The American Interest
Analysis by Walter Russell Mead & Staff
America: Where the Green Graft Grows

In 2010, Michigan battery maker LG Chem was given $150 million by the US Department of Energy, but it has yet to produce any batteries. A report released last Wednesday by Energy Department Inspector General Gregory H. Friedman sharply criticized the battery-maker, General Motors, and the Energy Department itself for the waste of millions in taxpayer dollars. The Washington Post brings us the story:

The Energy Department gave $150 million in economic Recovery Act funds to a battery company, LG Chem Michigan, which has yet to manufacture cells used in any vehicles sold to the public and whose workers passed time watching movies, playing board, card and video games, or volunteering for animal shelters and community groups.

Friedman said that only three of five planned production lines were complete, that less than half of the expected 440 jobs had been created and that battery production had not yet begun. General Motors, which was expected to buy batteries from the plant in Holland, Mich., is still buying the electric-car batteries from LG Chem in South Korea.

GM was supposed to buy batteries from the plant for their Chevy Volts, and have blamed poor sales of the electric car for their change of plan. But the report contends that, despite sluggish Volt sales, batteries for the electric car “could have readily been produced by using the then built-out capacity of the Michigan plant.” Instead, nearly $150 million has been spent with little to show for it.

This is a terrible shame; not only are US taxpayers being fleeced, but useful innovations are being stifled by gross mismanagement. LG Chem has already spent 94 percent of its federal funds, despite completing only three of its five production lines. The manufacturer has blamed this failure on higher than expected labor costs, but its willingness to pay employees to play board games and watch movies is surely part of the problem.

But while there is plenty of blame to go around, this ultimately falls on the shoulders of the Department of Energy. As we saw with Solyndra, this administration simply isn’t good at picking winners and losers, particularly when its grants are motivated by political concerns rather than a strong understanding of the businesses. If the energy department wants to support green tech, it should fund the R&D working on making the battery tech commercially viable, not companies trying to make money off of tech that can’t compete.

This is one of the biggest intellectual problems with the green movement today: its willingness to support subsidies for technologies that aren’t ready for prime time makes it vulnerable to the ‘green lipstick’ phenomenon. Corporate interests win support for wasteful subsidy programs by calling them green. Serious environmentalists should support research to develop technologies that can compete on a level playing field. That’s how you change the world; in these days of tough fiscal limits, no governments anywhere can afford to change the world’s energy picture by subsidizing weak sister technologies.

President Obama has called this plant a “symbol” of where Holland, Michigan, and the US are going. Let’s hope he’s wrong. We don’t want to end up where this policy is going.

[Image courtesy of Shutterstock.com.]

Published on February 17, 2013 1:00 pm