Lending program that funded Solyndra may turn a profit . . . or not

Clean Capital News

By Maura Forrest

November 20, 2014

Remember Solyndra? In 2011, the ill-fated solar panel manufacturer went bankrupt and created a storm of controversy around the U.S. government’s clean-energy loan program that poured $535 million into the company.

But now, the U.S. Department of Energy’s (DOE) Loan Programs Office is reporting that it may actually turn a profit, despite losses on Solyndra and three other failures that, together, cost about $780 million. However, some are casting doubt on the DOE’s optimism.

The program, which opened in 2009 with a budget of $32.4 billion to invest in clean energy innovation, now expects to make $5 to $6 billion as companies pay back the loans over 20 to 25 years.

A new report from the Loan Programs Office concludes that, “as of September 2014, more than $810 million of interest has already been earned.”

The result is particularly impressive as the program funds riskier clean-energy programs that struggle to find backing from other investors.

However, Donald Marron, a former acting director of the Congressional Budget Office, is challenging the new findings. In a blog post, he explains that the report doesn’t account for the money the Treasury Department borrowed from global investors to finance the loans. While the Loan Programs Office may collect $5 to $6 billion in interest, the Treasury will likely pay the same amount back to investors.

The story raises important questions about how we judge the success of renewable-energy funding programs. While Marron is critical of the DOE’s transparency, he argues that the issue of profit is largely beside the point.

“DOE’s lending programs should not be evaluated solely or even primarily based on their profitability or lack thereof,” he wrote. “What matters is their overall social impact.”

To that end, the government estimates the program has prevented 14 million metric tons of carbon dioxide emissions.

The Solyndra collapse had many calling for an end to the program. But some argue that $5 billion in interest would exceed the returns on many venture capital investments in clean energy, an industry that is high-risk by nature because so much of the technology is untested.

“People make a big deal about Solyndra and everything, but there’s a lot of VC capital that got torched right alongside the DOE capital,” said investment analyst Michael Morosi in an interview with Bloomberg. “A positive return over 20 years in cleantech? That’s not a bad outcome.”

Currently, Canada has nothing on the scale of the DOE’s lending program. The federal Clean Energy Fund and ecoENERGY Innovation Initiative are together worth just over $1 billion. Sustainable Development Technology Canada has an additional $325 million to invest in cleantech development.



Photo Credit:  Department of Energy Solar Decathlon