Energy storage company Beacon Power filed for bankruptcy protection on Sunday, according to news reports. It’s the second company after Solyndra to gain a coveted green technology federal loan guarantee, only to later seek bankruptcy protection -- and while its situation isn’t as bad as Solyndra’s for the government, it’s still terrible news for backers of government support for risky greentech ventures.
Beacon’s Sunday bankruptcy comes after the firm landed a $43 million Department of Energy loan guarantee in August 2010. The loan came from the same DOE program that gave solar panel startup Solyndra a $535 million loan guarantee in 2009, only to see that backing blow up in the DOE's face after the Fremont, Calif.-based company declared bankruptcy last month.
But unlike Solyndra, which shut down its Fremont factory after declaring bankruptcy, it appears that Tyngsboro, Mass.-based Beacon is continuing to operate at least one flywheel energy storage facility in New York. DOE spokesman Damien LaVera told Businessweek that the plant is operational and generating revenue, making it a “valuable collateral asset.”
He also said the subsidiary that got the loan guarantee for the plans had cash reserves and proceeds it was required to hold as collateral on the loan. That’s a better situation than what faces Solyndra, which is obliged to pay back $75 million in private debt before seeking to pay back the federal loan under terms reached with the DOE in February.
Beacon reported it has drawn down $39 million of the $43 million loan guarantee to back that $69 million plant in Stephentown, N.Y. meant to crank out 20 megawatts of frequency regulation to keep the grid stable. As of June, 18 megawatts of that total were operational, the company reported. It’s not clear how the company’s bankruptcy will affect those operations.
Beacon’s relatively small loan guarantee makes it a much smaller portion of the DOE program than Solyndra represented. That firm accounted for 3.4 percent of the program’s $15.59 billion in conditional commitments as of September.
Still, Beacon’s bankruptcy will doubtless give ammunition to opponents of the Obama administration’s greentech loan guarantee program, which has $35.9 billion set aside to back scores of green companies. A House of Representatives committee is investigating whether investors in Solyndra with connections to the Obama administration may have played a role in the DOE’s decision to grant the company a loan.
On Friday, the White House announced it would launch an independent review of the loan program. But Cliff Stearns, the Florida Republican leading the House Energy and Commerce Committee's probe into the loan program, told Reuters on Sunday that the Beacon bankruptcy was “a sharp reminder that DOE has fallen well short of delivering the stimulus jobs that were promised” from the loan guarantee program.
Beacon had $72 million in assets and $47 million in debts, according to its bankruptcy filing in Delaware. The company had also raised about $125 million through stock sales, and had a $5 million Pennsylvania state grant to build a flywheel plant in Pennsylvania, though the odds of that second plant being built now seem very slim.
Beacon’s bankruptcy doesn’t come as a complete surprise. The publicly traded company (BCON) has been losing money for years, and has had its flywheel systems break down under continued operation. It has recently warned investors that it might not be able to remain a “going concern,” and reported earlier this month that it had received a delisting warning the Nasdaq exchange for failure to keep its share price above a minimum of $1 through September.
Beacon wasn’t able to find the financing to keep running long enough to take advantage of a new federal ruling that could have increased its revenues. Last week, the Federal Energy Regulatory Commission ordered the country’s grid operators to increase the payments made to fast-reacting sources of generation to keep grid frequency within operating boundaries. Beacon CEO Bill Capp said at an August conference that this new rule could nearly double the revenues Beacon’s flywheels were earning for its services.
Beacon’s bankruptcy also highlights the fact that grid energy storage remains a very difficult business to make markets in under the current costs of storage systems, compared to traditional fossil fuel-fired sources of power generation. While Solyndra's collapse was linked to its apparent inability to compete against low-price competitors in the booming solar power industry, grid-scale energy storage remains a market of pilot projects.
In fact, Beacon's New York power storage facility was one of the first to bid its services into real-world power markets. Although its flywheel technology is very different than that of other companies seeking to bring batteries, fuel cells and other next-generation energy storage technologies to market, its bankruptcy may be a blow to the energy storage market as a whole. We'll continue to report on the story as it develops this week.