sent down the Solyndra drain.
Of course, if he had bothered to reach out to SunPower — or read the actual press release from the Department of Energy — this editor would know that the company is no longer the recipient of the loan guarantee — nor will the guarantee be leveraged to finance any of SunPower’s overseas manufacturing facilities.
“The loan guarantee, issued to NRG, does not finance SunPower’s manufacturing facilities or other operations in Silicon Valley, where we manufacture today, Mexicali or anywhere else,” explained Julie Blunden in a statement, when I reached out to SunPower for comment.
That didn’t stop McCabe from insinuating that the loan guarantee will help build a manufacturing facility in Mexico and create jobs there:
In addition to the 350 construction jobs and the 15 squeegee men, there will an as-yet-undetermined number of jobs created building the panels for the CVSR — in Mexicali, Mexico.
The company is looking for a facility of up to 320,000 square feet, where it will build three different solar panel models and its solar roof tiles, according the company’s Aug. 5 statement.
The good news for Mexican jobs seekers did not affect the DOE’s loan guarantee to SunPower. Hours before the DOE 1705 loan program expired at the end of Fiscal Year 2011 on Sept. 30, the $1.2 billion in loan guarantees was approved for the company.
And the hopelessly misinformed pundits at Fox News took the story and ran with it:
GREG GUTFELD: SunPower received $1.2 billion in guaranteed loans, they created, I believe, 15 jobs. So if you divide 1.2 billion by 15 — I didn’t do the math — it’s a lot. So it’s pretty crazy stuff, plus it’s not as fun as saying Solyndra.
KIMBERLY GUILYFOYLE: It’s a manufacturing plant in Mexicali, Mexico. Way to export the 15 jobs.
First, those jobs have yet to be created. Second, the project is going to create 350 direct construction jobs — with the permanent jobs staying in the U.S., not going to Mexico. And third, a large portion of the panels for the 250-MW plant are going to come from an American manufacturing plant, according to SunPower’s Julie Blunden:
Most of the solar panels for the California Valley Solar Ranch will be sourced from our manufacturing facility in the Silicon Valley (Milpitas). Because of the magnitude of the plant — at 250 megawatts, it is one of the first central station solar PV plants in the world — we also need to source panels from our facilities in Mexico and Asia. Our Silicon Valley manufacturing facility will deliver panels to CVSR using equipment sourced from 4 US states: Oregon, Colorado, Illinois, and Pennsylvania, and using silicon that comes from Michigan.
You wouldn’t know it from the coverage claiming that this company is the next Solyndra, but SunPower has been around for a long time. The company’s U.S. operations support 1,000 direct employees and more than 6,000 jobs through its dealer network. As the second-biggest U.S. solar manufacturer and developer in the country, it has a very long track record of good projects and top-of-the-line technologies. The company has successfully built the”largest” solar plant numerous times over around the world — with the Air Force playing host to one of those projects in 2007.
In fact, another Murdoch outlet, the Wall Street Journal, reported on April 30:
The San Jose, Calif.-based SunPower is one of a handful of solar-panel companies based in the U.S. and Europe that has been competing successfully for market against rapidly growing Chinese panel makers.
I spoke with Adam Browning, a long-time solar expert with the Vote Solar Initiative, who has followed the company very closely. When asked for his response to the made up scandal, he was incredulous:
Sunpower is one of the most highly-respected and savvy companies out there. They are a long-standing titan in advancing solar technologies. And that’s why organizations like Total — the 14th largest energy company in the world — sees value in investing in the company.
On the other hand you have a guy who has decided to take time off writing for Guns & Patriots to weigh in on the energy market. Who are you going to trust?
Indeed, McCabe, the editor who wrote the original story, writes about the drop of the company’s stock — a trend that has plagued every major solar manufacturer since the 2008 financial crisis due to the structural oversupply of modules.
Although its stock h
as recovered from its all-time low Oct. 4 of $6.60 per share to trade between $8 and $9 per share, it has been a steep slide from its all-time high Dec. 3, 2007 of $133. Then, the company was worth $13 billion.
Today, its market capitalization is $800 million, just short of its debt of $820 million, according to the company’s July filings for the second quarter.
The real question is whether SunPower can compete with lower cost producers in an increasingly competitive market. SunPower is an industry leader in efficiency. It recently received the Guinness Book of World Records Award for providing “the most efficient commercially available photovoltaic modules on the market.” But its panels cost more to produce and thus leave it more vulnerable to the heavy downward pressure in solar module pricing. McCabe and the folks at Fox News don’t bother exploring this angle. That would require knowing something about the solar business and being interested in reporting on it.
“Everyone is being squeezed right now,” said Shayle Kann, managing director of GTM Research’s solar practice, in an interview with Climate Progress. “But SunPower has a few really good things going for it.”
SunPower has a really solid project development business, where they have built great projects over and over. It also has the most well-structured sales channel of anyone in the U.S. — its dealer network provides a really high level of service for lead generation, financing and customer support. So when contractors want to sell solar, SunPower does a lot of the hard work for you. The company is also very serious about innovating in balance of systems — reducing costs of all the other components in a solar project. They’ve recognized the limitations of just selling solar modules and found ways to add value to their products. I think that gets them around the price competitiveness issue.
And as an experienced, long-time developer of massive solar projects, the loan guarantee for this first-of-a-kind 250-MW project (which is going to NRG) is low risk. GTM’s Kann explained to Climate Progress that the chances of default are “close to zero.”
By the time a project applies for a loan guarantee, they already had a guaranteed purchaser of the power from PG&E. This is a product that was pre-sold, and that drastically reduces the risk. They also have to get project finance in place before the loan commitment, so by the time they issue the loan guarantee, you have a guaranteed purchase by a credit-worthy off taker. All you have left is the development, which SunPower is extremely good at doing.
Remember, this is a loan guarantee, not a direct loan. It is a financial backstop that will allow the developers to leverage private financing. It only becomes a loan if the recipient defaults — which, in this case, is very unlikely.
So, you may ask, why do SunPower and NRG need a loan guarantee? As the largest solar PV project in the world — a massive 250 MW — the companies needed the additional backing to secure the private financing. But for the reasons explained above, this deal is absolutely nothing like Solyndra.
The final bit of “scandal” comes from a connection between SunPower and the son of California Rep. George Miller (D). As McCabe writes, Miller supported the development of a SunPower manufacturing facility in his district in 2010:
The congressman was not forgotten either. The SunPower PAC remembered him with $500 for his 2010 campaign. While SunPower was a financial partner in the congressman’s reelection campaign, it straight-out hired his son.
Miller the Younger is not registered to lobby in Washington, but he is a member of its bar. He is not a member of the California bar, home of his lobbying firm, Lang, Hansen, O’Malley and Miller (LHOM), of which he is a founding partner.
Yes, $500 to his campaign. That’s what constitutes being a “financial partner.”
Moreover, as Media Matters reports:
In Fact, Rep. Miller’s Son Does Not Lobby For SunPower
Firm Did Not Lobby For SunPower At The Federal Level. SunPower stated that it “utilizes the services of Lang, Hansen, O’Malley and Miller” — the firm that George Miller IV works for — “in California on a wide range of state-level issues. The company does not retain this firm for any activity at the federal level.” [E-mail correspondence, 10/12/11]
Rep. Miller’s Son Did Not Handle SunPower’s Account. George Miller IV stated that he did not work on SunPower’s account. [Phone conversation, 10/12/11]
The big questions are whether the solar industry will push back hard on the disinformation and whether the rest of the media will fall for another fake scandal.