Beacon Power Pulls the Plug

It may be darkest just before the dawn, but it doesn’t seem like there’s much of any light shining out of the US Department of Energy’s Energy Policy Act loan guarantee program.

First solar energy manufacturer Solyndra went lights out in September.  The end of October, now, brought us news that energy storage (back-up power supply) firm Beacon Power, another DOE loan recipient, ran out of juice and is filing for bankruptcy protection:

Beacon Power developed new technology that allows its energy storage plant to rapidly absorb electricity from New York’s power grid when demand drops, and inject energy back into the grid when demand increases.

The technology is designed to help more solar and wind power — which is intermittent — be used by power grids, which need stable power to remain reliable.

While the Feds were into Solyndra for a hefty $535 million, Beacon Power Corp of Stephentown, NY received a paltry $43 million loan guarantee in August 2010.  Then again they only promised to create 14 jobs, vs. Solyndra’s promised 3,000 jobs.  $3,000,000 per job, not too shabby….

As I wrote back in August, the back-up power supply field is littered with casualties.  Smart grid technology is largely untested, and it doesn’t look like the same political shenanigans are at play with this project.  The CEO of Beacon Power has gone to lengths to emphasize the differences between this project and the California debacle.  Mr. Capp states:

“Beacon Power has devoted considerable resources and applied extensive effort to build a first‐tier team of engineering, technical and other employees, refine our technologies, perfect our patents and other intellectual property, obtain the regulatory and other approvals as required to derive appropriate revenues for our services, and produce the advanced flywheel systems necessary to operate our presently deployed and planned facilities.  Those efforts have been very capital‐intensive over a several‐year period. While great progress has been made in every area, each continues to be a work in process and requires additional investment.

Unlike Solyndra, Beacon has a functioning plant, even though it doesn’t bring in enough revenue to cover costs.  And as recently as the end of September, Sioux Falls-based NorthWestern Energy touted Beacon Power’s energy storage project under construction near Butte, Montana.  Like Solyndra, the host-state had money in the project, too.  Unlike Solyndra which failed to pull off an IPO, Beacon Power has been a listed public company, at least until NASDAQ delisted it.  And it sounds like they won’t be the last loan recipients to call the guarantee.

Lesson learned? Probably not.  When the public sector takes on economic development projects, we have a fiduciary duty to vet projects clearly and substantively.  We’ll likely learn more about the DOE’s involvement in this project in the days to come.  I remain skeptical about much of the renewable energy technology.  However, if these projects were without risk, the private sector would probably have filled the gap.  If your public sector economic development program doesn’t have any losses, it most likely isn’t doing its job.

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