Beacon Power (Nasdaq: BCON), a development stage flywheel energy storage company, filed for bankruptcy when it wasn’t able to get further financing to support operations.
Beacon’s energy storage technology rapidly absorbs electricity from the grid when demand drops, and then puts it back when demand rises. It makes it possible to use more solar and wind technology in the grid, which is intermittent. SatCon Technology (Nasdaq: SATC) spun off Beacon in 1997 and it went public in 2000.
Ordinarily, this wouldn’t be big news. It’s pretty common for an early stage firm with a new technology to go under, but because Beacon is the second loan guarantee recipient from the Department of Energy (DOE) to do so, it will undoubtedly give the Republican-led House fresh ammunition to attack the Obama Administration’s support for renewable energy companies.
In 2010, DOE awarded Beacon a $43 million loan guarantee to help finance construction of a $69 million 20 megawatt (MW) flywheel energy storage plant in Stephentown, N.Y. The amount is quite small compared to the $535 million loan guarantee it gave to Solyndra. Beacon received $2 million from NY State and a $5 million grant from Pennsylvania to build a second plant there.
Unlike Solyndra, which closed its plant when it filed for bankruptcy, Beacon’s plant is operating and generating revenue – just not enough revenue to keep the company going without further financing. The DOE loan guarantee stipulates the government is first debt it must pay, so taxpayers aren’t on the hook.
Beacon has invested over $200 million in research and development and has 22 US and 11 foreign patents, as well as six pending US and 17 foreign patents, reports Bloomberg.
DOE’s loan guarantee included "many protections for taxpayers," DOE spokesman Damien LaVera told Reuters. DOE can use Beacon’s NY plant and cash reserves as collateral, and isn’t directly exposed to its liabilities. Those cash reserves were required as part of the collateral to get the loan guarantee.
Yet the GOP response doesn’t reflect these facts: "This latest failure is a sharp reminder that DOE has fallen well short of delivering the stimulus jobs that were promised, and now taxpayers find themselves millions of more dollars in the hole," says Cliff Stearns (R-FL), who is leading the House Energy and Commerce Committee’s probe.
After the GOP attacks began, DOE strengthened requirements for its loan program. Rather than helping companies commercialize promising technologies, its final loan guarantees (September 30) went to power generating facilities backed by power purchase agreements. Several worthy projects didn’t get funded because they couldn’t complete the documentation in time.
Beacon says it couldn’t find more investors because of DOE’s financing terms, its recent delisting by Nasdaq (because its stock fell under $1) and because of the current "political climate."
Out of DOE’s $35.9 billion loan guarantee program, $24.5 billion has been finalized. The largest recepient by far is $8 billion for a nuclear plant in Georgia.
The market for energy storage systems for wind is projected to reach $1.1 billion by 2015 – the technology is considered essential to integrate renewable energy into the grid.