Feds mull pull back on program for Solyndra, nuclear, fossil fuels
(Bloomberg) - President Donald Trump’s advisers have recommended the Energy Department freeze and consider ending a loan program that famously backed the failed solar panel maker Solyndra, according to two people familiar with the plan.
A memo prepared by Trump’s transition team for Energy secretary nominee Rick Perry calls for a halt to new loan guarantees while the department determines what should be done with more than $25 billion still available for use, the people said. That would give the administration time to determine whether the program, initially created in legislation signed by then-President George W. Bush, should be shut down entirely.
Either way, the Energy Department would continue to administer the $30 billion portfolio it has of existing loans and guarantees, according to the people who declined to be identified discussing the memo because it isn’t public. The aid has helped nuclear plants and wind farms, solar-panel fabricators and the geothermal industry. Brian Mahar, a spokesman for the loan programs office, declined to comment.
"Now is the opportunity to wind down the program for all technologies and get the government out of backing loans completely," said Nick Loris, a fellow at the conservative Heritage Foundation, which has long recommended the program be ended. Loris said he didn’t have direct knowledge of the Trump team’s recommendations.
The program is meant to help finance energy projects too risky to get traditional financing from banks. Since then it has made about $1.65 billion in interest for the government and has a loss ratio of about 2 percent. In addition to the funds available for wind, solar and storage technologies, it has $8.5 billion left for fossil-energy and $12.5 billion for nuclear plants.
Perry appeared to voice support for the program during his confirmation hearing last month telling Senator Bill Cassidy that a guarantee for carbon-capture project in Cassidy’s home state of Louisiana "appears to make sense," and that he is a "big believer" that government has a role to play in commercializing new technologies.
In his follow-up, written response to senators questions, Perry was more measured, saying he would review the program "and evaluate its successes and failures." He wrote, according to a copy provided to senators: "I am committed to both investing in energy innovation and using taxpayer dollars responsibly."
New technologies -- be they sleek electric vehicle plants, solar-cell factories or molten salt storage facilities -- can’t get the capital they need from commercial lenders, according to supporters of the loan program. The government backing is meant to fill the breach.
"It’s a lost opportunity," said Greg Wetstone, the head of the American Council On Renewable Energy, a trade group that represents companies ranging from renewable energy consumer Amazon.com Inc. to solar manufacturer First Solar Inc. "Where can we go to help give birth to a new sector?"
But members of Trump’s transition team and the initial agency hires are critics of the program. They argue that it meddles with the free market and subsidizes clean energy over fossil fuels. They have continued to highlight the program’s $535 million loan guarantee to Solyndra in making the case that it’s a failure and fraught with waste. Solyndra filed for bankruptcy.
"I hope what we do is have a DOE secretary who is going to kind of bring it to a pause so we can figure out exactly what is taking place," Representative Marsha Blackburn, a member of the Trump transition team executive committee, said in an interview before the recommendations to Perry were drafted. The administration must "make sure that money is not being wasted."
Supporters say by that metric, the program should continue.
"It’s not at all clear what’s not to like about this program," Mark McCall, the director of the DOE’s Loan Programs Office at the end of the Obama administration, said in an interview. "It has literally changed the world."
Since the program was ramped up under President Barack Obama, it guaranteed loans to Southern Co. subsidiary Georgia Power for the construction of the Vogtle plant, the first new nuclear reactor in 30 years. It also provided $1.6 billion in loan guarantees for NRG Energy Inc.’s Ivanpah solar plant in Southern California, the largest solar-thermal power plant in the world, and the first of its kind in the U.S.