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DOE Sitting on Taxpayer Dollars Due to Negative Publicity

Posted By Michael Sandoval On March 19, 2013 @ 12:07 pm In Energy,Featured | Comments Disabled

Despite billions of dollars in unused loan authority remaining under the Department of Energy’s (DOE) Loan Programs Office [1], negative publicity surrounding the loan guarantee programs (which offer taxpayer dollars to government-approved companies) has tampered with applications, according to a new Government Accountability Office (GAO) report [2].

More than $51 billion in unused loan guarantee authority and $4.4 billion in unused credit subsidies (to cover the government’s long-term cost of the loan) remain available under the DOE’s Loan Guarantee Program (1703) and Advanced Technology Vehicles Manufacturing (ATVM) loan program.

Neither program has an expiration date, and the DOE has not closed a loan under either program since September 2011, the report said.

The Recovery Act of 2009 (the stimulus bill) provided nearly $15 billion in additional loan guarantees [3] before the end of September 2011 as part of a rapid expansion of the program to spur the economy. This separate program (1705) funded 28 renewable energy projects, most notably Abound Solar [4] and Solyndra [5]—it has since expired.

The DOE to date has not issued a loan guarantee under the 1703 program’s $34.8 billion in loan authority, but is considering 13 applications totaling $15.1 billion in loan guarantees as of January 29, 2013, according to the report. Four of the applications—worth a collective $10.3 billion—have reached the “conditional commitment” stage—putting them one step away from receiving the money—but as of yet, no loans have been issued.

Eight remaining applications for $2 billion in loan guarantees exist for “two biomass projects, one solar generation project, three solar manufacturing projects, and two wind generation projects,” the report found. An additional project worth an estimated $2.8 billion rounds out the active applications.

There were no active applications for the remaining $16.6 billion of the separate $25 billion originally allocated for ATVM projects. The DOE allocated $8.4 billion in loan guarantees to five companies under this program, with the last project loan closed in March 2011.

The GAO’s audit found that applicants cited negative publicity associated with the loans made under the ATVM program—notably Fisker [6]—as well as many from the related 1705 loan guarantee program that included Abound Solar and Solyndra [7], as reducing certainty and increasing caution in proceeding with the loan guarantees:

Negative public image: Some applicants noted that the Solyndra default and other problems have created a negative public image and political environment for the program, which has made its future less certain and the DOE more cautious about closing on loan guarantees.

Association with the failed solar companies and troubled car manufacturers has diminished the program’s public perception. That negative “political environment” has made companies less likely to apply for the loan guarantees:

Most applicants and manufacturers noted that public problems with the Solyndra default and other DOE programs have also tarnished the ATVM loan program.… They believed the negative publicity makes DOE more risk-averse or makes companies wary of being associated with government support.

In addition, applicants took issue with the DOE application requirements as “lengthy,” “burdensome,” and “restrictive,” where “the costs of participating outweigh the benefits to their companies.”

The DOE noted that the ATVM program lacked active applicants, due to either “insufficient project sponsor equity” or a “project technology’s readiness.” Meaning that the companies applying for the loans could not meet the conditional requirements of acquiring private-sector loans or the technology they were producing was not ready for market.

The Heritage Foundation’s Nick Loris recently concluded that the loan guarantee programs [8] are a bad bet for American taxpayers, and significant force against improving energy technologies.

“The government’s intervention in the market decreases the incentive to innovate [9] and increases the incentive to use the political process and lobby for handouts. Loan guarantees promote cronyism that rewards political connectedness over market viability,” Loris said.


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URL to article: http://blog.heritage.org/2013/03/19/doe-sitting-on-taxpayer-dollars-due-to-negative-publicity/

URLs in this post:

[1] Department of Energy’s (DOE) Loan Programs Office: https://lpo.energy.gov/?page_id=45

[2] report: http://gao.gov/assets/660/653064.pdf

[3] $15 billion in additional loan guarantees: http://oversight.house.gov/wp-content/uploads/2012/03/FINAL-DOE-Loan-Guarantees-Report.pdf

[4] Abound Solar: http://blog.heritage.org/2013/03/01/bankruptcy-filings-allege-abound-solar-aware-of-defective-panels/

[5] Solyndra: http://blog.heritage.org/2012/08/06/morning-bell-solyndra-revelations-show-its-time-to-close-the-bank-of-washington/

[6] Fisker: http://blog.heritage.org/2012/11/16/lawsuit-alleges-corruption-and-negligence-at-department-of-energy/

[7] Abound Solar and Solyndra: http://blog.heritage.org/2012/11/05/green-graveyard-19-taxpayer-funded-failures/

[8] loan guarantee programs: http://blog.heritage.org/2013/03/13/profitable-or-not-loan-guarantee-program-is-a-failure/

[9] decreases the incentive to innovate: http://www.heritage.org/research/reports/2011/07/no-more-energy-subsidies-prevent-the-new-repeal-the-old

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