Report: 1603 Loan Guarantee Program is Working 0

Last year, solar news was dominated by the failure of one company, Solyndra, which received a more-than-$500-million loan guarantee through the Department of Energy (DOE). The program was widely derided by Republicans in Congress and is being used as a key criticism against the Obama Administration’s efforts to increase renewables in the U.S.

But was it really that bad a program?

Not so, according to a new report from Herbert Allison, who served as John McCain National Finance Chairman under both Republican and Democrat administrations.

The program is now defunct. It was set to expire last September, and after the failure of Solyndra, it was even less likely to be renewed.

Under the program, DOE made a total of $23.4 billion in loan commitments, according to the report. The loans were made to help promote clean energy and energy innovations, some of which were considered high-risk ventures. To protect those potential investments and any company failures, Congress set aside $10 billion.

The report found that the program is more likely to cost a total of $2.7 billion, far less than original estimates. The report also found that the loan guarantees helped reduce the costs of loans from private banks for the technologies and projects, which would have been between $5.0 billion to $6.8 billion.

The report, however, said the program could be improved. It recommended the DOE monitors the program with a chief risk officer that’s separate from the program and reports directly to senior managers at DOE. It also offered recommendations for creating an early warning system to mitigate future failures.

While the current loan guarantee program has ended and is unlikely to be reopened as is, the report may help a next generation program get traction.

“What this really does is clears a path for a clean energy deployment administration or another type of green bank,” said Richard Caperton, director of Clean Energy Investment on the Energy Policy team at the nonpartisan Center for American Progress.

It’s not likely that any such program would be enacted by Congress this election year.

“I think we’re probably looking at subsequent years,” Caperton said. “Getting it through the House is obviously complicated this year.”

Such programs, however, have had bipartisan support in the past.

“Any loan guarantee program going forward should be able to attract bipartisan support,” Caperton said.

A green loan guarantee program must be properly developed so it only benefits those technologies that need it for financing.

“If a technology is not able to attract effective financing or cost-effective financing, then it makes sense to have a loan guarantee program for it,” he said.

In 2012 the organization will work toward such a program. But it will focus on two more pressing clean energy issues, an extension of the 1603 Treasury Grant program for solar and the Production Tax Credit for wind, according to Caperton.

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