“Whether or not we would have survived without this series of events, I don’t know. But it certainly had a profound impact.
“Through all the things that [Solyndra] stimulated, the Congressional reaction, the media reaction, the financial market reaction – I don’t know but I assume that was part of the Department of Energy’s decision to stop making loans to us.”
Capp said that the Department of Energy (DOE) had been due to make disbursement payments up to a “couple of million” to the Massachusetts company which had been awarded $43 million from the 1705 loans program established by the American Recovery and Reinvestment Act 2009, better known as the stimulus.
Technology Support Undermined
Beacon’s world-first 20 MW flywheel energy storage plant in Stephentown, New York, was selected as promising technology that could regulate frequency on utility grids. Fast response energy storage is seen as a crucial technology to smooth out fluctuations on the grid that cause blackouts and brownouts at a cost of $150 billion to the US economy, according to DOE estimates. The loan agreed in August 2010 was the second the DOE awarded after Solyndra.
The company also received a $24m DOE smart grid stimulus grant award to build another 20MW flywheel facility in Hazle Township in north-east Pennsylvania.
Although Beacon announced in August that it faced a delisting of its NASDAQ shares, Solyndra’s collapse shook investor confidence further and sparked a vitriolic Republican-led campaign against stimulus funds used for the $37.5 billion program to fund clean energy projects.
As the company was trying to raise further private capital, Congressman Paul Ryan’s remarks on Fox News that Beacon was “finanacially unstable” were particularly unhelpful, he said.
“The congressional language that implemented the loan guarantee program said that the loan should have a reasonable chance of being paid, and not 99% certainty,” said Capp.
“The DOE was tasked with looking at companies that had technological success but had not yet deployed the first in kind. It was getting companies through death valley. It was a great idea. But for whatever reason, they stopped following that Congressional mandate when congress changed their direction. Suddenly, [after Solyndra] if you [did] anything wrong, you’re an idiot.”
That Fateful Afternoon
Capp said that DOE informed Beacon that it would cease payments at 5pm October 20 2011 – the same day that Federal Energy Regulatory Commission issued Order 755 designed to compensate providers of efficient fast-ramping frequency regulation such as flywheel and battery storage technologies. Beacon had been developing this “pay per performance” rule with the federal regulator to try to secure a premium for its fast response clean power.
Capp estimated that such power generation will recover “two or three times as much value as fossil fuel incumbents” under FERC order 755.
Nine days after the DoE’s news, Beacon Power filed for bankruptcy. Capp said a “long and ugly process” began, culminating only in March with in the sale of assets to private equity firm Rockland Capital. Last month, Rockland established Beacon Power LLC, which purchased the Stephentown plant for a reported $30.5 million that will return around 70% of the government loan. Rockland also intends to provide equity capital to develop the Pennsylvania plant and has retained half the pre-bankruptcy workforce.
Capp said he could only guess at the reasons why a private equity firm could see the business case for Beacon Power, while the DoE could not.
“That’s where you get into that realm of politics,” he said. “What’s different? You’ve got a PE company that can make its own decisions and the DOE that’s an administrative organisation appointed by the president and being called to the Hill to testify about their bad judgment. I don’t think it was a bad judgment at all. The program made sense.”
In his first public comments since Beacon declared bankruptcy last year, Capp described the months leading up to and after the bankruptcy filing and admitted that the company had struggled to compete against the dramatic decline in natural gas prices. When it obtained a conditional loan guarantee in 2006, the price of natural gas was around $7-$8 per mmbtu.
“As a pioneer you’re a step ahead and get all the land. If you’re two steps ahead you’re a martyr. It’s difficult to introduce new technology to a very conservative [utility] industry.”