The controversial Energy Department loan program that backed a now-bankrupt solar panel maker could nearly double in size by the month’s end.
The Department of Energy has until Sept. 30 to give 14 companies final approval for loan guarantees totaling over $9 billion.
So far the Energy Department has already backed over $10 billion in loans to 18 companies, including a $535 million loan to Solyndra, the solar panel maker that went bankrupt and is now the subject of congressional and FBI investigations.
The high-profile bankruptcy is causing some to question whether the rest of the loan guarantees should be made.
“Taxpayers may be better served by putting that money towards reducing the deficit,” Rep. Cliff Stearns, a Republican from Florida, said during a congressional hearing Wednesday.
The companies awaiting funding, detailed on a Department of Energy website, include firms building advanced ethanol projects like Abengoa, ones building solar generation projects like Sunpower (SPWRA), wind generation projects, and a geothermal project from Ormat (ORA).
“These firms are sweating right now,” said Dan Ries, a renewable energy analyst at Collins Stewart, a New York-based boutique investment bank. “They are wondering if they will get this money.”
The loan program, set up in 2005 and then expanded after the stimulus act in 2009, is intended to support emerging energy technologies. Freeing the nation from foreign oil and developing cleaner sources of energy has been a major rallying cry for presidents since Richard Nixon.
Under the program, the government doesn’t hand out any money unless the companies fail. The Energy Department essentially acts as a sponsor, putting the government on the hook for the loan should the company default.
DOE estimates that maybe 10% of the loans will go bad, and Congress has $2.4 billion on hand to support over $20 billion in renewable energy loan grantees. The loan program is part of a broader energy loan program that includes nuclear power plants and electric vehicles. All told, DOE has backed nearly $40 billion in projects.
Despite the Solyndra bankruptcy supporters of the program say it’s working exactly as it should.
“Support for innovative technologies comes with inherent risks,” Jonathan Silver, the DOE official in charge of the loan program, told a House panel Wednesday. “Congress believed that the overall positive impact that the program, and its many successful investments, would have on our national clean energy economy outweighed the associated risk.”
But there are many who feel the government shouldn’t be involved in giving direct loans to companies – that should be the realm of banks or private equity firms. They say the Solyndra case highlights just how bad the government is at picking successful companies.
But it appears most of the riskiest loan guarantees have been already made. There are no solar manufacturing facilities like Solyndra that remain to be funded by Sept. 30, just power generation projects.
Those projects are “loans that help to facilitate the deployment of wind and solar arrays, with many of those based on technologies that have been proven to be stable and viable in years of deployment,” said Collins Stewart’s Ries.