The United States DOE Loan Guarantee Program has disbursed $30.7 billion and claims to have created or saved 62,350 jobs. The loan program has three categories:

  • Section 1703 of Title XVII of the Energy Policy Act of 2005 authorizes the DOE to support innovative clean energy technologies that are typically unable to obtain conventional private financing due to high technology risks.
  • Section 1705 is a temporary program designed to address the current economic conditions of the nation. It authorizes loan guarantees for certain renewable energy systems, electric power transmission systems and leading edge biofuels projects that commence construction no later than September 30, 2011.
  • The Advanced Technology Vehicles Manufacturing (ATVM) Loan Program consists of direct loans to support the development of advanced technology vehicles and associated components in the U.S. 

The more publicized loan guarantee recipients include Solyndra, BrightSource Energy, Ford, Fisker, and Tesla. (See the more complete list of loan recipients at the end of this article.)

The Loan Program Office (LPO) has issued conditional commitments to 13 power generation projects with cumulative project costs of over $27 billion.  This represents a greater investment in clean energy generation projects than the entire private sector made in 2009 ($10.6 billion), and almost as much as was invested in such projects in 2008 -- the peak financing year to date ($22.6 billion), according to the DOE.

President Obama has requested a $36 billion increase for the Title XVII Loan Guarantee program and appropriators will soon decide whether to increase its funding. The Senate is also considering the establishment of a new financing entity, known as the Clean Energy Deployment Administration (CEDA), that would subsume Title XVII and expand energy loan guarantees. The CEDA is essentially a "Green Bank."

Is the DOE Loan Guarantee Program a righteous creator of jobs, a kickstart to the renewable energy industry, and a savior of the U.S. automobile industry?

Shayle Kann, the Managing Director of Greentech Media Solar Research commented, "The Loan Guarantee program has been crucial both in enabling the largest solar projects currently in development and in supporting domestic solar manufacturing. Beyond this, the program is a particularly effective policy tool because it enables the government to leverage a relatively small public investment to mobilize a much larger private sector commitment. An expansion of the program would enable an entire group of large solar projects to move forward that have recently been called into question without the possibility of a loan guarantee."

Or is it, as some conservative groups would have it, a fiscally irresponsible choice when the nation is facing a $1.65 trillion deficit and $14 trillion in debt?  What are the fiscal implications of Treasury-backed loan guarantees?

U.S. taxpayer groups and conservative groups held a news conference today to outline their reservations about loan guarantees and a federal government that picks winners in the private sector. I listened in.

Ryan Alexander, president, Taxpayers for Common Sense (note that this non-partisan group also opposes loopholes for oil and gas firms and subsidies for natural gas and ethanol) had this to say: "Facing a $1.65 trillion deficit, taxpayers cannot afford to jeopardize billions on high-risk, capital intensive projects -- projects that private markets steered clear of even at the height of the credit bubble. With appropriations and energy legislation on the horizon, lawmakers must exercise fiscal restraint and not add any money to the Title XVII program or create any new financing mechanisms to fund the same projects like the Clean Energy Deployment Administration proposed in the Senate, which, like Title XVII, would channel money towards massively expensive nuclear reactors, coal plants, and other mature industries."

Andrew Moylan, vice president for government affairs, National Taxpayers Union, said: "Loan guarantees, whether for traditional or alternative energy sources, are nothing more than massive taxpayer handouts to private entities. Like many such programs, they are difficult to track and lack robust oversight. The time has come to shield taxpayers from further losses and end these subsidies."

Moylan added, "The risk should be borne by private entities, not taxpayers."  He cited synfuel programs during the Carter administration that failed and ethanol programs that are failing now. Moylan continued, "Don't subsidize any technology." and "Loan guarantees are bad deals for taxpayers."

The National Taxpayers Union is a grassroots taxpayer group fighting for limited government.

Jack Spencer, research fellow, Heritage Foundation, said: "While loan guarantees may be good for the near-term interests of the individual guarantee recipient, they are not good for consumers, taxpayers, or long-term competitiveness. They remove incentives to decrease costs, stifle competition and innovation, perpetuate bad policy, and suppress private-sector financing solutions." He added, "Loan guarantees distort the market place and the allocation of resources. It signals to industry that they don't have to be competitive. It distorts the risk of failure. It removes the incentive to decrease cost."  

William Yeatman, energy policy analyst, Competitive Enterprise Institute, said: "In light of our massive budgetary problems, if these green energy investments are too risky for the banks, then they should also be too risky for the American taxpayer." (The Competitive Enterprise Institute is a libertarian think tank.) Yeatman suggested that the number one inhibition to renewables is the power of the PUCs at the state level. He said that "innovation is illegal at the state level."  

Yeatman said that "History indicates a Green Bank is doomed," adding that "Government cannot pick winners or losers." He went on to say, "The Green Bank would fail due to political meddling -- political considerations are always a factor." Yeatman also suggested an "uncomfortable correlation between loan guarantee recipients and political contributions to President Obama."

Henry Sokolski, executive director, Nonproliferation Policy Education Center said, "The capacity of this country to waste money cannot be underestimated." 

Hard to argue with Sokolski on that. This group of speakers was no more in support of nuclear subsidies than they were for renewable subsidies.

Despite this intensive barrage of free-market, libertarian, less-government advocates, the question remains -- absent subsidies and lower cost capital sources -- how do you kick start an emerging industry like solar or biofuels that is confronted by the decidedly non-free-market incumbents of coal, oil and gas? We can either remove oil and gas subsidies or give these emerging technologies a helping hand.

A Department of Energy spokesperson gave me this comment: “The goal of the Department’s loan guarantee program is to fund innovative, clean energy technologies at scale that would otherwise have a difficult time finding funding in the private markets, while also creating jobs in communities around the country. To date, the loan program has committed to or finalized more than $30 billion in loan guarantees for 29 clean energy projects which have created or saved over 62,000 jobs. The program does not distinguish between technologies, instead focusing on an “all-of-the-above” approach that has resulted in investments in an array of energy sectors including solar, wind, geothermal, transmission, energy storage, energy efficiency, biofuels, nuclear, and advanced technology vehicles.”
 

        Program
        Technology
Amount
    Location
       
1703
 
        AREVA
        Nuclear
        $2B
  ID
        Georgia Power
        Nuclear Gen
        $8.3B
  GA
        Red River Enviro
        Energy Eff
        $245M
  CO
        SAGE Electrochrom
        Energy Eff
        $72M
  MN
       
1705
 
        Abengoa Solar
        Solar Gen
        $1.4B
  CO
        Abound Solar
        Solar Mfg
        $400M
  CO
        AES Corporation
        Storage
        $17M
  VA
        Agua Caliente
        Solar Gen
        $967M
  AZ
        Beacon Power
        Storage
        $43M
  MA
        BrightSource Energy
        Solar Gen
        $1.6M
  CA
        Caithness Shprds Flat
        Wind Gen
        $1.3M
  NY
        Cogentrix of Alamosa
        Solar Gen
        $90.6M
  CO
        Diamond Green Diesel
        Adv Biofuels
        $241M
  TX
        Kahuku Wind Power
        Wind Gen
        $117M
  MA
        LS Power Associates
        Transmission
        $343M
  NJ
        Nevada Geothermal
        Geothermal
        $78.8M
  BC
        Nordic Windpower
        Wind Mfg
        $16M
  CA
        Record Hill Wind
        Wind Gen
        $102M
  ME
        Solar Trust
        Solar Gen
        $2.1B
  CA
        SolarReserve
        Solar Gen
        $734M
  NV
        SoloPower
        Solar Mfg
        $197M
  OR
        Solyndra Inc.
        Solar Mfg
        $535M
  CA
        SunPower (CVSR)
        Solar Gen
        $1.1B
  CA
        US Geothermal
        Geothermal
        $97M
  ID

ATVM

Fisker Automotive $529M   2,000 jobs
Ford Motor Company $5.9B   33,000 jobs
Nissan North America $1.44B   1,300 jobs
Tesla Motors $465M   1,500 jobs
The Vehicle Prod Grp $50M   900 jobs


 

Tags: abound, abound solar, aboundsolar, barack obama, brightsource, brightsource energy, bse, doe, doe funding, doe loan guarantee, doe loan guarantees, fisker, fisker automotive, fisker karma, jonathan silver