Energy Department Loan Guarantees Went Mainly To Low-Risk Projects: Report
WASHINGTON -- A new independent report on the Department of Energy's 1705 loan guarantee program found it to be in good financial health, with the majority of the projects it supported to be much lower risks than the now-bankrupt solar panel manufacturer Solyndra. Of the 28 loans backed by the program, 18 went to power generation projects that show minimal risk of default.
What's more, the report notes, Congress planned for failure. Even if none of the loans to the remaining higher-risk projects (including Solyndra) were repaid, the losses incurred could easily be covered by a $2.4 billion loan loss reserve Congress specifically set aside. If all 10 higher-risk projects defaulted, the fund would still have a $446 million surplus.
"This report reaffirms that the loan program is working as Congress intended, and highlights the strength of the Department's overall portfolio of clean energy loans," said DOE spokesman Damien LaVera via email. "Ultimately, this debate comes down to a simple choice: will America compete for and win the jobs of the future, or will we stand on the sidelines and allow China and other countries to dominate a market that Americans have pioneered."
The dense report, released Friday by Bloomberg Government, comes as Congress and countless media outlets have given extensive scrutiny to the circumstances surrounding the collapse of Solyndra, which received $535 million in DOE loan guarantees. In their executive summary, the report's authors wrote that such scrutiny has overshadowed the need for a substantive evaluation of the overall loan guarantee program.
The focus on Solyndra is not proportional to its impact, the executive summary says. The 1705 program constitutes just 1.7 percent of the federal government's guarantee commitments across all agencies, and Solyndra's guarantee of roughly a half-billion dollars is just 3 percent of that portfolio.
The study, which provides an in-depth analysis of the $16.1 billion in loan guarantees DOE allocated to 28 energy projects under the American Reinvestment and Recovery Act of 2009, also found that the lower-risk guarantees far outweighed the higher-risk ones, with most of them going to electricity generation projects rather than manufacturing ventures. A full 87 percent of portfolio funds were directed toward projects that had minimal risk because buyers for their power output were required upfront.
Shutting down DOE's other loan programs would not help reduce the deficit, the study pointed out, because loan guarantees are not included in the federal budget.
"Ending DOE's loan-guarantee authority would have no budgetary impact and may jeopardize the remaining projects under review, calling into question the potential of new-to-market energy projects for renewable, nuclear power, advanced fossil fuel and carbon capture technology," the report concluded.
Rep. Cliff Stearns (R-Fla.), chairman of the energy subcommittee heading up the Solyndra investigation, responded to the report in an email on Friday afternoon.
“This is the first oversight ever conducted on the DOE loan guarantee program and we looked at Solyndra because it was the first loan guarantee in the program," he said. "To date, two of the first three recipients of a DOE loan guarantee have gone bankrupt, and Solyndra is under criminal investigation by the FBI. The Committee is looking at all of the loan guarantees in the program, and it is apparent that taxpayer money was recklessly put at risk.”