Loan Programs Wind Down

Clean energy stimulated

Bill Opalka | Aug 09, 2011


The two biggest clean energy programs to come out of the Recovery Act have been the cash grants in lieu of tax credits, and the federal loan guarantees for projects and innovative technologies. The loan programs’ time is winding down.

I spoke to Jonathan Silver, the executive director of the U.S. Department of Energy’s Loan Programs Office.  He leads the Obama Administration’s $70 billion dollar investment program in alternative energy, financing a wide range of solar, wind, geothermal, biofuels, fossil and nuclear energy projects. 

“This is without question the largest and most successful clean energy financing effort in U.S. history and the scale in which we’ve been able to operate is really remarkable,” Silver said.

He cites the statistics. Since March of 2009, the office has issued 42 conditional commitments for loans and loan guarantees totaling over $40 billion with total project costs of $63 billion. It claims to have created or saved over 68,000 direct jobs plus tens of thousands more across the supply chain.  

Technically, the loan program wasn’t created in 2009, but that was the first time it received significant funding.

Most of the program winds down at the end of the current fiscal year on September 30.There are some project closings and some funds for additional elements to continue through the winter. A $200 million proposal to continue some project financing in fiscal year 2012 is in the next budget.

When the stimulus program started, renewable energy developers were impatient with its slow start.

“They were correct. As recently as January of 2009 there were 14 people in the office,” Silver said. Now up to 175 to from career civil servants and outside consultants “deeply steeped in energy project finance.”

In fact, the large, high-profile wind and solar projects, many too large for the private capital markets to finance, were in the program. So, too, were innovative technology companies in clean energy manufacturing.

And that’s where the program generated heat on Capitol Hill, with Republicans charging favoritism for solar photovoltaic manufacturer Solyndra.
“The Solyndra story has been significantly misunderstood,” Silver said, referencing the $535 million guarantee to expand manufacturing facilities. The project employed 3,000 construction workers and has more than 1,000 permanent employees. “I’ve never seen a company grow straight up without some bumps in the road.”

But the company is not profitable and last year cancelled its initial public offering (IPO).

“The notion that filing an IPO and then putting it on the  shelf during a period of time in which almost no IPOs were coming out doesn’t strike a private equity guy as terribly surprising,” said Silver, who was co-founder and a managing director of Core Capital Partners, an early-stage investor in alternative energy technology, advanced manufacturing, telecommunications and software.

But he said the company met the criteria for the program and the office did its due diligence.

Even as the program winds down, interest remains high. “We have far more demand that we have resources to support,” he says.  But a successor must be found.

A clean energy development administration, discussed by renewable energy advocates in and out of Congress, has been floated, but has not been enacted.

“It’s clear that if the United States intends to remain a leader in the clean energy space we have to figure out exactly what role we’re going to play in support of that,” he concluded.

With shrinking government support, that becomes a tougher riddle to solve.

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Jonathan Silver, really?

Solyndra filed bankruptcy today - and I fully expect Jonathan Silver to start a new version of the truth. So, first of all - Jonathan is not a "private equity guy." I believe he worked at Tiger Management (hedge fund industry) for nine months months before he was fired by Julian Robertson. He then did found Core Capital - a venture capital firm. However, I worked in the Northern Virgina tech industry at the time. Jonathan had a terrible reputation. His track record was terrbile (any decent investment at Core was not made by him!). No area entrepreneurs or venture capitalists would work with him. Period. In the end, he was forced out at Core Capital despite being a founder! This is very well known in DC tech circles. So what did Jonathan do well? Raise money for the Democrats! As a result, he was given an important job and promptly lost the government lots of money. Solyndra is the perfect example.

stimulating clean energy

If we can still afford to devote substantial public dollars to clean energy those dollars should be prioritized to favor the (1) cleanest, (2) most effective in terms of emissions reduction, and (3) most valuable energy. In contrast to solar, wind energy is soiled by large numbers of birds and bats killed, ton-for-ton emissions of CO2 from large volumes of cement, and frequently clear cutting (five acres per turbine site) and fragmentation of habitat with scores of access roads and miles of transmission lines. As a necessarily grid-connected solution, big wind requires more backup generators the more it grows, progressively diminishing its emissions reductions effect (or just displacing other low-emissions generators). As a new draft study by an MIT economist points out, in contrast to solar, wind-powered electricity is the least valuable because most often generated at off-peak times, but enjoys artifically inflated wholesale prices on account of RPS requirements (not direct subsidies). The study finds that wind-powered electricity is over-paid compared to its market value by as much as a factor of four. Planning for integrating more wind is overdue. We should do that first, before directing more public money to the industry.