US: GOP hopes Solyndra Act will sway American voters

17. July 2012 | Industry & Suppliers, Markets & Trends | By:  Cheryl Kaften

Can the United States fund research and innovation, without factoring in some financial risk? In a political move calculated to prolong the Solyndra scandal, but characterized as concern over lack of due diligence in the Department of Energy (DOE) loan guarantee process, Capitol Hill Republicans are putting American ingenuity on the chopping block this election season.

Solyndra factory building

Republican committee members expressed great frustration over DOE’s decision to restructure the loan after Solyndra’s bankruptcy.

On July 12, the U.S. House Energy and Commerce Committee held a hearing on a draft of a bill that is, pointedly, being called the No More Solyndras Act. (For the uninitiated, Solyndra was a California-based solar-panel manufacturer, backed early on by the Obama Administration, that squandered a US$535 million Section 1705 loan guarantee from the DOE and declared bankruptcy last September.)

The legislation, which was coauthored by Committee Chairman Fred Upton (R-Michigan) and Rep. Cliff Stearns (R-Florida), is intended, "to limit further taxpayer exposure from the loan guarantee program." It would bar the DOE from granting loan guarantees for any applications received after the end of 2011.

In support of the draft legislation, Upton stated, "The Obama administration's gross mismanagement of the loan guarantee program necessitates the phase-out of the Title XVII loan guarantee program. With the bankruptcies starting to pile up, our message to American taxpayers is clear: There will be no more Solyndras."

At the hearing, Republican committee members also expressed great frustration over DOE’s decision to restructure the loan after Solyndra’s bankruptcy, which, they said, "put wealthy investors at the front of the line ahead of taxpayers."

Posturing and pushback

Although the act has created lots of talk in Washington, DC and on the campaign trail, the odds are that it won’t lead to action, at least not in its present form. Indeed, it could run amuck among both Democratic and Republican lawmakers, many of whom say that the loan program should be revised, not excised.

Alaska Senator Lisa Murkowski, the top Republican on the Senate Energy and Natural Resources Committee, has warned against a "knee-jerk" reaction that would eradicate the entire loan program. "I think we need to get through this period and be able to reflect on what it is that actually comes out of these loan guarantee programs. We are focusing right now on the failures instead of also recognizing that we have done good things [with] the loan guarantee program," Murkowski said, adding, "We need to make sure it does what it is supposed to be doing."

Her measured stance conflicts with the GOP (Grand Old Party - Republican) platform, which promises to focus federal cleantech investments more narrowly on basic research. However, in an interview with The Hill, Murkowski qualified her position, opining that the loan recipients also should be required to invest upfront in their own technologies. "They have got to have some skin in the game. They have got to have that business plan that works," she said of companies seeking taxpayer-backed loans. "You are not going to be able to guarantee 100 percent that nothing bad will ever happen, but if you have had to find those resources for that credit subsidy, that is an indicator that you have something behind you."

What the act would do

The specifics of the act start with effectively phasing out DOE’s loan guarantee program under Title XVII of the Energy Policy Act of 2005 "by prohibiting DOE from issuing any loan guarantees under Title XVII for applications submitted after December 31, 2011."

In addition, the act would provide for the following:

  • Pending applications: While the legislation will ultimately terminate the loan guarantee program entirely, some applications already are pending in the queue; and some projects have received conditional commitments, but have not yet been issued a loan guarantee. To account for these existing program participants and the resources that have already been committed, the bill allows only these applicants and projects to remain eligible to pursue a loan guarantee.
  • Additional protection: The bill offers added protections to any new guarantee issued for an existing application: (i) No guarantee shall be made until the Secretary of Treasury has made a written recommendation to DOE on the merits of the guarantee; and (ii) If DOE makes a guarantee that does not conform to a Treasury recommendation, DOE must provide a detailed explanation to Congress.
  • Greater transparency: The legislation requires DOE to provide a report to Congress, comprising the following information for any new guarantees issued to an existing applicant: (i) The review and decision-making process used by DOE in issuing the guarantee; (ii) the terms of the guarantee; (iii) the recipient; and (iv) the technology and project.
  • No restructuring: The No More Solyndras Act prohibits DOE from restructuring the terms of any guarantee unless the department first consults with Treasury. Just as with current law, the act also prohibits the subordination of U.S. taxpayer dollars to any other investors.

The loyal opposition

In a statement entered into the official record, the ranking Democrat on the House Committee on Energy and Commerce, Senator Henry A. Waxman of California, commented, "This is a hearing for politics. That’s all it is."

Waxman acknowledged (see video), "I’m sorry Solyndra happened. We lost $500 million dollars. That’s a shame, but that’s why loan guarantees are provided, because these are risky enterprises and not all of them are going to succeed. But there has been no showing of wrong-doing by anybody in this Administration due to the Solyndra loan loss. No showing of wrong-doing, despite the claims being made by the Republicans. There’s no evidence for it.

"So what are they proposing?" he asked. "Legislation that would, they say, end this loan guarantee program, but would instead provide billions of dollars still to be used. But they do it in a way that would ignore the best possible technologies. They create a winner’s list of about 50 projects that are eligible, and if any new idea comes up in this year or next, it wouldn’t even be eligible to seek a loan guarantee."

Waxman warned his colleagues on the committee, "We need to step outside the bubble of being in Washington and being consumed by the quest for political power – and recognize the havoc that extreme weather is causing around the nation. Then, we need to develop solutions to climate change and the real energy challenges facing our nation."

DOE's position

DOE had no comment immediately following the meeting, but the agency consistently has held that the loan programs have accelerated "America’s transition to a clean energy future," with nearly $35 billion in loans, loan guarantees, and conditional commitments for loan guarantees to 33 clean energy projects, with more than $55 billion in total economic investment. Among the projects (since January 2010) are:

  • One of the world’s largest wind farms;
  • The world’s largest photovoltaic and concentrating solar power (CSP) plants currently under construction;
  • Two CSP plants that will more than double the nation’s CSP capacity;
  • The first two all-electric vehicle manufacturing facilities in the United States;
  • The first distributive photovoltaic energy project on a national scale, which will deploy panels on commercial rooftops in up to 28 states; and
  • One of the country’s first commercial-scale cellulosic ethanol plants.

SEIA enters the squabble

The solar industry also weighed in on the draft bill, late on July 12. Rhone Resch, president and CEO of the Solar Energy Industries Association (SEIA), a major solar trade group in the United States, issued the following statement:

"The solar industry supports efforts to ensure that taxpayer dollars are protected and used wisely to increase the effectiveness of Department of Energy Loan Guarantee Program. The solar industry stands ready to work with policymakers on a bipartisan basis to achieve these common sense goals and improve the loan program.

"Unfortunately, the discussion draft  – as was as was noted on multiple occasions in the legislative hearing – would 'throw the baby out with the bathwater.' The loan program has been utilized on a bipartisan basis to leverage private capital to promote transportation, health care, education, housing and energy infrastructure policies. The provision in the discussion draft that sunsets DOE’s loan program would hinder our nation’s ability to develop innovative energy infrastructure projects. In solar alone, this program has achieved a number of notable successes. Chief among these are 11 utility‐scale solar power plants in the Southwest, totaling 2.7 GW – enough to power 500,000 homes."

Resch concluded, "The solar industry welcomes the opportunity to work with Congress and the Administration to improve the DOE loan program."

All sides having been heard, before leaving the meeting room, Committee Chairman Upton said he hoped to see action on the bill before Congress adjourned for its August recess.


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