Editor's Letter

12/01/2014 | By Chris Olson

Can the Federal Government Play a Role in Energy Entrepreneurism?

Chris Olson Chief Content Director

The answer to that question isn’t easy, not merely because the issues are complex but because they are mired in politics.

The Energy Policy Act of 2005, popularly known as EPAct, authorized a green-technology loan program that became a political flashpoint due to the failure of Solyndra, a manufacturer of distinctive thin-film solar cells wrapped around lightweight cylinders. (It should be remembered that EPAct included many provisions, including rebates of up to $1.80/square foot for energy efficiency improvements in commercial buildings, a program that extended through 2013.) Solyndra received $535 million in federal green-tech loans.

After Solyndra went bust, it was reported that company officers had received huge bonuses just before the end. There were also reports that the company had attempted to disguise its sagging financial situation and the actual performance of its products. The FBI began an investigation, as did congressional Republicans.

To date, Solyndra has not been put on trial for any charges. Of course, that doesn’t mean that the firm is innocent or guilty. But in the political wars, Solyndra came to represent the entire green-tech loan program.

Energy Secretary Ernest Moniz has announced that a revamped loan program is open for business, and last month the DOE issued a performance report on the Loan Programs Office (LPO). Through September 2014, loans and loan guarantees totaled $30.29 billion. The loss rate as a percentage of funds disbursed is 3.59% and the loss rate for total commitments is 2.28%. LPO-financed projects have returned $3.5 billion in principal and $810 million in interest to the Treasury.

Some opponents of the loan program argue that, as a matter of principle, government should not be involved in using taxpayer funds for such purposes. That’s a position that can certainly be supported, but opponents can’t argue that Solyndra represents the entire loan program. They also can’t ignore the fact that the federal government supplies billions in loans, subsidies and guarantees to the oil and gas industry and many others, not to mention small businesses.

In the meantime, the buildings industry needs cost-effective alternative energy. Innovation takes time – and money – to develop; bringing new technology to viable commercial products often takes more of both.

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