All posts tagged 'Solyndra'

2011: Notwithstanding Extreme Weather, US Climate Policy Does Not Move Forward

December 30, 2011 22:01
by J. Wylie Donald
NOAA reported that 2011 was one for the record books:  12 weather and climate-related disasters each causing over $1 billion in damage.  One might expect (or hope) that a national climate change policy would be coming into place to prevent repeating or setting a new record.  One would be disappointed.  U.S. climate policy is "uncertain," to quote Michael Morris, CEO of American Electric Power, "dysfunctional" is the word applied by Resources for the Future, "hamstrung" is how the chief UN climate change negotiator and Executive Secretary of the UNFCCC, Christiana Figueres, calls it.   We don't disagree with these viewpoints; they are accurate.  But if a response to climate change is the goal, it is worse than these commenters are acknowledging because not only has Congress shown that it is incapable of getting anything done, other avenues are not delivering either.  As the year expires we thought it might be helpful to sift through the year's detritus and assess  the status of attempts to reduce carbon dioxide emissions, distinct from overt attempts like passing laws and adopting regulations. 1. Tax emissions - Some will remember our blog on the federal lawsuit brought by Mirant Corp. against Montgomery County challenging the County's tax on carbon emissions which fell only on Mirant. The County challenged the federal court's jurisdiction and won before the federal district court. In June, however, the Fourth Circuit reversed.  With that Montgomery County folded its tent and abandoned its carbon tax. 2. Favor renewable energy - The inexorable scrutiny of the markets has proved the undoing of several former high-flying renewable energy ventures. Most well-known is the debacle with Solyndra LLC, whose well-publicized collapse generated scrutiny by the FBI and Congress. Others that have failed with less limelight in 2011 include numerous solar companies (Solar Millennium, Stirling Energy Systems, Evergreen Solar, Spectrawatt), as well as ventures in wind (Skycon), energy storage (Beacon Power), and biofulels (Range Fuels). 3. Impose liability for emissions of carbon dioxide - The results here are mixed.  Everyone points to American Electric Power v Connecticut for the principle that for greenhouse gas liability claims the federal common law of nuisance has been displaced by federal regulation. They could equally point to Connecticut v AEP before the Second Circuit for the principle that the political question doctrine does not bar these types of claims or to the Fifth Circuit panel in Comer v Murphy Oil USA that held similarly.  However, even if the cases are permitted to move forward, they face daunting problems in proof of causation. 4. Force state action to regulate carbon dioxide - We blogged last May and just this month about the tidal wave of litigation unleashed by Our Children's Trust, an Oregon environmental group that had orchestrated a dozen suits asserting the defendant States had an obligation under the public trust doctrine to restrain carbon dioxide emissions, as well as regulatory petitions in about 40 jurisdictions.  Time has not been good to OCT. First, its petitions have been denied by at least 23 agencies (Arkansas, Connecticut, Georgia. Hawaii, Idaho, Illinois, Iowa, Louisiana, Maine, Maryland, Michigan, Nevada, New Hampshire, North Dakota, Ohio, Oklahoma, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, and Wyoming).  Where OCT filed lawsuits, three states (Arkansas, Minnesota and New Mexico) responded with motions to dismiss.  The lawsuit against Montana was dismissed. In the federal lawsuit, the plaintiffs lost a motion to transfer. 5. Reach regional agreements - With great fanfare the Regional Greenhouse Gas Initiative was launched in 2005. Despite a recent study that claims significant economic benefit to the states in RGGI, its future success is unclear. New Jersey pulled out, New Hampshire tried to leave but the governor vetoed the bill. In New York, there is a court challenge.  6. Voluntarily trade carbon dioxide emissions credits - The only carbon exchange in North America came to an end in 2010 when the Chicago Climate Exchange closed its doors.  A shadow of its former self, the CCX now registers verified emission reductions based on a comprehensive set of established protocols. 7. Develop carbon capture and storage - The most prominent project in the US came to a halt in July when American Electric Power concluded not to build a full-scale CCS plant at its Mountaineer, West Virginia plant. As noted above, AEP explained its decision as based on the uncertainty of US climate policy.  The lack of direction in American climate change response hurts business. AEP walked away from a $300 million Department of Energy match.  It didn't help that the Virginia consumer advocate, in successfully arguing against including CCS costs in the rate base, asserted:  “Any potential benefit is speculative and outweighed by the enormous cost of the pilot project.” Some may think no policy is the best policy.  We think otherwise.  Climate change is happening.  There will be a response.  All will benefit if that response is choreographed over time, rather than rushed into when political consensus ultimately concludes that something must be done NOW.  Maybe in 2012?  Happy New Year. 

Carbon Dioxide | Carbon Emissions | Climate Change | Climate Change Litigation | Legislation | Regulation | Renewable Energy | Weather | Year in Review

Solyndra Takes the Fifth and Mascoma Prepares for an IPO: A Down-and-Up Day for Renewable Energy

September 26, 2011 19:50
by J. Wylie Donald
  It was a sobering moment Friday. Two executives of Solyndra LLC, after being honored by the President, receiving vast sums of money from investors, and earning kudos and accolades from industry and government,  asserted their Fifth Amendment right against self-incrimination and refused to testify before a congressional committee investigating the solar cell manufacturer's bankruptcy and potential improprieties in the procurement of loan guarantees.  We are not privy to the corporate planning but are comfortable stating that that was definitely not in the business plan. A more successful business model (for the moment anyway) appears to be that of cellulosic ethanol entrepreneur Mascoma Corporation, which on Friday filed its S-1 in anticipation of its IPO seeking $100 million in investment. As one blogger reported:  "the numbers continue to look strong, and the timelines continue to point toward commercial volumes of cellulosic ethanol in the 2013-14 time frame, at affordable prices."  We shall see.  Mascoma describes itself as follows:  "Using its proprietary consolidated bioprocessing, or CBP, technology platform, Mascoma has developed genetically-modified yeasts and other microorganisms to reduce costs and improve yields in the production of renewable fuels and chemicals."   While the holy grail is commercial success using any biomass resource, Mascoma is hedging its bets and touting application of its "bugs" to ethanol producers. It asserts that its "consolidated bioprocessing" is better than current processes and that it can help ethanol manufacturers produce more cheaply. This resort to established product lines is becoming a trend. An article in Scientific American, The False Promise of Biofuels by David Biello, reports that many in the biofuel area, where the lack of success in commercialization of biofuel applications has been discouraging, are seeking to use their proprietary technologies in other areas such as pharmaceuticals and cosmetics. Internet commentators draw parallels between Mascoma and Solyndra based on the government support each received. Frankly, we find it not much of an insight. Government support is an enticement for investors.  If you have it, it will be easier to locate private financing. If you don't, it is just the opposite.  Still, federal and state involvement is eye-opening.    Mascoma's S-1 reveals that it has yet to turn a profit over the past five years and in fact has lost almost $140 million so far. It has been able to do this with a little over $100 million in private investment, $30 million in debt and $34.5 million in revenue. Eighty-six percent of Mascoma's revenue in 2010 came from government sources, which is substantial; government grants exceed $65 million.  The Department of Energy has provided separate grants of $20 million and $4.3 million, New York's Energy Research and Development Authority and Michigan's Strategic Fund have contributed $14.8 million and $20 million, respectively, in return for facilities in each state. A few million ($6.3 MM) has come from the BioEnergy Science Center at UT-Battelle. And somehow, for less than a million dollars, the Province of Alberta has a commitment for the construction of a facility in Alberta.  We hesitate now as we write our conclusion, for fear of jinxing Mascoma. We hope and trust that the its economic trajectory is 180 degrees from that followed by Solyndra. But just in case, we offer this small bit of advice: pay close attention now to the D&O policy. The next shoe to drop for Solyndra and its officers and directors will be lawsuits alleging various forms of misfeasance as individuals and entities that were financially burned seek to shift their loss.  We could write much regarding D&O policies. It will suffice here to counsel for focusing on pursuing coverage extensions for government investigations and for a requirement of "final adjudication" in any species of fraud exclusion.  The market is reportedly soft (except for Chinese reverse mergers) and there is no time like the present to establish the most favorable coverage terms.  Stated differently, when your executives are taking the Fifth and the litigation sharks are circling is no time to be parsing your coverage.

Renewable Energy | Solar Energy

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The business case for the development of renewable energy projects, from biodiesel and ethanol to wind, solar, and distributed generation, is more compelling than ever as tax and regulatory incentives combine to attract investments. Emerging issues in environmental law and increasingly recognized principles of corporate social responsibility are encouraging public companies to voluntarily reduce greenhouse gas emissions, install clean energy alternatives, and invest overseas in projects under the Kyoto Protocol to respond to climate change concerns.

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