Another green-energy-related company built on government subsidies is having trouble keeping its head above water.
This time, the scandal surrounds Compact Power, a subsidiary of LG Chem.* In 2010, the Obama Administration proudly gave Compact Power a $150 million grant to build a vehicle battery manufacturing facility in Michigan. These batteries were to be used in two plug-in electric vehicles, the Chevy Volt and the Ford Focus.
As President Obama put it, Compact Power was “leading the way in showing how manufacturing jobs [were] coming right back here to the United States of America.” Last week, Compact Power announced they are placing their 200 employees on rotating furlough.
What happened between 2010 and 2012 to extinguish this beacon of hope for Michigan manufacturing and electric vehicles? For one thing, Compact Power did not produce a single battery.
In an interview with FoxNews.com, LG Chem spokesperson Randy Boileau claimed that the Michigan plant has “spent the past two years building infrastructure and conducting pre-production ‘test runs.’” He added that battery production would begin when the Volt resumes production later this month.
Compact Power’s battery manufacturing struggles demonstrate the problem with government investments in the energy sector. Subsidizing electric batteries does not bring about the demand needed to make that industry profitable—even though generous subsidies also exist to incentivize the purchase of electric vehicles. If the demand for electric vehicles and electric vehicle batteries did exist, the manufacturing facility wouldn’t need subsidies in the first place.
Compact Power is not the only government-backed vehicle battery manufacturer that is struggling. In June, Heritage’s Lachlan Markay highlighted the struggles of battery manufacturer A123 Systems, which received $250 million in taxpayer money.
This is only the most recent failure in a string of government-backed green energy flops. This past June, Abound Solar, which received a $400 million loan guarantee from the Department of Energy, filed for bankruptcy. Last September, Solyndra, which received $535 million in government loans, went bankrupt.
As Heritage economist Nick Loris said, it is time to “remove the government—and the taxpayers—from the role of subsidizing research that should be the purview of the private sector.”
*An earlier version incorrectly stated the name of the company.
Vanessa Bazan is currently a member of the Young Leaders Program at The Heritage Foundation. For more information on interning at Heritage, please visit http://www.heritage.org/about/departments/ylp.cfm.