| Frank Bernheisel: The View From Here |
  Frank Bernheisel |
Posted 11.18.14 Just Outside Washington FRANK BERNHEISEL
Picking losers, and winners
In 2011 Solyndra, the solar panel manufacturer, went bankrupt. Normally this would not be big news, however Solyndra had received a loan guarantee from the U.S. Department of Energy (DOE) for a $535 million loan and DOE would lose money. Needless to say, the anti-government types went ape.
"the government has no business picking winners and losers." [Sen. Jim DeMint (R-S.C.), Sen. Mike Lee (R-Utah), and Sen. Ron Johnson (R-Wisc.), House Rep. Mike Pompeo (R-Kan.)]
In addition, the House of Representatives passed the No More Solyndras Act (introduced by Rep. Pompeo) that would phase out the DOE loan guarantee program for clean and renewable energy projects. In 2012 this was great political theater and the press piled on. The bill died in the Senate.
The DOE program, run by the Loan Programs Office, was part of the Energy Policy Act of 2005. Purpose of the program is to provide debt to innovative energy projects that are not able to secure debt from private sector banks, the bond market, or other lenders, because of risk. The program focuses on the following clean energy technologies:
A number of the loans have been paid off, including the one to electric car maker Tesla, which repaid its $465 million loan in 2013. The losses to the portfolio are about 2.3 percent; well below the 40 percent loss ratio attributed to venture capitalists by Forbes. Of course, DOE does not get the upside that venture capitalists make by taking an ownership position in the company.
The 31 projects that received the DOE loan guarantees created approximately 55,000 jobs, counting construction and operations. These are spread over 11 states. Again using Tesla as the example, DOE estimated that the Tesla loan created 1500 jobs. As of September 2014, Tesla employs over 10,000 people.
Who says the government can't pick winners? |