President Obama’s most recent green energy fixation—algae—may suffer from the accusations of cronyism that have plagued his broader effort to promote non-fossil fuel energy sources through massive federal subsidies.
Solazyme, a San Francisco-based firm that specializes in the plant matter, has received more than $25 million in federal grants and contracts as part of Obama administration’s controversial stimulus package, and is poised to receive millions more as part of the president’s recent efforts to promote green biofuels such as algae.
TJ Glauthier, who is listed as a “strategic adviser” and corporate board member, previously held a number of high-ranking posts in the Clinton Administration, including deputy secretary and chief operating officer of the U.S. Department of Energy.
Glauthier’s bio on the Solazyme website used to note that he “focused primarily on the energy portion of the economic stimulus bill,” but has since been amended to remove all reference to his work in the Obama administration.
It does mention, however, that Glauthier serves on the board of EnerNOC Inc., a company that provides demand-response services to electric utility firms.
Glauthier also served on the board of SunRun, a solar financing company that received a $6.7 million federal grant in 2010.
Glauthier’s relationship with Democratic lawmakers has been beneficial. Since 2007, he has donated nearly $8,000 to Democratic candidates and committees, including $2,500 to Obama.
Solazyme’s other board members and top executives have given much more.
In total, Solazyme officials have contributed at least $360,000 to Democrats since 2007. The majority of that money has come from just three individuals: board members Jerry Fiddler ($226,650) and Daniel Miller (more than $36,000), and executive vice president of technology Peter Licari (more than $100,000).
The president’s $787 billion stimulus package has been slammed by critics who claim that federal funding was allocated not based on need or qualifications, but as part of a concerted effort to reward large campaign donors.
A 2009 memo authored by former White House economic adviser Larry Summers appears to validate this claim.
“The short-run economic imperative was to identify as many campaign promises or high priority items that would spend out quickly and be inherently temporary,” Summers wrote. “The stimulus package is a key tool for advancing clean energy goals and fulfilling a number of campaign commitments.”
In addition to the stimulus funding, Solazyme was one of two companies selected by the Obama administration to sell 450,000 gallons of alternative biofuels to the U.S. Navy, which will use the fuel for a “Green Strike Group” maritime exercise later this year.
The contract is worth $12 million, which works out to about $27 per gallon, or nearly seven times the cost of the Navy’s standard JP-5 fuel. However, Navy Secretary Ray Mabus has said the Navy will pay about $15 per gallon for the biofuel, which is still roughly four times the cost of conventional fuel.
The contract was arranged using the Defense Department’s procurement authority as part of the president’s “We Can’t Wait” campaign. As a result, it is not subject to congressional oversight. But, if Obama gets his way, Solazyme and other biofuel companies could benefit from an additional half-billion dollars in federal funding.
In August 2011, the president announced his intention to invest up to $510 million in biofuels over the next three years, partly in an effort to meet the Navy’s goal of deploying a “Great Green Fleet” powered entirely by renewable energy sources by 2016.
More recently, Obama called for an additional $14 million in federal grants for research and development of algae-based fuels. The White House has sought to deflect criticism that the administration is not doing everything it can to address concerns over record fuel prices, or is actually rooting for higher prices.
“We’re making new investments in the development of gasoline and diesel and jet fuel that’s actually made from a plant-like substance—algae,” Obama said in a Feb. 23, 2012 speech in Miami. “You’ve got a bunch of algae out here, right? If we can figure out how to make energy out of that, we’ll be doing all right.”
Critics have panned the Obama administration for spending large amounts of money on biofuels like algae at a time when the Defense Department is facing deep cuts to its budget and increasing health benefit costs for retirees.
“The president lives in this fantasy land, like Solyndra, he imagines these things up,” former House Speaker and GOP presidential hopeful Newt Gingrich said last week. “I’m for biological research. I’m for developing algae over time. But the current algae technologies, you’d have to have $850 a barrel oil to make it competitive.”
Sen. John McCain (R., Ariz.) said the Navy has spent more than $400 per gallon on roughly 20,000 gallons of algae-based for testing, and worried the administration’s investment could become “another Solyndra situation,” a reference to the solar panel company that declared bankruptcy in September 2011, despite receiving a $535 million taxpayer-guaranteed loan.
Recent scholarly research has raised doubts about the use of algae as a viable source of fuel. A 2010 University of Virginia study found that, although algae-based biofuels “offer a higher level of energy output and require a minimum level of land area to develop, the production of such fuels results in significantly more environmental degradation.”
Solazyme lost $16.3 million in 2010, and has been forced to diversify its product line away from algae-based fuels. As noted last month by Jeffrey Klein at Examiner.com, the company has started to focus on its line of beauty products and nutritional supplements.
Pavel Molchanov, an energy analyst at Raymond James, told Klein: “Solazyme isn't likely to become in the foreseeable future a fuel-centered business.”