Print

House vote could begin to dismantle loan guarantee program

By Erin Voegele | September 13, 2012

The U.S. House of Representatives is set to vote on loan guarantee legislation on Friday. The No More Solyndras Act would essentially discontinue the U.S. DOE’s loan guarantee program, preventing the department from approving any applications received after the end of 2011. While the bill only addresses the DOE program, I would guess the USDA’s program would be next in line for the bill’s supporters.

Unsurprisingly, “conservative” organizations that primarily support the fossil fuel industry have been some of the bills strongest supporters. For example, earlier this year American Commitment send a letter to members of the House in support of the act, saying that the DOE’s loan guarantee program “has produced little if any value for the American people, but has resulted in a parade of scandalous waste of taxpayer dollars, most spectacularly in the case of Solyndra. Federal bureaucrats simply do a poor job of picking promising energy technologies, which should be unsurprisingly because they lack the dispersed knowledge that only the marketplace can efficiently use to allocate resources.”

These types of comments lead me to believe that the American public—and leaders of these types of organizations—have little to no understanding of what a loan guarantee actually is.

First, loan guarantees—by definition—do not require the same fiscal standards as bank loans do. This is by design. New, innovative, potentially game-changing technologies are not something that traditional lenders consider, because they haven’t been proven on a commercial scale. In other words, they are risky. However, if these “risky” technologies are successful, many have the potential to completely change the landscape of our energy future. It is the role of these loan guarantee programs to step in and make sure that worthwhile, technologically sound, well-researched technologies like this see the light of day and are enabled to move beyond pilot- and demonstration-scales, to commercial production.

Second, if I own Company XYZ, and I am granted a loan guarantee for $500 million, the DOE (or USDA) is not on the hook to pay out that amount if I fail. Rather, loan guarantees support institutional investment. In other words, if my project fails, the loan guarantee simply is in place to hedge the risk my local bank took on my company. A portion of the money they provided me is guaranteed, at a particular rate. The DOE doesn’t hand them a check for $500 million. I grew up in a town where a failed loan guarantee project employed hundreds of local citizens, which in a town of only 3,000 or so is a big deal. When the original project owners failed roughly two decades ago, due to financial reasons, the DOE actually stepped in and took custody of the plant. It worked out a deal with an adjacent power plant, which took ownership of the facility. That “failed” project is still operating today. The DOE might have lost a little money on the deal, but it certainly didn’t lose everything. In addition, that plant is still operating, providing employment to hundreds of area citizens and pumping money into rural economies. Essentially, just because a project failed, doesn’t mean all value is lost. Chances are a failed project will still hold value in terms of equipment, intellectual property, etc. This value doesn’t disappear when a project fails, and can be used to recoup costs.

Finally, loan guarantee programs budget a failure rate into their programs. Some projects are expected to fail. If they didn’t the DOE wouldn’t be taking on the type of risk the program is designed to support. Indications are that programs fees have traditionally funded the programs, the failed project expenses, and then some. The DOE is not raiding taxpayer dollars to pay for Solyndra’s failure, as some would have us believe.

 

 

5 Responses

  1. JT

    2012-09-14

    1

    ouch. Congress playing favorites. Constituents against new energy revenue competition.

  2. Richard Rodriguez

    2012-09-19

    2

    Please don't throw a liberal twist to your editorial. Obama's agenda to replace carbons is way to costly. He is still hel_ bent on his environmental agenda. Plain and simple we need carbons. Lets not figure out how to pay for programs after the country goes broke. Just saying of course!

  3. Deokjin

    2012-10-08

    3

    A SURPRISE TESTIMONY ABOUT MY LIFEMy name is Michelle Maxwell. I live in Cleveland United state. I came from a very poor family, one day I cried all tuhrogh the night, after that I fell into a very deep sleep and as I was dreaming I saw this Email address, I then began wondering what was the meaning of this dream. In the dream I was referred to money lender that said is the only one that can help me now, but I didn’t have system because my cell system had been disconnected. One faithful day I was at my home when a friend of mine came to me, she was filled with happiness; I then asked her what brought her to my home today? Ever since no one had been coming to my place because of the hardship that was falling upon me. She then told me that I should guess what make her came to me today? I then told her that I am not good in guessing she then told me that she applied for a loan from one Mr. David kollince and he gave her the loan without any stress. I then remember the dream I dream that was the name I saw also, I then told my friend that I have seen this name before in my dream, I then ask my friend if she was sure of what she just told me that he granted her the loan? My friend then took me to her house that is the place I confirmed that the dream will not refer me to a wrong person. I saw my friend’s name in the Document Carmella that encouraged me more again that this must be a saint to my life, I then told my friend to help me with some money to connect my system from there. I then applied from him also; he then granted me a loan of $ 100,000. I then made a promise that I must always testify this miracle on yahoo answer that takes place in my life to everyone. I know people will be wondering why I said that I came from a poor home and I placed my story to the world. I am not ashamed, if I did not enquire, I would have still been in abject poverty today, now I am one of the happiest people today. I am fully out of poverty. I Michelle will advice you to go for inquiry if you believe that you can pay back the loan you should enquire from this faithful Mr. David kollince (micro finance company) you can contact him via. My family will always be grateful to you for the success you bring to our Home today. Even if I depart in death today or my husband our children will testify this to the whole world because they all know were they are coming from, your help makes us to be where we are today, my family will always pray for you for long life and good health.

  4. Deokjin

    2012-10-08

    4

    A SURPRISE TESTIMONY ABOUT MY LIFEMy name is Michelle Maxwell. I live in Cleveland United state. I came from a very poor family, one day I cried all tuhrogh the night, after that I fell into a very deep sleep and as I was dreaming I saw this Email address, I then began wondering what was the meaning of this dream. In the dream I was referred to money lender that said is the only one that can help me now, but I didn’t have system because my cell system had been disconnected. One faithful day I was at my home when a friend of mine came to me, she was filled with happiness; I then asked her what brought her to my home today? Ever since no one had been coming to my place because of the hardship that was falling upon me. She then told me that I should guess what make her came to me today? I then told her that I am not good in guessing she then told me that she applied for a loan from one Mr. David kollince and he gave her the loan without any stress. I then remember the dream I dream that was the name I saw also, I then told my friend that I have seen this name before in my dream, I then ask my friend if she was sure of what she just told me that he granted her the loan? My friend then took me to her house that is the place I confirmed that the dream will not refer me to a wrong person. I saw my friend’s name in the Document Carmella that encouraged me more again that this must be a saint to my life, I then told my friend to help me with some money to connect my system from there. I then applied from him also; he then granted me a loan of $ 100,000. I then made a promise that I must always testify this miracle on yahoo answer that takes place in my life to everyone. I know people will be wondering why I said that I came from a poor home and I placed my story to the world. I am not ashamed, if I did not enquire, I would have still been in abject poverty today, now I am one of the happiest people today. I am fully out of poverty. I Michelle will advice you to go for inquiry if you believe that you can pay back the loan you should enquire from this faithful Mr. David kollince (micro finance company) you can contact him via. My family will always be grateful to you for the success you bring to our Home today. Even if I depart in death today or my husband our children will testify this to the whole world because they all know were they are coming from, your help makes us to be where we are today, my family will always pray for you for long life and good health.

  5. Deokjin

    2012-10-08

    5

    A SURPRISE TESTIMONY ABOUT MY LIFEMy name is Michelle Maxwell. I live in Cleveland United state. I came from a very poor family, one day I cried all tuhrogh the night, after that I fell into a very deep sleep and as I was dreaming I saw this Email address, I then began wondering what was the meaning of this dream. In the dream I was referred to money lender that said is the only one that can help me now, but I didn’t have system because my cell system had been disconnected. One faithful day I was at my home when a friend of mine came to me, she was filled with happiness; I then asked her what brought her to my home today? Ever since no one had been coming to my place because of the hardship that was falling upon me. She then told me that I should guess what make her came to me today? I then told her that I am not good in guessing she then told me that she applied for a loan from one Mr. David kollince and he gave her the loan without any stress. I then remember the dream I dream that was the name I saw also, I then told my friend that I have seen this name before in my dream, I then ask my friend if she was sure of what she just told me that he granted her the loan? My friend then took me to her house that is the place I confirmed that the dream will not refer me to a wrong person. I saw my friend’s name in the Document Carmella that encouraged me more again that this must be a saint to my life, I then told my friend to help me with some money to connect my system from there. I then applied from him also; he then granted me a loan of $ 100,000. I then made a promise that I must always testify this miracle on yahoo answer that takes place in my life to everyone. I know people will be wondering why I said that I came from a poor home and I placed my story to the world. I am not ashamed, if I did not enquire, I would have still been in abject poverty today, now I am one of the happiest people today. I am fully out of poverty. I Michelle will advice you to go for inquiry if you believe that you can pay back the loan you should enquire from this faithful Mr. David kollince (micro finance company) you can contact him via. My family will always be grateful to you for the success you bring to our Home today. Even if I depart in death today or my husband our children will testify this to the whole world because they all know were they are coming from, your help makes us to be where we are today, my family will always pray for you for long life and good health.

  6. Leave a Reply

    Biomass Magazine encourages civil conversation and debate. However, comments containing personal attacks, profanity, business solicitations or other advertising will be deleted.

    Comments are closed