RELEASE: Federal Energy Loan Guarantees Win Clean Bill of Health
Herb Allison, former national finance chairman for Sen. John McCain (R-AZ), and his team of accountants and auditors found that despite the hysteria around the now-bankrupt solar-panel maker Solyndra LLC, this program will cost $2 billion less than initially expected. When the Department of Energy first issued these guarantees starting in 2009, they expected that they would cost the government more than $5 billion. Now Allison and his team of independent consultants find that even DOE’s most recent projections were too high, and that the guarantees would only cost $2.7 billion. To put that in perspective, the fossil-fuel industry got a whopping $70 billion in government subsidies from 2002 to 2008. Many of these subsidies have been in place for nearly 100 years. The nuclear industry, too, has benefited from billions of dollars in subsidies, including loan guarantees, over the last half century.
Instead of looking at individual investments, CRS examined the entire DOE portfolio, concluding that the overwhelming majority of the portfolio was in electrical-generation projects, which DOE structured to have very low risk. Bloomberg Government took that a step forward, and concluded that the media’s incessant focus on Solyndra was “not proportional to its impact.” The risks to taxpayers from this program are so low because most of the guarantees went to support projects that have very secure contracts to sell their power to investment-grade rated utilities and, even in the event that something does go wrong with an investment, there is almost always someone willing to buy the project at a discount.
The DOE’s Loan Guarantee Program brought companies across the “valley of death” by providing these businesses with loan guarantees that made it possible to raise the necessary capital and jumpstart the economy. By fixing the “valley of death” problem, DOE has allowed extremely important projects to move forward, including the world’s largest wind farm, the first commercial cellulosic ethanol plant, and our country’s largest concentrating solar power project. In total the program will support nearly 40 projects, which will employ 60,000 people. The Loan Guarantee Program helped America compete in the global economy. In 2011 the United States invested more in renewable energy than any other country in the world, helping us capture our share of this trillion-dollar opportunity.
While the Loan Guarantee Program has undoubtedly been cost effective for taxpayers, it would be a shame not to learn any lessons about the program’s management. Allison and his team of independent consultants recommend several actions, such as refining oversight boards and filling certain job vacancies. Congress should act on these lessons when creating a Clean Energy Deployment Administration, which would also be a cost-effective investment program. In fact, a Clean Energy Deployment Administration would be a stronger program than the DOE Loan Guarantee Program. It would boast more independence from the political process, a fuller set of financial tools at its disposal, and the ability to view its investments as a comprehensive portfolio.
Allison’s independent review tells us everything we need to know about the DOE Loan Guarantee Program: It’s a good deal for taxpayers, and DOE staff have avoided exposing taxpayers to unacceptable risks. Now, Congress should focus on finding new ways to replicate the success of this program to put Americans back to work.
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