Energy Secretary Steven Chu said on Thursday that he would be “very surprised” if his department’s loan-guarantee program lost as much as $3 billion when propping up nascent clean-energy technologies.
An independent report commissioned by the White House in response to the Solyndra controversy and released last week found that the government could lose $2.6 billion when providing loan guarantees to advanced-energy technologies. The amount is only about a quarter of the $10 billion Congress appropriated for such losses that experts say are inevitable when helping prop up new technologies, the report noted.
“I don’t think we’re going to use $3 billion,” Chu said after a Senate Energy and Natural Resources Committee hearing on the Energy Department's budget request for 2013. "It looks as though there is a rapidly changing ecosystem or a company doesn’t meet a milestone repeatedly, and we’re going to have to look at that and have to trade off whether we’re going to continue to disperse money or whether we’re going to have to say, ‘Sorry, the payback isn’t going to be there.’ ”
In words that Republicans are likely to hold him to, Chu added, “I’d be very surprised if we lost that.”
Chu’s emphasis on monitoring a company’s financial standing is probably an implicit reference to his department’s oversight of the $535 million loan guarantee it awarded Solyndra, the solar manufacturer that went bankrupt in September after receiving the government’s first-ever energy loan guarantee in 2010. An investigation by the House Energy and Commerce Committee has revealed that even though DOE was aware of numerous warning signs about Solyndra’s financial well-being throughout the two years the company was taking money from the federal coffers, the department continued to insist that its loan guarantee was a good bet.
The $2.6 billion that the report found the government could lose is the aggregated amount of “credit subsidy” rates for 30 loan guarantees that Energy has awarded since September 2009. A credit subsidy rate, calculated by the White House Office of Management and Budget and DOE, acts as insurance against default. Each credit subsidy rate is a percentage of each loan guarantee and represents the chance the government thinks the project has of failing.