Mississippi Copies Misguided Energy Subsidies

December 5, 2014
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The federal government has a long history of “green energy” failures. Many states have also foolishly subsidized green energy, including Mississippi.

KiOR biofuels launched several years ago with much fanfare. The company was supposed to turn wood chips into liquid hydrocarbons for use as fuel and promised to revolutionize the energy industry. Its chief investor, Vinod Khosla, described KiOR’s refinery as “an amazing facility.”

The company benefited from a federal biofuel requirement that mandated refiners use 16 billion gallons of biofuels annually by 2022. It then sought out state subsidies. The company decided to locate in Mississippi after the state offered a $75 million, no-interest loan. In exchange, the company promised to create 1,000 jobs by December 2015.

Yet the company had financial problems that were apparent from the start. Operating costs  ran $5 to $10 a gallon. The Washington Post reports that court papers estimated KiOR’s revenue at just $2.25 million but losses of $629.3 million.  

Production issues also plagued the facility. The system that fed wood chips into the plant frequently malfunctioned. The process converted less than 40 percent of its inputs into gasoline or diesel, leading to higher costs.

The problems were too much for the company to overcome. It filed bankruptcy in November and  still owes Mississippi $69.5 million.

This loan is just one of the many types of energy subsidies that Mississippi provides to green energy companies. The state exempts some green energy manufacturers from taxes. It has provided grants and loans to multiple companies.

Former Mississippi governor Haley Barbour was in KiOR’s “cheering section” and droveMississippi’s foray into green energy subsidies. Khosla leveraged Barbour’s central-planning approach to energy policy to benefit KiOR and ventures. Khosla invested in at least three other companies that received subsidies from Mississippi, including Soladigm (now View Inc.) and Stion. Khosla is no stranger to energy subsidies. Several of his other investments, including Range Fuels and Coskata, were also failures that benefited from loans from the federal Department of Energy and Department of Agriculture.

KiOR is not the first of Mississippi’s green investments to fail. Twin Creeks Technologies, a solar firm, received a $26 million loan from the state before it filed for bankruptcy.

Energy subsidies waste millions in state and federal dollars annually, but sadly policymakers have not yet learned their lesson.

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