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Summary:

The Obama administration is working on streamlining the DOE’s loan guarantee program, a spokesperson for the Office of Management and Budget (OMB) tells me this morning. The program will not be abandoned, but will be changed to run more smoothly, and take less time.

Was the DOE Loan Guarantee for Solyndra a Mistake?

The Obama administration is working on streamlining the Department of Energy’s loan guarantee program, a spokesperson for the Office of Management and Budget (OMB) tells me this morning. The move follows a leaked memo (online here) dated October 25, reported by the Wall Street Journal (and picked up by others), from White House officials to the President that lays out several recommendations for ways to revamp the DOE loan guarantee program. One of the recommendations from that memo was moving the remaining loan guarantee program funds to another renewable energy grant program, basically killing the loan guarantee program.

But instead of “reprogramming” the loan guarantee program, the Obama administration and the DOE have decided to remain committed to the program and try to make it better and take less time, the OMB spokesperson tells me.

The OMB sent me this statement from Bill Burton, WH Deputy Press Secretary:

“The Administration is committed to the 1705 loan program and the role it plays in helping us bring about a clean energy economy and creating jobs in this burgeoning industry. The memo was drafted several weeks ago to tee up a wide array of options and issues for consideration. The Administration’s policy is not to propose the re-programming of 1705 funds; our focus instead is to continue our commitment to make the DOE loan program work effectively.  Since the Recovery Act was signed into law, the Administration has worked to implement and improve the process of assessing potential projects and delivering needed funds. Building on these efforts, we are taking steps to streamline the 1705 process while still protecting taxpayers who, ultimately, are the ones investing in these projects.”

Loan guarantees essentially serve as a promise by the government to make good on a loan if the company can’t, and typically enable better interest rates and lower costs than would otherwise be available to a company for project financing. Greentech startups have been building businesses around these loan guarantees and pulling the plug on the project would probably have a ripple effect across the industry.

But it’s clear to many that the DOE loan guarantee program hasn’t been working as well as it should. Hence, the reason for the original memo, and the meeting with the President. The White House officials (Carol Browner, Larry Summers and Ron Klain) in the memo write that they have been concerned about the DOE loan guarantee program because of three risks: the potential loss of non-obligated funds, fear of criticism of slow implementation of the program, and the risk of making commitments to projects that would have happened anyway.

In the memo one of the things that the White House officials recommended was potentially reprogramming the loan guarantee funds over to the renewable energy grant program, because the typical length of review for the loan guarantee program is 6 months, compared to the 4 to 6 weeks for the grant program. In addition just 8 companies have received loan guarantee commitments, and another 4 received commitments and closed those deals (I updated this line), while 3,851 projects have received renewable energy grant funds.

While the OMB wouldn’t go into many details of how the program will be streamlined going forward, the spokesperson said that the White House and DOE are looking to make the program run “more smoothly,” “take less time,” but also “protect tax payer interest.”

It should be noted that the memo and the streamlining of the loan guarantee program isn’t focused on getting better results to boost energy innovation or create more green jobs in the long term (or fund more solid companies, see Solyndra and the disaster). The memo was focused on politics, and getting funds allocated faster and not ruffling feathers. However, the OMB spokesperson tells me that in addition to examining the process, the Obama administration is keenly focused on “the long term impact and metrics of the program.”

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  1. Streamlining of the loan guarantee program is the only right way to go, but it can be filled with problems when turning the program from a political point of origin to an effective practical implementation.

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  2. Companies that have failed the public Investors off 3 different stock exchanges shouldn’t be allowed an ATVM loan I don’t care how they re-structure it. The Govt is NOT in the car business to support Losers. If the losers can’t come up with a better business model or make their brand of vehicle from venture capital then their time will NEVER come in the general market place against real competition in the future once the umbilical cord is cut from Govt Funding. Let only take the STRONGEST applicants from the pool. That is what the government has done to date & it is working.

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