In an unprecedented lawsuit that could derail $4.5 billion worth of utility-scale solar energy projects in California--plus billions worth elsewhere--Californians for Renewable Energy (CARE) has challenged the legality of federal loan guarantees issued over the past two years under the American Recovery & Reinvestment Act. “Crony capitalism is bad economics,” said Michael Boyd, CARE executive director and the plaintiff in the suit. “It’s not sustainable growth.” He said the federal government is subsidizing large companies and financiers through the guarantees at the expense of taxpayers. Boyd said he filed his suit in his quest to break up large-scale power utilities and end centralized power generation. He wants to see centralized power replaced with small-scale distributed generation projects owned by businesses, residents, and communities. The lawsuit, according to legal analysts, may be the first to ever challenge the legitimacy of federal financial obligations. It claims that the U.S. Department of Energy erred when it issued regulations to implement the loan guarantee program for renewable energy under Section 1705 of the Energy Policy Act of 2005. Congress added that section to the energy statute when it enacted the Recovery Act in 2009. The lawsuit contends that Department of Energy failed to reference Section 1705 when it issued rules governing the renewable energy loan guarantees under the Recovery Act, instead referencing only Section 1703, a pre-existing loan guarantee authority under the 2005 energy statute that preceded the economic stimulus law amendment in 2009. The federal government claims Boyd does not have legal standing to bring the challenge. The Department of Justice asked the court to turn down the lawsuit Feb. 10. Boyd said he plans to reply by Feb. 24. Boyd said because he has regularly intervened in the power plant licensing and loan guarantee proceedings there is little doubt that he has standing. He predicted the suit would proceed on the merits. If the suit in the U.S. District Court for the District of Columbia does succeed, “billions of dollars of investment, and tens of thousands of construction and permanent jobs, will be thrown into turmoil, with potentially calamitous consequences for the market in U.S. obligations,” warned the law firm Haynes & Boone in a briefing paper on the case last month. Haynes & Boone explained that the department’s final rule for the loan guarantees issued under Section 1705 “referred only to ‘Eligible Projects under Section 1703’.” The federal department never laid out specific criteria for grants under Section 1705, the briefing paper noted. On account of this, Boyd’s suit wants the court to invalidate all of the guarantees DOE made under Section 1705, which total $13.76 billion and cover separate projects across the nation. In California, the suit seeks to invalidate loan guarantees of: -$535 million for bankrupt solar manufacturer Solyndra in Fremont; -$1.2 billion for Abengoa Solar’s Mojave project in San Bernardino County; -$646 million for First Solar’s Antelope project in Los Angeles County; -$1.46 billion for First Solar’s Desert Sunlight project in Riverside County; and -$1.237 billion for SunPower’s California Valley Solar Branch Project in San Luis Obispo County. These projects are expensive compared to smaller-scale alternatives, according to Bill Powers, an independent energy project engineer in San Diego. He said it appears they won DOE financial assistance largely “due to political pull, not technological or economic merit.” “Few, if any, of the renewable energy projects supported by DOE would survive the withdrawal of such credit support, with potentially catastrophic effects on affected parts of that important industry,” concluded Haynes & Boone. The law firm added that while it believes the suit is likely to fail, many unanswered questions remain.
