Ever since Solyndra, a California manufacturer of solar panels, went bankrupt Sept. 5 with $535 million of federal loan guarantees, Chu and his Energy Department have been the focus of some unwanted attention. The department has been hammered by members of the House Energy and Commerce Committee, which has unearthed reams of Obama administration e-mails about internal rifts over the Solyndra loan guarantee. Rep. Cliff Stearns (R-Fla.), head of the panel’s oversight subcommittee, has gotten Chu to agree to testify Nov. 17. And GOP presidential candidate Newt Gingrich called for Chu to be fired for “grossly mismanaging federal dollars.”
“Daily Show” host Jon Stewart devoted eight minutes to the Solyndra affair and addressed lawmakers’ charges that the loan was based on politics, not merit.
“Maybe their hearts were in the right place and they bet on the wrong horse,” said Stewart of the Energy Department officials. “It’s not like there’s any damning evidence they knew in advance this horse was, in fact, a donkey.”
For Chu, a Nobel Prize-winning physicist, it has been a demonstration that the laws of politicsare more important in Washington than the laws of physics.
For most of Chu’s time here, those laws have been aligned. President Obama is fond of the idea of having a Nobel Prize-winning physicist in his Cabinet, say people who have been in touch with senior administration officials.
The president liked Chu’s wonkiness, intellectual authority and devotion to planting technological seeds for slowing climate change. Though the Energy Department’s grant and loan guarantee programs were less than one-tenth of the 2009 stimulus total, Obama showcased many of the projects because, unlike road repairs, they held out the promise of gee-whiz innovation and of heightened competitiveness on a global stage.
Chu personified that gee-whiz character, and as a physicist he was able to understand the bulk of the Energy Department’s more mundane but important responsibility to manage the nation’s nuclear weapons stockpile. On the day Obama visited Solyndra in 2010, he mentioned that Chu — “who, as you know is a Nobel Prize-winning physicist” — was then in the Gulf of Mexico personally poring over plans, pressure equations and photos in an effort to plug BP’s leaking Macondo oil exploration well.
But now Solyndra has become a financial and political blowout, and it has made Chu look naive, at best, for saying in March that with Solyndra’s sales rising and its equity investors kicking in more money, he was “confident they can repay” the federal loan.
Weeks earlier, in a Jan. 31 e-mail, an Office of Management and Budget staffer was alarmed. The staffer wrote that an upcoming senior staff meeting “might present an opportunity to flag to DOE at the highest levels the stakes involved, for the [Energy] Secretary to do as he sees fit (and be fully informed and accountable for the decision).” The staffer, whose name was redacted, said, “Although [political] optics are generally out of our lane, it may be worthwhile for the [OMB] Director to privately make this point to the Secretary.” What happened at that senior staff meeting remains unclear.
What is clear is that if the laws of physics and politics still resemble one another it is in this way: The Solyndra story, once in motion, has tended to stay in motion. And it might be hard for Chu to stop it.
Chu was an unorthodox choice for the Energy Department from the start, and not just because he bikes to work whenever possible or likes to climb the seven flights of stairs to his office. He had spent much of his life in labs. He did his Nobel-winning work at Bell Labs in New Jersey, using lasers to capture subatomic particles. Later he taught at Stanford.
But gradually he became alarmed about evidence of climate change and came to see fighting climate change as his mission. In 2004, he became director of the Lawrence Berkeley National Laboratory to steer people there toward projects aimed at slashing greenhouse gas emissions.
Many of his views were not in line with the entrenched energy establishment of oil, coal and nuclear, or with the priorities of past energy secretaries. Chu declined to comment for this article. In an interview with The Washington Post in 2007, he said that the U.S. cost of electricity was “anomalously low,” that a cap-and-trade approach to limiting greenhouse gases “is an absolutely nonpartisan issue” and that scientists had come to “realize that the climate is much more sensitive than we thought.”
He said then that debates over whether climate change is being caused by humans were “reminiscent of the dialogue in the 1950s and ’60s on tobacco.” (At that time, many argued that there was insufficient evidence linking smoking to cancer.) In a speech, he once said that “coal is my worst nightmare,” a comment tossed back at him during confirmation hearings.
Once in Washington, he continued his focus on alternative energy sources. In a speech soon after taking office, he talked about energy efficiency, transmission lines and renewable energy. Afterward, Peter J. Robertson, vice chairman of Chevron at the time, dryly noted that “it would be nice to hear a bit about oil and gas.” In a session with reporters, Chu said the Organization of the Petroleum Exporting Countries was “not in my domain.”
But if Chu was an unusual choice for energy secretary, he also arrived at an unusual moment. The 2009 stimulus bill gave more than $37 billion to Chu’s Energy Department to dole out in grants, plus enough money to cover up to $38.5 billion in loan guarantees, each figure far more than the department’s usual annual budget. The Energy Department had limited experience — and Chu had none — in lending money to companies.
Yet the stimulus money was an opportunity, and Obama was keen to use the economic crisis as an opportunity to jump-start some renewable-energy projects. In February, the day after the stimulus bill passed, Chu was urging companies to trim loan guarantee applications down to 50 pages to streamline the process; he vowed to “cut checks” in just over two months. When he issued the Solyndra guarantee in just one month, the announcement said it showed the “speed at which the department can operate.”
But as other applications bogged down later, he told acquaintances that he felt pressure to get the program moving.
In e-mails about Solyndra released to a House oversight committee, Chu is absent; messages have gone to or from his subordinates. But copies of letters from members of Congress show how lawmakers added to the pressure on Chu.
Iowa’s entire congressional delegation signed a letter urging Chu to “fully and carefully consider” a wind project “without delay.” Idaho Rep. Mike Simpson (R) backed a biorefinery, asking Chu to consider the “recent economy downturn and the closure of two major employers.”
On April 27, 2009, three weeks after meeting Chu, Rep. James E. Clyburn (D-S.C.), then House majority whip, wrote a letter thanking Chu for his “candor” but disputing program details about collateral required of investors to protect taxpayers in case of default. Clyburn expressed concern that the “best” of five projects under consideration might not get a loan guarantee.
“This would be a wholly unacceptable outcome,” he said.
Worries about program
The sense of urgency in Congress and at the Energy Department conflicted with White House economic officials who did not like the loan guarantee program to begin with and disagreed with some of the department’s choices. But the president let the program continue, with the Energy Department negotiating loan guarantee terms and the OMB estimating the risk of failure and credit.
To many, that still seemed too slow. Rep. Henry A. Waxman (D-Calif.), who was then chairman of the House Energy and Commerce Committee, wrote to Chu and the acting OMB director because of “reports of unnecessarily slow and duplicative reviews” by OMB. He urged that proposals be dealt with “expeditiously.”
In the end, the Energy Department could not complete the paperwork for four loan guarantees it wanted to give, and half a billion dollars of the $2.4 billion available to cover default risk went unused.
Chu has argued that that the loan guarantee program would be a success overall while the Solyndra bankruptcy — accompanied by charges that political expediency or favoritism led to ill-advised federally backed funding for the firm — would be more the exception than the rule.
Some clean-technology investors said that if Chu made errors with the loan guarantee program, they might be attributed to his passion for technological solutions and his inexperience with what was essentially a venture capital program. Solyndra’s technology using cylindrical tubes was expensive, but it was novel way of capturing sunlight, like a tracker without moving parts.
He has faith in science to solve problems. In an interview before he became secretary, Chu talked about how humans can improve upon nature, citing the use of titanium in making jet planes.
“Maybe we can build a better artificial photosynthesis machine just as birds cannot build jet planes,” he said.
One day recently he received a briefing on appliance standards that compared U.S. standards to those overseas. Chu himself has dug into the data on appliance standards and is writing a paper on the topic, according to one person in contact with him.
Some political veterans believe that Chu will weather the Solyndra storm.
“Just looking at the factors that bring a Cabinet officer down, I don’t see any of them here,” said former defense secretary William Perry, a member of Chu’s advisory group. “It’s either because that officer has done something really stupid or done something the president doesn’t agree with. . . . The president supports the goal of introducing alternative energy. There can be no doubt of his commitment to that.”
Besides, there is virtually no chance of getting another secretary confirmed, other political analysts say. And ousting Chu would imply that the loan guarantee program was fundamentally flawed, whereas the administration has asserted that some individual project failures were inevitable.
“Now, we knew from the start that the loan guarantee program was going to entail some risk, by definition,” Obama said at an Oct. 6 news conference. “But the overall portfolio has been successful. . . . There were going to be some companies that did not work out; Solyndra was one of them. But the process by which the decision was made was on the merits.”
However, when the president put forward his latest jobs and economic stimulus proposal, clean-energy technology grants and loans were not part of the package.
On Oct. 1, the dreary weather seemed to be a metaphor when Chu spoke to the college teams that had competed in the Solar Decathlon, a biannual event sponsored by the Energy Department. For six of the previous nine days, Washington’s skies had been overcast and rainy while the teams showed off innovative solar-powered homes temporarily erected between the Tidal Basin and the Potomac River.
“Sun, sun, sun, here it comes,” a recording blared hopefully as the closing ceremony began.
It should have been a sunny moment for Chu, but the Solyndra flap over the previous month had cast its own shadow. So Chu made a spirited defense of the much-maligned loan guarantee program.
“Just as there is a fierce competition happening here, there is also a fierce competition happening around the world,” Chu said. “The United States faces a choice today: Will we sit on the sidelines and fall behind, or will we play to win the clean-energy race?”
“I say we can’t afford not to,” Chu added. “It’s not enough for our country to invent clean-energy technologies. We have to make them, and we have to use them. Made in America, invented in America and sold round the world. That’s how we’ll compete in the 21st century.”
Will that be Chu’s legacy?
Many say he will leave things such as science hubs, new labs and new agendas for old national labs. Then there is the advanced vehicle technology portfolio of federal loan guarantees and the renewable-energy loan guarantee program, which in addition to Solyndra included $16 billion in guarantees to 27 other projects, such as big solar power generation plants, a giant wind farm and two of the first commercial-scale cellulosic ethanol plants.
While these initiatives have won Chu devoted fans, others question Chu’s management of the department and his lack of political skills.
“To be energy secretary, it is not necessary to be able to explain how a nuclear plant works,” said Scott Segal, an energy lobbyist at the law firm of Bracewell & Giuliani. “We need someone to talk about what policy should be, which may be more complicated.”