It was revealed last week that the solar project had Crescent Dunes, a recipient of $ 737 million in US government-backed loan guarantees Filed for bankruptcy. When the project began construction in 2011, it represented a promising avenue to reduce the cost of solar energy and demonstrate large-scale solar use. When the facility was completed a few years later, the rapid drop in the price of solar modules essentially had the facility obsolete. The project was plagued by various technological challenges, and leakages in critical components forced the plant to go offline in April 2019, which continues to this day.
Critics of the Department of Energy’s Loan Guarantee Program (DOE) have pointed to the project and other failures such as Solyndra and Fisker, as evidence that the program is a poor use of taxpayers’ money. The Wall Street Journal blared that US taxpayers will “lose up to $ 225 million”. However, these arguments quickly disintegrate when looking at the loan program portfolio as a whole and completely vanish when looking at the second-order effects of DOE loans. Loans granted under the DOE program are now viable despite these failures, and its efforts have boosted new sectors of the economy and created thousands of jobs. The DOE should make more of these guarantees.
The DOE Loan Guarantee Program (consisting of three parts: Section 1703 under the Energy Policy Act of 2005, the Advanced Technology Vehicles Manufacturing Direct Loan Program under the Energy Independence and Security Act of 2007, and Section 1705 under the American Recovery and Reinvestment Act of 2009) is divided into technology sectors, including nuclear, fossil and renewable, and was originally created to provide access to project finance and close out for new projects and technologies. Instead of giving federal funds in the form of grants to projects, the loan programs expect the funds to be repaid over the term of a loan with interest. The government spends no money on successful business. From June 30, 2020 the program issued Just over $ 35.5 billion in loan guarantees, nearly $ 30 billion in funds has been disbursed, $ 3 billion in interest has been collected on the loans, and the loans have lost nearly $ 800 million.
The base bookkeeping shows that the loan portfolio is $ 2.2 billion in the dark As of June 30th. The portfolio did not lose any money even after taking the defaults into account. Although many loans are still to be paid back, only 1 loan is left on it Books was issued later than 2011 which means almost all of them have passed the point of technological and commercial demonstration and highest risk. Five loans totaling US $ 3 billion have already been paid off. The low default rate of DOE loans (losses are less than 3% of funds disbursed as of June 30) would be market-leading for a commercial lender.
The secondary effects of the program are not even taken into account. There are plenty of examples: Tesla
Any loan program is likely to fail and success must be measured by the performance of the entire portfolio, not a single transaction. Even after the failure of Crescent Dunes, now is the time to invest more and continue the success of the DOE lending program. Congress doesn’t even have to act: the loan programs still have over $ 43 billion in authority remained in its different sectors. It is sufficient for the management of the DOE to start processing and approving loan applications again. The decision should be a breeze, regardless of your political leanings: a government program that catalyzes innovation and commitment, creates thousands of well-paying American jobs, and actually brings in tax dollars. This program is the best government.