The Obama administration is in a race against the clock to close by month’s end more than a dozen renewable-energy loan guarantees totaling $9 billion. Of that, just over $3 billion would come directly from the federal government’s coffers.
The administration now has two weeks to finalize the process amid an escalating political battle over a federally backed solar company spiraling into bankruptcy and facing an FBI probe. President Obama once praised the company, California-based Solyndra, as “the true engine of economic growth.”
At a House hearing Wednesday, there was bipartisan concern about risking more taxpayer dollars on renewable energy projects that ultimately fail. While Republicans’ rhetoric was more heated, Democrats agreed it is a critical issue.
“Taxpayers have over $500 million at risk as a result of Solyndra’s bankruptcy,” said House Energy and Commerce ranking member Henry Waxman, D-Calif. “We need to understand what happened and how we can avoid future losses.”
In 2009, Solyndra was the first company to receive a federal clean-energy loan guarantee as part of the stimulus package. The Fremont, Calif.-based maker of solar photovoltaic systems then received photo-op visits from Obama, Vice President Joe Biden, and Energy Secretary Steven Chu, all touting the job-generating potential of solar and other renewable energy industries. But on Aug. 31, Solyndra shuttered operations, laying off its 1,100 workers while seeking Chapter 11 bankruptcy protection.
Under the Recovery Act that Obama signed into law in February 2009, the Energy Department’s loan guarantee office was given roughly $6 billion to help cover the financing of renewable energy companies applying for loans both with the Treasury Department’s Federal Financing Bank and with private lenders, such as banks. Congress has since peeled away about half of that for other purposes and left the department with just $2.4 billion for the renewable loan guarantee program.
That $2.4 billion allocated to the Energy Department pays for each renewable energy project’s “credit subsidy,” a fee worth usually around 10 percent of a loan and which helps defray costs if the loan fails. The Energy Department doesn’t disclose the credit subsidy rate of loans the government guarantees, so it’s unclear how much of that $2.4 billion remains.
When the Recovery Act passed Congress, the Energy Department was given a sunset date of Sept. 30, 2011. That date is fast approaching with 14 companies’ loans still listed as “conditional” on the Energy Department’s website. In the next two weeks, the administration will try to finalize those loans, whose amounts total $9 billion. If the loans don’t close, the companies won’t get any money.
Of the 14 projects pending as “conditional commitments” on the Energy Department’s website, half are borrowing from the Treasury Department’s Federal Financing Bank and half are borrowing from private lenders, according to DOE spokesman Damien LaVera.
Initial loans come either from the Treasury Department or private lenders, depending on the loan guarantee’s contract. In a worst-case scenario, taxpayers could be on the hook for the whole $9 billion — but only if the federal government approves all 14 remaining projects with conditional loan guarantees, and all 14 subsequently default.
The loans conditionally committed to companies borrowing from the government total $3.18 billion. The other seven companies borrowing from private lenders totals roughly $5.8 billion.
Most of the money Treasury has available — if loans are closed by Sept. 30 — is targeted to solar companies. Of the seven companies borrowing from the government, four of them are in the solar industry, two are in biofuels, and one is in the wind sector, according to DOE’s website.
Of the companies seeking to borrow from the Treasury Department, the biggest loan — worth $1.18 billion — would go to SunPower Corporation Systems to build a solar farm in California. Another loan of $737 million would go to SolarReserve to build a solar farm in Nevada.
WATCH Jon Stewart mocks the administration’s embrace of Solyndra: