The U.S. Department of Energy, led by Secretary Ernie Moniz, is trying to change how people perceive its loan program, which doled out over $30 billion in loans over the years, funding clean energy projects like huge solar panel farms, but also now-bankrupt solar startup Solyndra. Why? Because the Department has another $40 billion left to hand out in the program, and of course it wants that process to go as smoothly as possible.
Moniz and DOE officials said in interviews Thursday morning that the loan program is now starting to make a small profit ($30 million from interest payments), and eventually the program could bring in between $5 billion and $6 billion over 20 years. More details will be released in a report due out tomorrow.
The program wasn’t designed to make money, and it actually had $10 billion set aside to cover losses. The loss rate on the first $30 billion was only 2.28 percent, or $780 million, of which $535 million was for Solyndra, and some of the rest from Fisker. Abound Solar and Vehicle Production Group were also small losses. Now interest payments have covered all of those losses and brought it into the black.
Moniz told me in an interview last month that using government funds for the deployment phase of clean energy technologies (as opposed to funding basic research) has historically led “to some rough sailing in the political world.” But Moniz says because of the urgency of climate change, “our view is, look, we don’t have time.” The government needs to help get the technologies to market that are already proven and at the edge of being commercial.
For example, the DOE loan program funded a number of large solar panel farms that couldn’t get debt financing with its first $30 billion about five years ago, Moniz pointed out last month. But now that solar panel farm development has come down in price substantially, and private funding has become readily available, the private sector has taken over this type of investment and the DOE has moved on. This is the type of model that works for the DOE, said Moniz. But of course bringing newly commercial technologies to market can be risky.
Despite its successes, for the next $40 billion in the loan program, the DOE still plans to make few changes. First, the DOE wants to act as a co-lender, to make the resources go farther, and also to open up more opportunities for new private investors. Another tweak is that for the auto loan program specifically (the one that aided Tesla and Fisker), the DOE plans to push on the supply chain specifically, and less on car makers.
With the DOE report out tomorrow and news that the original loan program is actually profitable, it will be interesting to hear from all those critics who used Solyndra as a political talking point, including in the last presidential election. Is the ghost of Solyndra finally dead? If the money’s been covered by interest payments, it seems as if it should be.