The Department of Energy’s loan program for new solar and clean energy technologies is proving more successful than ever imagined. The DOE has loaned $34.2 billion under the program. It has already received $810 million in interest payments and $3.5 billion in principal payments—these are on loans with an average repayment period of 22 years!
“For loans that have been disbursed to date, we expect to earn more than $5 billion in total interest payments over the full term of the loans,” said DOE Loan Programs Office (LPO) Executive Director Peter Davison in an update about the program. “All of which goes back to the benefit of taxpayers,” he added.
The program was created by Congress under the Energy Policy Act of 2005. It was designed to invest in new technologies. Under the Obama Administration and as part of the recovery from recession the DOE began investing in new solar technologies and other renewable energy technologies. While the program has been wildly successful it’s most famous for its failures, like the Solyndra fiasco. The LPO issued Solyndra a $535 million loan guarantee, which the company defaulted on putting taxpayers on the hook to repay the loan.
However, when Congress initiated the program it assumed that companies receiving funding or loan guarantees through the program would default on up to $10 billion since it was assumed a certain number of the new businesses would fail. That hasn’t been the case.
“Actual and estimated loan losses to the portfolio are only approximately $780 million, or only a little over 2 percent of the program’s loans, loan guarantees and commitments,” wrote LPO Executive Director Peter Davidson In a Nov. 12 post about the program’s progress. He observed that the losses to the program are already lower than the more than $810 million in interest payments the program has earned.
That puts the program $30 million in the black already stated NPR National Desk Correspondent Jeff Brady.
Davidson also points to many of the important achievements accomplished under the loan program. For instance it gave banks and investors confidence to invest in the gigantic utility-scale photovoltaic (PV) solar arrays that continue to come online in the southwestern U.S. and increasingly elsewhere throughout the country. These include projects like the Antelope Valley Solar Project and the Abengoa Solar’s Solana plant. Davidson also pointed toward the loan program’s support of electric vehicles including Tesla Motors as well as cellulosic biofuels and nuclear energy.
“We think those results show that LPO is succeeding in its mission to help finance the first commercial deployments of innovative technologies in the U.S.,“ Davidson said. “As a whole, the portfolio is performing very well. As of September 2014, 20 projects supported by LPO are operational and generating revenue. These projects are now repaying their loans to the U.S. Treasury, which issued the loans guaranteed by the Department through the Federal Financing Bank.”
The DOE could issue more loans and loan guarantees through the offices as well, according to Davidson. It has $40 billion more that it can invest in more new technologies. Energy Secretary Ernest Moniz told Brady It is important that the program invest in both technologies deemed a safer investment as well as those that are riskier investments to help make them safer investments.Tweet