The latest political squabbling over the No More Solyndras Act is a reminder that politically entrenched energy subsidies enjoy bipartisan support.
The No More Solyndras Act prohibits any new loan guarantees from Title XVII of the Energy Policy Act of 2005. For applications that are already under consideration or have received conditional commitment, the bill would require the Secretary of the Treasury to make a recommendation based on the merits of the program. It would prohibit restructuring of the loan so investors can’t jump in front of taxpayers to recover money from a failed project.
The bill could protect taxpayers even further by ensuring that recipients pay the full cost of the subsidy as determined by an independent, private financial risk assessor. This would provide the best information to determine the actual risk of providing the loan guarantee and ensure that the recipient is actually paying the subsidy cost as required by law.
Nevertheless, the already-sound No More Solyndras Act has its Republican detractors. Republicans like loan guarantees (or tax credits or direct grants) if they support projects for their politically preferred sources of energy, such as clean coal and nuclear, or if they bring jobs to their districts that they can take credit for creating. But these programs do not create jobs. They misallocate labor and capital by shifting taxpayer dollars away from economical projects and toward political ones.
If these projects were economical, they wouldn’t need help from the taxpayer. And if they are viable, the government is merely taking money from the taxpayers to bankroll private companies who don’t need it. As Heritage’s David Kreutzer testified earlier this month, “Private investors will finance risky projects, new projects, and projects with long payback periods. None of these conditions is an example of market failure or a call for loan guarantees.”
Republicans and Democrats alike need to end their addiction to energy subsidies, or we’re going to continue down the same failed path of wasteful spending. While President Obama more than doubled down on subsidies for carbon-free energy, George W. Bush’s solar initiative sounds eerily similar to the one put forth by Secretary of Energy Steven Chu and the Obama Administration. The recently bankrupted Amonix was one of 13 solar energy projects that received funding under President Bush’s Solar America Initiative. The DOE press release of the grants reiterates the goals of the Advanced Energy Initiative (AEI):
President Bush’s AEI challenges Americans to change the way we power our nation. As an integral part of the AEI, the Solar America Initiative aims to bring down the cost of solar energy to make it competitive with conventional electricity sources in the U.S. by 2015. The SAI is also part of the President’s commitment to diversify our energy resources through grants, incentives and tax credits and; aims to spur widespread commercialization and deployment of clean solar energy technologies across America, which would provide long-term economic, environmental, and security benefits to our nation.
Sound familiar? Looking at President Obama’s DOE solar program, the SunShot Initiative, it’s much of the same:
The DOE SunShot Initiative aims to dramatically decrease the total costs of solar energy systems by 75% before the end of the decade. Reaching this goal will make solar energy cost-competitive with conventional forms of electricity without subsidies and enable widespread deployment across the United States. Under the SunShot Initiative, the U.S. Department of Energy will fund selective research and loan guarantees for high risk, high payoff concepts—technologies that promise genuine transformation in the ways we generate, store, and utilize solar energy projects.
Conservatives need to get on board. We don’t need to fix the energy subsidy programs. We need to abolish them.