Solyndra Has a Cousin in the Poorhouse

By MATTHEW L. WALD
Steven Chu, the secretary of energy, testifying on Thursday before a House Energy and Commerce subcommittee.European Pressphoto AgencySteven Chu, the secretary of energy, testifying on Thursday before a House subcommittee.

At a hearing  on Thursday that lasted all of five and half hours, Republicans on the House Energy and Commerce Committee grilled the energy secretary, Steven Chu, on the bankruptcy of the solar manufacturer Solyndra  and asked what other loan recipients might be in financial trouble. Dr. Chu named only one other company, Beacon Power, which borrowed $39 million and entered bankruptcy late last month.

In remarks to reporters after the hearing, Dr. Chu tied the two companies together, although they are in different lines of business. Solyndra, based in Cupertino, Calif., built solar modules for rooftops, and Beacon built an array of flywheels at a plant near Stephentown, N.Y. The flywheels are mechanical batteries designed to absorb power or give it back on signals from the New York power grid operator ; they were capable of reversing direction every four seconds.

Their purpose is to help regulate the frequency on the grid so that the electrons dance back and forth precisely 60 times every second, which is the alternation in “alternating current” or AC power.

Solyndra received a loan guarantee of $535 million and built just what it promised to build. But on the world market, the price of its product fell by 70 percent over two and a half years, Dr. Chu testified, because the Chinese government had subsidized so many manufacturers in that country and because the Europeans, struggling with money problems, had slowed their purchases.

Beacon was also a technical success, according to the company. But the price paid for the service it provides, frequency regulation, fell by about 70 percent in the last year.

The reason is that this price, too, is market-based. Gene Hunt, a spokesman for the company, said that Beacon was a victim of the recession, which has hurt demand for electricity among industries. “It’s kind of a perfect storm,’’ he said. The same cliché has been used to describe what happened to Solyndra.

Dr. Chu, speaking in a hallway outside the hearing room in a House of Representatives office building in Washington, said that the “market changed very very rapidly, just as the photovoltaic market changed very rapidly.” And among the approximately three dozen other loan recipients, “I can’t promise you there won’t be another’’ with the same problem, he said.

Outside analysts have noted that the Energy Department has made extensive loans and grants to companies that want to produce batteries and other components for electric cars or entire cars. If that market does not develop, batteries will be in oversupply and their price will crash, the analysts say. But backers of electric cars still have high hopes for a major market.

Solyndra is in liquidation. Beacon is still operating and has earned about $600,000 in revenue in the last year, Mr. Hunt said. The company has asked the bankruptcy court for access to an escrow fund that it placed with the Energy Department in exchange for its loan. A bankruptcy court in Delaware is scheduled to hold a hearing on Friday.

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