Bloomberg Government (New York, New York, U.S.) has issued an analysis of the U.S. Department of Energy's (DOE) Loan Guarantee Program, noting that 87% of the loan guarantees are for low-risk power generation projects, and that the program has paid for itself to date.

"Beyond Solyndra: An Analysis of DOE's Loan Guarantee Program" addresses the media storm over the USD 535 million U.S. federal loan guarantee to now-bankrupt Solyndra LLC (Fremont, California, U.S.). Solyndra was one of two DOE loan guarantee recipients among a total of 28 to go bankrupt in 2011. The two comprised 3.6% of the energy loan guarantee portfolio by value.

"The attention Congress and the news media have devoted to Solyndra LLC, the bankrupt solar panel manufacturer, has overshadowed the need for substantive evaluation of loan-guarantee initiatives at the Department of Energy," states the report's executive summary.

"This Bloomberg Government Study provides a deeper look at the DOE’s loan-guarantee process and the energy projects that received loan guarantees under Section 1705."

Misunderstood policy

The report states that loan guarantees are "widely misunderstood" as a policy, and are important for helping new-to-market companies and technologies overcome the gap between venture funding and debt financing.

The DOE provides loan guarantees through three laws, two of which were passed under the administration of former U.S. President George W. Bush. The Section 1705 program, created through the American Recovery and Reinvestment Act of 2009 ("stimulus package"), granted that DOE authority to provide loan guarantees for clean energy projects including renewable energy projects.

Solar is strongly represented in the implementation of the Section 1705 program, with 16 of the 28 DOE loan guarantees through Section 1705 issued to solar companies.

87% of loan guarantees go to projects with buyers for electricity

Bloomberg Government also found that 87% by value of the DOE loan guarantee portfolio is for power generation projects where the DOE has required developers to find buyers for the electricity generated, substantially reducing the project risk.

The remaining 13% of the portfolio is for manufacturing, fuel production and storage projects, which were not required by the DOE to find buyers, and represent higher risk.

DOE loan guarantee program has no impact on budget

The report notes that the DOE provided USD 2.47 billion in credit subsidy costs, to work as a form of insurance in the event of project losses, which could cover all of the higher-risk projects and still have money in reserve.

Bloomberg government also notes that ending the loan guarantee program, which has been under heavy attack by members of the opposition Republican Party, would result in no budget savings as well as potentially harming energy development.

The company notes that so far the DOE's loan guarantee program has paid for itself with fees from applicants, and that future overhead is expected to also be paid with applicant fees.

Bloomberg Government is a service of Bloomberg Finance LP (New York, New York, U.S.).

2011-12-13| Courtesy: Bloomberg Government | solarserver.com © Heindl Server GmbH

Our editorial selection of breaking solar news is published at:
www.solarserver.com/solar-magazine/solar-news/top-solar-news.html