Rewarding Proven Success with Competitive Prizes vs. Subsidizing Failure with Government Subsidies

From Julian Morris and Adam Peshek at the Reason Foundation (emphasis mine):

"The Obama administration should be examining a recent example that shows how to spur environmental innovation and progress – without putting any taxpayer money at risk. Last year, the X Prize Foundation and Wendy Schmidt partnered to create the Oil Cleanup X Challenge to “develop innovative, rapidly deployable, and highly efficient methods of capturing crude oil from the ocean surface.”

The Deep Water Horizon explosion and oil spill off the coast of Louisiana in 2010 demonstrated how little improvement in oil cleanup technology had been made since the Exxon Valdez spill in 1989. So the Oil Cleanup X Challenge’s goal was straightforward:  whoever could create the most efficient method of removing oil from the surface of sea water, meeting a minimum oil recovery rate of 2,500 gallons per minute, would receive $1 million.  

Second- and third-place would get $300,000 and $100,000 respectively. 

This $1.4 million call to action prompted over 350 teams to pre-register and the results, announced October 11, were impressive. Seven of the final 10 teams doubled the standard oil recovery rate of 1,100 gallons per minute.  The winner, privately-held Elastec/American Marine of Illinois produced an oil recovery rate of nearly 4,700 gallons a minute. In a single year, without any federal funding, the X Prize had identified a problem, incentivized a solution, and produced a more efficient and cheaper technology that more than quadrupled the industry standard for cleaning oil spills.

The primary difference between the Oil Cleanup X Challenge and the disastrous federal loan program that gave Solyndra over half a billion dollars is clear:  The government program wasn’t based on results. It loaned money to the companies, like Solyndra, that had the most lobbying influence and best political connections. The oil cleanup contest awarded money for outcomes.  It was an even playing field open to all comers. Companies didn’t compete through grant applications or lobbying. The best products won."

MP: Rather than promoting crony capitalism and subsidizing Solyndra's failure with $500 million of taxpayer money, maybe the federal government should have instead created a $500 million "Solar Challenge" that would have provided financial incentives for private companies and researchers to develop cost-effective, market-based solar solutions?