Written by Richard W. Caperton
Imagine a government program that had produced dozens of success stories, cost less than expected, and helped build an industry of the future. Wouldn’t you want to expand that program? Yes, you probably would. Unless, of course, you were Rep. Cliff Stearns (R-FL).
If you were Rep. Cliff Stearns, you would introduce legislation to end the program. And, if the program somehow did survive, your legislation would make sure that it operated with more bureaucratic red tape and weaker financial standing.
Welcome to the bizarre politics around the Department of Energy Loan Guarantee Program. Today, two subcommittees of the House Energy and Commerce Committee will consider a piece of legislation written by Stearns called the “No More Solyndras Act.” Every aspect of this bill is bad. If Congress really wants to improve the loan guarantee program, they should do so by allowing it to fund many more projects with a full portfolio of financial tools. Let’s look at why.
The Loan Guarantee Program has been a success
First, some background. DOE’s loan guarantee program was created in the Energy Policy Act of 2005, and was strengthened in the American Recovery and Reinvestment Act (the stimulus bill). The program is built to provide financing to new clean energy technologies that the private sector is unable to finance. These companies are trying to cross the “Valley of Death,” where they need many millions — even billions — of dollars to build new projects. Traditional lenders won’t finance these projects because they’re generally the first-of-a-kind, and venture capitalists who would finance innovative projects simply don’t have enough money to meet these companies’ needs. So, the government stepped in and guaranteed that they’ll pay back a loan if the company is unable to. This guarantee unlocks capital.
The program has been an overwhelming success. The loan guarantee program alone financed 32 projects in more than 20 states, ultimately creating 22,000 jobs directly. Best of all, the government only spent $2.5 billion to mobilize more than $20 billion in private capital.
Even projects without guarantees have benefited from the process. For example, the due diligence process helped bring in a $1 billion investment from Bank of America for the largest residential solar project in U.S. history. The chief executive officer of the solar company deploying the project said that without the due diligence process to attract private lenders, “We would not have been able to make the economics of this project work.”
Enter the “No More Solyndras Act”: A potential disaster
Despite the fact that the Title XVII loan guarantee program has been a success and should be expanded, Rep. Stearns’ legislation would effectively end the program, mandate unnecessary and duplicate consultations, and tie the government’s hands behind when it’s representing taxpayers.
The “No More Solyndras Act” does three main things:
1. It sets a retrospective deadline by which applications must have been received in order to be considered for loan guarantees. No application that was submitted after December 31, 2011, is eligible for a new guarantee.
2. It creates a new process for the Secretary of the Treasury to influence the outcome of a decision on a guarantee, and requires the Secretary of Energy to explain why he or she did or did not follow Treasury’s recommendation.
3. It says that taxpayers must always be the senior debt holder, even after a restructuring of a guarantee for a troubled company.
Each of these is a mistake.
Disclaimer: The views expressed above are solely those of the author and may
not reflect those of
Care2, Inc., its employees or advertisers.