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DOE Finally Issues Solar Loan Guarantee

The guarantee could help Solyndra, a solar cell company, scale-up production.
March 23, 2009

The Department of Energy has finally offered a renewable-energy company one of its long awaited loan guarantees. On Friday, the DOE offered Solyndra, a company that makes cylindrical solar cells for commercial rooftops, a loan guarantee of $535 million, designed to allow the company to raise money to build a factory.

Congress approved loan guarantees for energy companies in 2005 and the DOE is only now getting around to offering them. The guarantee for Solyndra is supported by this year’s stimulus bill, and is part of the new Energy Secretary Steven Chu’s effort to speed things up.

Many experts consider loan guarantees important for getting new technologies from the prototype and pilot stage into mass production. Especially for energy companies, which require large amounts of capital, getting the first commercial-scale production facility built can be a challenge. Few financiers are willing to hand out large amounts of money for an unproven technology, and the loan guarantees can take away that risk.

Others are concerned that the loan guarantees involve relying on the government to pick winning technologies. The government has often chosen poorly, perhaps most famously with a scheme to produce synthetic fuel after oil crises in the 1970s.

What do you think? Are the DOE loan guarantees a good move?

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