Green Energy Stimulus Bankruptcies Come in All Sizes

ReVolt logoThe little-reported bankruptcy of a relatively small electric vehicle battery manufacturer last month illustrates the many problems with President Obama’s green energy stimulus program, and why the more appropriate location for the ramblin’, gamblin’ White House might be Las Vegas.

This smaller (compared to other Recovery Act beneficiaries) example is ReVolt Technology, which relocated from Switzerland to Oregon to take advantage of a $5 million Recovery Act grant from the Department of Energy in order to develop and mass-produce a “zinc-air” vehicle battery. Its technology was developed in Norway where the company was backed since 2004 by Viking Venture Management. According to the Portland Business Journal, ReVolt believed it could “deliver twice the energy of conventional rechargeable battery technologies, such as lithium-ion.”

Federal money wasn’t the only attraction. The company also received $5 million in city and state loans, as well as business energy tax credits. Thus we have another alternative energy failure – much like the many wind, solar and electric vehicle busts that have been archived by Obama administration watchdogs – that went belly-up once the government money ran out.

Of course, none of these companies can be honest about the fact that they are just rent-seeking. So to justify it, in the case of the green energy flim-flam, they cloak it in the mysterious and undefined parameters of “research investment.”

Hence we have thousands of government-funded companies like ReVolt, whose super-secret technology – just by virtue of its existence – justified the aforementioned millions of dollars from taxpayers. If you can make bureaucrats (or their contracted law firms) believe a zinc-air battery (or for that matter, any made-up technology that sounds good) holds promise as the “next big thing” in energy research breakthroughs, then the money’s in the bag.

The proof that government loan/grant analysts don’t know what they’re doing is obvious. Stimulus money went out the door to unproven start-ups, many whose leaders and investors were adept at playing the government cronyism game and/or making a case for their “alternative” technologies, such as Fisker Automotive, A123 Systems, Abound Solar and Solyndra. The determination that any of these companies deserved financial support looked more like the result of a crapshoot rather than a thorough and proper evaluation.

In the case of ReVolt, despite its obvious shortcomings, the Portland Business Journal still attempted to determine whether government authorities properly vetted the company – especially the state of Oregon. The publication, via public records requests, sought all loan application materials submitted to the state of Oregon, Oregon Department of Energy and Portland Development Commission.

What it received were documents that were heavily redacted, thanks to exemptions in the public information law (which is the case in most states when it comes to corporate welfare) that allow private companies to protect “trade secrets” and other confidential information. The Business Journal also reported that ReVolt asked officials to sign an agreement to further prevent the release of certain company information. Failed technology and bankrupt businesses are entitled to their privacy, you see, even when taxpayers are forced to pay for it. 

“Since detailed descriptions of the company’s technology and most of its financial information – including its balance sheet — are redacted, it’s difficult to determine whether the company presented a good case for more than $5 million in taxpayer subsidies,” the Business Journal reported.

What the publication did discover was a sales forecast memo signed by CEO James McDougall that projected ReVolt would sell 5,000 of its batteries by 2013 at $5,000 each, with a false prophecy of $25 million in 2013 revenue.

As for the promise of ReVolt’s technology, a loan review panel for the Portland Development Commission characterized the company’s application as “high risk.” The Business Journal quoted an analyst for Pike Research, who said the zinc-oxide battery developed by ReVolt wouldn’t be viable “in the first part of this decade.”

Despite that expert assessment, the feds and Oregonians were apparently more impressed with ReVolt’s techno-dazzle. According to the Web site, the company promised to design a battery based upon “cycle life, round trip efficiency and power.” The unit’s zinc “is transported through reaction tubes (the cathode) to facilitate the discharge and recharge of the battery.” The remarkable-sounding “Zinc Flow Air Battery” was to be “a new class of rechargeable battery system that combines key innovations from the fields of fuel cells and metal-air batteries to enable a number of disruptive inventions aimed at solving previous system limitations.”

Compared to those striking credentials – whether they’re legitimate or not – “high risk” and “not viable” get lost in the fireworks. At least that’s the case for government know-nothings; for the private investment world, they tend to examine reality more, and if they don’t then they lose their own shirts’ and not taxpayers.’ As top investor Viking Venture announced in mid-October when ReVolt revealed it would go bankrupt, the non-government capital dried up.

“The potential of the technology has been considered huge and the company has attracted considerable capital from international investors as well as public grants,” said Viking’s Managing Partner Erik Hagen. “However, it is time to acknowledge that the company could not attract new capital in order to continue the development.”

ReVolt is much like other green stimulus recipients that NLPC has covered, which illustrates the depths of indifference and/or incompetence that existed among those who reviewed loan and grant applications, both at the federal and state levels. Much of the attention has been directed at the big beneficiaries like Solyndra and A123 Systems, which were granted hundreds of millions of dollars, but there are many times more undeserving companies – like ReVolt – that also received funds. For example:

·      ReVolt was similar to bankrupt battery makers A123 and Ener1, both of which had no serious track record of success, no established mass-market technology, and not enough customers to justify huge investment. How many other little businesses with minimal credentials like ReVolt were shoveled money?

·      ReVolt was similar to Kansas City-based Smith Electric Vehicles, which left Great Britain – where it was failing – to seek fame and stimulus fortune in the U.S. How many other companies left their homelands because President Obama threw open the green energy vault to nearly all comers?

·      ReVolt was similar to Abound Solar, which was described as “lagging in technology relative to its competitors” by Fitch Ratings, who also said there was only a 45-percent likelihood Abound would repay its loan to taxpayers. Like “high risk” ReVolt, Abound was granted the taxpayer-backed loans anyway. How many other companies, large and small, were identified by industry experts as poor bets yet were given public money?

Bankruptcies and discredit have not diminished the Obama administration’s passion to give away other peoples’ money to their cronies and other alt-energy operatives. So despite no more automotive ReVolt, and no voter revolt, we are likely to see no change.

Paul Chesser is an associate fellow for the National Legal and Policy Center and publishes, an aggregator of North Carolina news.