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Second GOVT Energy Loan Failure - Beacon

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One commonly quoted definition of insanity is doing the same thing again and again but expecting different results? But you have to be careful in making such comparisons, is it really the same thing? Can you equate Beacon's bankruptcy with Solyndra's? Probably not.

Said by some pundits to show once again the futility of using government backed loans to pump up a segment of the economy, the second major recipient of Department of Energy loans, Beacon Power Corporation, has filed for Chapter 11 bankruptcy, but is this a REAL failure?

The Beacon filing follows on the heels of the collapse of Solyndra (a company making solar panels) which had received a $535 million loan.

Fortunately there are some major differences between Beacon and Solyndra, including both the technology behind the companies and the fact that Beacon has cash reserves and is simply operating in bankruptcy while Solyndra is liquidating.

These and other differences are critical and show that not all the government loans were created equal.

It is important to remember that there is more than one kind of bankruptcy under U.S. law and many companies operate for years in bankruptcy, keeping factories open and eventually returning to profitability - in fact some divisions of a bankrupt company can actually be running at a profit, the filing merely keeps creditors from shutting everything down and liquidating the company's assets - the good along with the bad.

One big difference from the simple financial bookkeeping side is the fact that the Solyndra government loan was secondary to a private loan which means the govt. loan will get repaid only after the primary loan. The loan to Beacon is primary and hasn't even been completely used.

Another vital difference is on the technical side where Solyndra was competing with China in trying to make cheap solar panels despite the labor advantage China has and the critical difference that solar panels require rare earth elements of which China owns 95-99% of the world's supply (depending on the particular element.)

Beacon builds flywheel energy storage units using little or no rare earth elements. These 20 megawatt devices are used to help level out power demand in the smart power grid, providing energy to meet surges in demand.

This is a green energy source because it can help avoid building more power plants whose extra capacity is needed to meet peak demand. The Beacon devices help smooth out energy demand.

The Solyndra loan looked doomed to failure from the beginning while Beacon used the money to build a factory which is actually operating at full capacity even today.

While we should take a careful look at how these government loans were awarded, we also need to be careful to not paint all the companies with the same brush - while it may not survive bankruptcy, Beacon stands a fighting chance and reportedly hasn't laid off even a single worker from the Stephentown, N.Y. factory, whereas Solyndra immediately fired about 1,000 American employees.

Here is a link to Becon videos: http://www.beaconpower.com/company/videos.asp

See the Beacon press announcement for more details: http://www.beaconpower.com/files/Beacon-Media-Statement.pdf

John McCormick is a reporter, /science/medical columnist and finance and social commentator, with 17,000+ bylined stories. Contact John through NewsBlaze.

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