Loans to Clean Energy Dwindling

New ideas may get started

Bill Opalka | Sep 25, 2011

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The two biggest clean energy programs to come out of the Recovery Act have been the cash grants in lieu of tax credits, and the federal loan guarantees for projects and innovative technologies. The loan programs’ time is winding down.

I spoke to Jonathan Silver, the executive director of the U.S. Department of Energy’s Loan Programs Office.  He leads the Obama Administration’s $70 billion dollar investment program in alternative energy, financing a wide range of solar, wind, geothermal, biofuels, fossil and nuclear energy projects. 

“This is without question the largest and most successful clean energy financing effort in U.S. history and the scale in which we’ve been able to operate is really remarkable,” Silver said.

He cites the statistics. Since March of 2009, the office has issued 42 conditional commitments for loans and loan guarantees totaling over $40 billion with total project costs of $63 billion. It claims to have created or saved over 68,000 direct jobs plus tens of thousands more across the supply chain.  

Technically, the loan program wasn’t created in 2009, but that was the first time it received significant funding.

Most of the program will end on September 30.There are some project closings and some funds for additional elements to continue through the winter. A $200 million proposal to continue some project financing in fiscal year 2012 is in the next budget.

When the stimulus program started, renewable energy developers were impatient with its slow start.

“They were correct. As recently as January of 2009 there were 14 people in the office,” Silver said. Now up to 175 to from career civil servants and outside consultants “deeply steeped in energy project finance.”

In fact, the large, high-profile wind and solar projects, many too large for the private capital markets to finance, were in the program. So, too, were innovative technology companies in clean energy manufacturing.

And that’s where the program generated heat on Capitol Hill, with Republicans charging favoritism for solar photovoltaic manufacturer Solyndra.

“The Solyndra story has been significantly misunderstood,” Silver said, referencing the $535 million guarantee to expand manufacturing facilities. The project employed 3,000 construction workers and has more than 1,000 permanent employees. “I’ve never seen a company grow straight up without some bumps in the road.”

But the company is not profitable and last year canceled its initial public offering (IPO).

“The notion that filing an IPO and then putting it on the  shelf during a period of time in which almost no IPOs were coming out doesn’t strike a private equity guy as terribly surprising,” said Silver, who was co-founder and a managing director of Core Capital Partners, an early-stage investor in alternative energy technology, advanced manufacturing, telecommunications and software.

But he said the company met the criteria for the program and the office did its due diligence.

Even as the program winds down, interest remains high. “We have far more demand that we have resources to support,” he says.  But a successor must be found.

A clean energy development administration, discussed by renewable energy advocates in and out of Congress, has been floated, but has not been enacted.

“It’s clear that if the United States intends to remain a leader in the clean energy space we have to figure out exactly what role we’re going to play in support of that,” he concluded.

Still, debate ensues as which energy forms should get federal assistances, with the staunchest free market advocates saying that none of them should. That’s not likely to happen, although this is a period of high deficits that are getting cut. 

With shrinking government support, the riddle becomes more difficult to solve.


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Government Support of Renewables: Forever?

The need for government suport of renewable technologies is due to the fact these technologies, such as wind and solar, are expensive compared to their fossil fuel counterparts, and are therefore supported out of necessity by numerous federal, state and local incentives. Policy analyst might ask, “When will these subsidies cease so that renewable energy technologies can stand on their own in the market place?” An answer to that question can be framed in terms of levelized cost of electricity (LCOE). For further information, please see my blog post:

http://www.jheversonconsulting.com/blog/2011/09/08/when-can-renewable-energy-subsidies-end/

Dr. Jeffrey Everson