Solar Startups: 3 Politicians Ignoring a Growing Industry in the USA

Solar Industry vs. Other Startups

A study of startup business failure rates shows that the majority of startups do not make it in the long run. After the first year, 25% of startups fail; after the fourth year, half of startups fail; and after 10 years, 71% of startups are wiped off the map.

According to The Solar Foundation’s National Solar Jobs Census of 2012, as of September 2012, there were 15,000 solar establishments in the United States, which was 2,000 fewer solar companies than there were in 2011. Using these figures, the solar industry faced a failure rate of 11.8% in one year. However, this is a relatively low rate of failure when compared to the broad spectrum of startups, which experienced a failure rate of 25% in the first year.

Even with this failure rate, the solar industry employed 119,016 Americans in 2012, up from 105,145 the year before. This increase in solar jobs represents a 13.2% employment growth rate during that year; the overall economy grew at a meager rate of 2.3% during the same timeframe. That means that 1 in 230 jobs created from 2011 to 2012 were solar industry jobs. During that same time period, the fossil fuel electric generation sector lost nearly 4,000 workers.

The major political debate surrounding the solar industry is whether it is a wise investment for the government. As expected, like other startup industries, the solar industry is subject to failures, but also successes. These rates of failure in startups do not deter venture capitalists from making investments in new companies; like any industry, there are wins and losses. It seems that from the data found in the National Solar Jobs Census of 2012, we should perhaps feel more security investing in solar companies than we can in investing in other startup companies because of their lower failure rate and increase in solar jobs over time. The government is really no better or worse at picking winners than professional investors (VCs), however, the government's flops may be more highly publicized and scrutinized than private investments.

Bureaucrats have a lot to say on the matter, but tend to put their foot in their own mouths in the process.

Representative Edward Whitfield (R-KY)

The most recent solar policy in President Obama’s Climate Action Plan directs the Department of the Interior to issue permits for an additional 10 gigawatts of renewables, like wind and solar, on public lands by 2020.

Chairman of the Energy and Commerce Subcommittee on Energy and Power, Representative Edward Whitfield, has been one of the most vocal politicians against President Obama’s Climate Action Plan. Whitfield called the hearing on “The Obama Administration’s Climate Change Policies and Activities” on Wednesday, September 18, 2013, to discuss the plan’s economic and environmental impact. Whitfield spent much of the hearing refuting climate change science and pointed to closing coal mines, power plants, and the carbon limit proposal as, “almost certain to further economic uncertainty facing our nation’s utilities and have devastating effects on our community,” mentioning that, “in 2012, 375 coal units at power plants closed.” In this case, Whitfield has proven his counter point; the fossil fuel industry is slowly fading out and there is more opportunity for employment in the solar sector. Perhaps Representative Whitfield did not read the National Solar Jobs Census of 2012?

Representative Fred Upton (R- MI)

When the California based solar energy company, Solyndra, went bankrupt in September of 2011, the House Energy and Commerce Committee held an investigatory hearing. The panel’s chairman, Representative Fred Upton, investigated the half billion-dollar loan that the Energy Department directed to Solyndra in 2009. Upton is known for saying that “it is not the role of the government to pick winners and losers,” regarding Solyndra’s massive failure, but later urged the Department of Energy to approve funding assistance for a Michigan solar company that later went belly up. How can Upton criticize the government on their investment strategies, if he made the same mistake? Also, it wasn’t just the government who invested in Solyndra’s eventual demise - the company managed to raise nearly $1 billion in private investment before the federal loans. Both the federal government and private investors struck out in this case even though the odds of success were in their favor.

Mitt Romney

During Mitt Romney’s campaign for presidency, the candidate used Solydra’s failure as part of his campaign tactics. His video filmed outside of the former Solyndra Headquarters criticized the Obama administration for “picking winners and losers.” Yet, after three weeks as governor of Massachusetts, Romney gave a similar loan to four renewable energy companies, one of which went bankrupt. As this example depicts, the federal government, state governments, and the private sector have equal risk when investing in the solar industry. Romney later tried to defund the underlying green energy-financing program later in his gubernatorial term, even though the other three companies went on to flourish and create jobs.

Conclusion

With the solar industry growing at greater rates than the rest of the economy, the success of the industry is hard to deny. Like any other industry, solar has seen its share of failures, but has seen much, much more in the way of successes. Although politicians like Rep. Whitfield, Rep. Upton, and Romney do not support solar policies or investment, the industry is still projected to grow and should continue to gain support from the government.