Report Recommends Changes for DOE’s Loan Program

An independent review of the U.S. Department of Energy’s loan program for alternative energy provides a mixed report card for the management of the funding program, but no smoking gun pointing to any systemic failure in the program.

The review did not directly evaluate the handling of loans for Solyndra or Beacon Power; both companies filed for bankruptcy last year and the review estimates the DOE program’s total “exposure” to the failures is $567 million. The review largely focuses on future risks, recommending a number of steps that DOE can take to manage those risks, stating that the most important factor in “the ultimate performance of the Portfolio will be DOE’s management of it going forward.”

The report looked at 30 loans with a total value of $23.8 billion, of which $8.3 billion has been drawn so far. Of those 30 loans, the review says the greatest risks are in the eight “non-utility-link loans,” including cellulosic ethanol projects, solar manufacturing companies, and small startup automotive manufacturing companies. Such loans account for roughly $2 billion of the total $23.8 billion.

In a statement in response to the review, DOE’s Secretary Steven Chu said:

We have always known that there were inherent risks in backing innovative technologies at full commercial scale, and it is very likely that there will be other companies in the portfolio that won’t succeed, but the vast majority of companies are expected to pay the loans back in full, on time, and with about $8 billion in interest—while supporting a total of 60,000 American jobs and helping us compete for a rapidly growing global industry.”

Not surprisingly in the aftermath of the Solyndra collapse, the review instantly became a political football, with some focusing on the fact that the DOE loan program turned out to be a “safer bet” than originally anticipated while others shouted “Clean-Energy Aid Racks up Losses.”  The Wall Street Journal analysis was, of course, in its “Election2012” section of the publication.