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Summary:

Flywheel maker Beacon Power declared bankruptcy on Sunday after winning a $43 million loan guarantee from the DOE in the summer of 2009. This is the second company to declare bankruptcy that had a loan guarantee from the DOE program, following solar maker Solyndra’s bankruptcy.

Beacon Power and the Long Road to a Loan Guarantee

Flywheel maker Beacon Power declared bankruptcy on Sunday, first reported by Reuters, after winning a $43 million loan guarantee from the Department of Energy in the summer of 2009. This is the second company to declare bankruptcy that had a loan guarantee from the DOE program, following solar maker Solyndra’s bankruptcy about two months ago.

Beacon Power makes flywheels, which are energy storage devices in the form of large spinning discs contained in a vacuum that keep electricity flowing over the power grid at a steady frequency. The technology has struggled to reach a mainstream market, but the idea is that flywheels can help stabilize the grid and allow it to run more efficiently. They also need little maintenance over their 20-year-plus life span, and they don’t have some of the toxic chemicals found in many batteries. Flywheels are most commonly used as backup power for emergency power systems — what’s called uninterruptible power supply, or UPS — and facilities like data centers sometimes use them when grid power is halted.

Beacon Power received the $43 million loan guarantee to help build a 20 MW flywheel energy storage plant in Stephentown, N.Y. — the first full-scale commercial deployment of the company’s technology. The Stephentown energy storage plant was built to absorb and discharge energy to the electric grid, making it possible to use more variable renewable energy sources like solar and wind.

Reuters reports that Beacon drew down on $39 million of the loan for the Stephentown plant, and it reports that the plant is still operating. Unlike in the case of Solyndra, where private investors are set to get paid back a portion of the funds first (before the government), Beacon Power will be paying back the government first, says Reuters.

Flywheel technology has struggled for years, and Beacon in particular has continued to face problems. In late 2008, Beacon said it was delaying expansion of its commercial project, and back in 2006 the company faced technology malfunctions. Flywheels have had difficulty finding the right market and have faced competition from batteries, which have received a good amount of funding and support.

Earlier this month Beacon Power received a notice for potential delisting from the Nasdaq for trading under $1. Reuters reports that Beacon has $72 million in assets and $47 million in debt and that Beacon blamed its bankruptcy partly “on its inability to secure additional investments due to the financing terms mandated by the Department of Energy.”

No doubt House Energy Commerce Committee Republicans and right-leaning media will have a field day with the bankruptcy of Beacon Power. Already, electric car maker Fisker has been deemed the next Solyndra. But it turns out Beacon Power is actually the next Solyndra.

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  1. Like Solyndra, I will bet cronyism was behind issuing this loan. This cronyism is a serious problem that spans across both parties.

    Consider also what just happened in a federal court in Texas. As described at http://www.lawinjustice.com, a Dallas business owner was involved in a civil dispute and paid millions of dollars to lawyers, and when he objected to additional fees after settling the case, they had a “friendly” judge seize all of his possessions, without any notice or hearing, and essentially ordered him under “house arrest” as an involuntary servant to the lawyers. The business owner has been under this “servant” order for 10 months and is prohibited from owning any possessions, prohibited from working, etc..

    …and some quotes from the judge:

    THE COURT: “I’m telling you don’t scr-w with me. You are a fool, a fool, a fool, a fool to scr-w with a federal judge, and if you don’t understand that, I can make you understand it. I have the force of the Navy, Army, Marines and Navy behind me.”

    THE COURT: “You realize that order is an order of the Court. So any failure to comply with that order is contempt, punishable by lots of dollars, punishable by possible jail, death”

  2. R. L. Hails Sr. P. E. Tuesday, November 1, 2011

    After forty years of engineering energy systems, some thoughts on the various technologies, and government funding are in order. The government once funded research and development; they gave grants to professors to develop prototypes. This took paper designs to a lab test bench, where fundamental parameters, e.g. volts, watts, etc. were measured. The next step, for the lucky few, was a small pilot plant, where more performance information was gathered. The best of the best received grant money to engineer and built demonstration plants, small, full size “power plants”, where real world problems were confronted, e.g. the needed talent mix of PhDs and mechanics, cold weather starts, grid dispatching, real world fuel costs, and efficiencies. Some succeeded; most failed. It is worth while and honorable to definitively prove the actual user cost for some proposed technology. It is also absolutely necessary to scrutinize proponents, within the DoE, and private industry, whose rice bowl is linked to their favorite system. But it is neither ethical, or in the public good, for DOE, or any government entity to rest their fat thumb on the scales of commerce, to subsidize political buddies.

    There is nothing really new about batteries, flywheels, capacitors, or wounded up rubber bands. They all store energy, which is useful because man normally uses electricity the instant he makes it. It is a unique business; there is no inventory of manufactured product, i.e. electrons.

    Our bedrock conflict is almost religious in nature. We must resolve the risks, centuries from now, on two atoms used to make energy: uranium and carbon. If the risks are small, none of the alternative energy technologies can compete, without massive subsidizes, or mandated purchases. As noted, America has poured oceans of money on a “green” fuel, ethanol in the last decade. The reason was given by Senator Ethanol, Bob Dole. There are thirty eight states that grow corn, and each one has two Senators. There are others who fight to price gasoline to ten bucks per gallon, to force you to park your car. Lyndon Johnson created the depletion allowance, unique to oil, which paid Texas billionaires to pump oil. (This is wholly different from depreciation, the time rate of decreasing book value of an asset, as noted nearby. No other taxpayer gets this break. Example: My asset is my brain, but the government does not pay me as I grow older and have fewer thoughts to produce.)
    The sole legitimate energy subsidy is uranium. Roughly half of the fuel in today’s US reactors comes from “watered down” USSR hydrogen bombs. It heats our cities, does not evaporate them. This is good government policy, money well spent.

    The topic must be debated in this election. Consider the early snow, in the Northeast, and three million without power. Now consider this condition to last ten years. That is what this engineer fears. It can happen.

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