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Maligned DOE Green Energy Program Could Yield $5 Billion Profit

DOE Green Energy

Credit: Shutterstock

The much-maligned government program that funded the failed solar tech company Solyndra is expected to make taxpayers a $5 to $6 billion return, Bloomberg Businessweek reported on Wednesday last week.

The loan program is run out of the Department of Energy (DOE), and covers a large umbrella of investments to encourage green energy and low-carbon technologies. According to Businessweek, the expected positive returns on those investments are detailed in a new report DOE will be releasing, perhaps as early as Thursday, on the loan program’s performance — the first such estimate the agency has made of the fruits of its efforts.

Related: Are The US And China’s Climate Goals Realistic?

The program has the authority to spend as much as $40 billion, and has allocated $32.4 billion of that to a portfolio with dozens of specific projects. Half of the $32.4 billion has already been paid out, in loans that average a 22-year lifecycle. The Energy Department expects the full $5 to $6 billion return to come in over that total time period. But $3.5 billion of the principal for those loans has already been paid back by the various companies that received them, and the government has already garnered over $810 million in interest payments. The portfolio’s losses only amount to $780 million so far, and they aren’t expected to rise above $2 billion once everything is said and done — a fraction of the $10 billion in losses the government anticipated when it originally designed the program.

This stands in stark contrast to the image critics painted of the program. In 2011, the solar tech company Solyndra collapsed after receiving $528 million from the program, setting off a political feeding frenzy and embarrassing the White House.

In the 2012 presidential campaign, Republican candidate Mitt Romney said he thought “about half” the businesses the program invested in had gone out of business. On Tuesday, Rep. Marsha Blackburn (R-TN) declared that “most of these companies are bankrupt and are no longer in existence, and the taxpayer is left holding the bag.” In point of fact, as of November 2012 only three companies out of several dozen had folded, though a few others were facing financial difficulties. That number has ticked up one more to four failures since. Investigations into the loan program have found no evidence of political manipulation or wrongdoing.

The expected returns on DOE’s investment portfolio are especially noteworthy since venture capital is an inherently risky endeavor, and it was the explicit purpose of the loan program to seek out promising green energy projects that the private markets were unwilling to support. The issue is the so-called “valley of death,” the time when a firm has already spent all its capital on research, development, and capacity — and is thus at maximum debt — but has yet to see any market success and thus get the revenue to pay that debt down. This is the period DOE’s loan program was meant to shepherd companies through, and no loans were given out unless private investors made up at least 20 percent of the investment pool. “When these project developers took their projects to conventional financing sources, those lenders said, ‘Sorry, there’s too much risk here.’ That’s the gap that we’ve filled,” Peter Davidson, the program’s director, told Businessweek. He also pointed out that the loan applicants tended to look at the program as a last resort, after private investment options had been exhausted.

Related: More Battery Storage Would Improve Texas Grid

“People make a big deal about Solyndra and everything, but there’s a lot of [private venture capital] that got torched right alongside the DOE capital,” added Michael Morosi, an analyst at Jetstream Capital LLC, a firm that invests in renewable energy projects. “A positive return over 20 years in cleantech? That’s not a bad outcome.”

Estimates put the number of jobs created by the program at 20,000 — and it increases to 60,000 once the loans for advanced low-carbon automobiles are thrown in. The program stopped issuing loans in March of 2011, but then restarted in July of 2014, looking to hand out another $4 billion as part the Obama Administration’s second-term effort to cut the country’s greenhouse gas emissions.

By Jeff Spross

Source – www.thinkprogress.org

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  • Lee James on November 16 2014 said:
    As general background to this article, clean energy investment in general has been doing well for the last two years. Compare the S&P Global Clean Energy Index fund to the S&P Energy Index fund (mostly petroleum stocks) and the S&P as a whole.
  • Cliff Claven on November 16 2014 said:
    “People make a big deal about Solyndra and everything, but there’s a lot of [private venture capital] that got torched right alongside the DOE capital,” added Michael Morosi, an analyst at Jetstream Capital LLC, a firm that invests in renewable energy projects."

    Not so much. Strangely, private investors in Solyndra like Argonaut Ventures got a favorable IRS ruling that allowed them to keep the $535 million in lost loan money and even preserve the federal tax avoidance benefit of more than an additional $350 million in net operating losses, while the taxpayers via DOE and ARRA got screwed for a total of $900 million. And no one is going to prison. Here is more federal financial fornication:

    Fisker Automotive ($529 million)
    Abound Solar ($400 million)
    A123 Systems ($279 million)
    Babcock and Brown ($178 million)
    Compact Power ($151 million)
    ECOtality ($126.2 million)
    Ener1 ($118.5 million)
    Mascoma Corp. ($100 million)
    Nevada Geothermal ($98.5 million)
    Amonix ($96.5 million)
    Vestas ($50 million)
    Beacon Power ($43 million)
    Navistar ($39 million)
    Xunlight ($34.5 million)
    Raser Technologies ($33 million)
    Evergreen Solar ($25 million)
    Konarka Technologies Inc. ($20 million)
    Nordic Windpower ($16 million)
    Energy Conversion Devices ($13.3 million)
    UniSolar ($13.3 million)
    Olsen’s Crop Service and Olsen’s Mills Acquisition Co. ($10 million)
    Stirling Energy Systems ($7 million)
    Thompson River Power ($6.5 million)
    Azure Dynamics ($5.4 million)
    Satcon ($3 million)
    Mountain Plaza, Inc. ($2 million)
    Willard and Kelsey Solar Group ($700,981)
    SpectraWatt ($500,000)
    GreenVolts ($500,000)

    Administration-backed and RIN-subsidized biofuel companies no longer in the commercial biofuel business or in business at all:
    Range Fuels ($156 million)
    KL Energy
    Dynamic Fuels
    Amyris (no buyers)
    Solazyme (no buyers)
    KiOR (latest to declare bankruptcy)

    And consider the "success" of the giant $2.2 billion Ivanpah thermal solar facility that just came online this year that is burning natural gas five hours a day to supplement its dismal power output which is running at only 1/4th of that promised. It was built at a cost of $19/watt -- more than twice as much as a nuclear plant and 10 times as much as a natural gas plant. And taxpayers covered $1.6 billion of that money pit as a DOE loan guarantee.
  • Cliff Claven on November 16 2014 said:
    This is a ridiculous accounting. Each of these projects that are still alive, including Tesla, are still feeding at the public trough of subsidies. Most were built with installation tax credits (ITC) and bonus tax depreciations (MACRS) that together covered 60% of their project costs out of the US Treasury. Some also got state grants and/or loan guarantees. All are also getting one or more of the following: US Treasury production tax credits (PTC), EPA renewable identification numbers (RIN), USDA crop program subsidies, state renewable energy credits (REC), zero emissions credits (ZEC) appropriated from their competitors, artificially inflated power purchase agreement (PPA) and feed-in tariffs (FIT) rates, etc. In addition, they are benefiting from market-distorting government mandates such as dispatch priority and curtailment prohibitions, fuel blending quotas, must-take obligations, guaranteed retail prices for wholesale product, etc. The money is going from taxpayer wallets and electricity rate payer wallets and motorist wallets into the pockets of these corporate welfare clients of the current Administration. Pull the plug on subsidies and these all dry up in an instant along with their loan payments. Many of these huge projects are still not even commercially operational (i.e., Abengoa biorefinery). How can we call an involuntary taxpayer-funded loan program that spent $32.4 billion creating 55,000 temp jobs at $589,000 apiece a "success," let alone an improvement on what the private sector would have done with that money?

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