Solyndra Fallout Tests Fed Loans

By Published On: March 16, 2012

The dichotomy between public investment in cleaner energy and short-term taxpayer risks was highlighted at the Senate Committee on Energy & Natural Resources Committee March 13. The hearing came the same day that the Senate failed to muster the votes needed to renew the Section 1603 incentive program, which provides federal grants equal to 30 percent of the cost of renewable energy projects in lieu of the federal investment tax credit. At the hearing, in spite of risk and political fallout from the financial collapse of Fremont-based Solyndra, the Department of Energy’s separate loan guarantee program continues to be supported by both the DOE loan auditor and the department chief. “We want to balance between stimulating [energy business] and looking out for taxpayer money,” Steve Chu, Department of Energy secretary, insisted. The loan guarantee program “is intended to encourage risk taking” of non-governmental entities, committee consultant and auditor Herb Allison told senators. But, he urged the DOE to develop a risk-management department to cope with outstanding loan guarantees. Allison encouraged continued investment in renewable manufacturing and research by the federal government “because you’ll get something back.” Solyndra’s financial implosion continues to be used as an example of management problems with the DOE’s loan guarantee program and its cost to taxpayers. The department came under political attack for structuring the Solyndra loan in a way that had taxpayers investment repaid after other investors. Allison told senators that in spite of the Solyndra fallout, it remains a good idea to subordinate the government’s payback because it “attracts” additional financing from equity sources. In related DOE finances, the Senate was unable to renew the Section 1603 grant program for solar and other projects. It voted 49-49 on an amendment to a transportation bill by Sen. Debbie Stabenow (D-MI) to renew the grant program established by the American Recovery & Reinvestment Act. Sixty votes were needed for passage. The grants--administered by the DOE and U.S. Treasury Department--are helping energy projects being built in California.

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