The controversy surrounding the collapse of solar panel manufacturer Solyndra could make it impossible to extend the US loan guarantee or cash grant programmes for renewable energy and may make supporting other clean energy programmes much more challenging, experts have said.
The case of Solyndra, which filed for Chapter 11 bankruptcy protection on 6 September, is being used by some Republican legislators as an excuse to try to eliminate investment in clean energy, according to energy experts. The Fremont, California-based company was backed by a $535 million loan guarantee from the Department of Energy (DOE).
“The debate around Solyndra is a Washington, DC-manufactured issue that is being driven by members of Congress who think they can get political gain for attacking an emerging sector of the private economy,” said Joshua Freed, director of the clean energy programme of centrist think-tank Third Way. “It’s hard not to be at the very least frustrated by this because there’s so much at stake.”
Backing firms such as Solyndra is exactly the kind of risk the US must take if it wants to remain competitive in the emerging clean energy economy, he said.
“Solar in particular is a capital-intensive sector,” Freed said. “If you remove the cost of capital, the US is competitive with solar in China. It’s that cost of capital that makes a difference.”
Solar installation goal at risk
The Solar Energy Industries Association (SEIA) has set a goal of installing annual capacity of 10GW of solar in the US by 2015. But the industry needs an extension of the Section 1603 Treasury cash grant programme, which allows renewable energy developers to receive a grant in lieu of tax credits and is set to expire at the end of the year, said Tom Kimbis, SEIA’s director of policy and research.
“It’s going to take the support of Congress and smart federal policy to reach this annual solar installation goal,” Kimbis said.
The bulk of the $8.5 billion in the Section 1603 Treasury cash grant programme has so far been spent on wind projects, but the Section 1705 loan guarantee programme has helped get major solar projects off the ground.
“I think they’re at risk,” Freed said. “We face a House of Representatives that is unwilling to do much of anything. Even basic spending bills to keep the government open have turned into a game of legislative chicken.”
Extension to 1705 loan programme 'unlikely'
The Section 1705 programme expired on 30 September and an extension looks unlikely, Kimbis said, despite the pleas of developers such as SolarCity, which lost a potential loan guarantee due to what the company’s chief executive described as an inability to meet the DOE’s increased documentation requirements in light of the Solyndra scandal.
The DOE’s Section 1703 loan guarantee programme, included in the Energy Policy Act of 2005, does not expire and can provide aid for innovative technologies typically unable to obtain conventional private financing due to high technology risks. A House bill earmarks $160 million for the programme while a Senate subcommittee bill has a $200 million allocation.
“It looks like as of now the 1703 programme will be in good shape,” Kimbis said.
But what is frustrating to some experts is that other government support mechanisms such as the DOE’s Advanced Technology Vehicles Manufacturing loan programme are getting caught up in Solyndra’s web. In a September continuing resolution to keep the federal government funded, the House cut $1 billion in unspent funds from the programme, which provides direct loans to support the development of vehicles meeting higher fuel efficiency standards.
“Its resurrecting an electric vehicle sector that was all but moribund in the US,” Freed said.
What is also distressing to some experts is that certain renewable energy technologies are less than a decade away from achieving parity with traditional energy sources and only need government support for a few more years, but are in danger of losing that support.
“If we get solar [photovoltaic] at utility scale at 6 cents a kilowatt hour, we don’t need any subsidies,” said Mark Fulton, global head of climate change research at DB Climate Change Advisors in New York. “How long will that be? Five to 10 years. I think we’re in the last phase of the big subsidy ask, which we need to be because there ain’t much money left.”
By. Gloria Gonzalez