Status Report: DOE Section 1705 Loan Program

Central to the Obama Administration's energy policy are massive subsidies for politically-preferred energy sources. The Department of Energy's (DOE) section 1705 loan guarantee program has been one of the Obama Administration's primary methods for funding renewable energy projects. The DOE reports $34.7 billion in taxpayer-subsidized loan and partial loan guarantees have funded 33 clean energy projects including $535 million to the infamous Solyndra.

Last year, IER produced a video detailing the failure of the Solyndra loan. Watch it below: The Solyndra scandal, fueling the combative political atmosphere of an election season, has resulted in an increased scrutiny of DOE loan programs. Politico recently released a status update of 26 projects funded by the DOE's section 1705 loan program. The DOE's section 1705 clean energy loan guarantee program supports renewable energy projects in solar, wind, biofuel, geo-thermal and electric transmission, whole or in part, through loan guarantees. For each DOE section 1705 project, Politico's list reports the amount and purpose of the DOE loan in addition to a status update on the project's construction and estimated level of power production and job creation. Majority of the projects on the list are reported to be on track to complete construction and begin power production within a few years.

Increased scrutiny of DOE loan programs, including Politico's status update, have revealed other potential Solyndras, projects in which millions of tax dollars are wasted on nonviable and inefficient renewable energy projects. Similar to Solyndra, Beacon Power, Abound Solar, Nevada Geothermal Power Co and NRG Energy/SunPower Corp are reported as having significant financial problems resulting in layoffs, substantial project delays and even bankruptcy. Most recently, as of June 28, Abound Solar--having only drawn $70 million of its $400 million loan guarantee-filed for bankruptcy. Here is a list of the DOE section 1705 projects and loan amounts: Increased scrutiny has prompted the DOE to defend the effectiveness of the loan programs, claiming the nearly $35 billion in loans and loan guarantees have created over 60,000 jobs and 'accelerated the United States into a clean energy future'[1]. It is evident in Politico's status update that a majority of the projects are still in the construction stage with few only producing a fraction of projected power capacity, if producing at all. Also Politico's status update puts the DOE's estimated level of job creation of over 60,000 jobs into perspective. The estimated 60,000+ jobs account for temporary construction jobs, projected permanent jobs and estimated 'saved' jobs. According to Politico's status update, a majority of the projects create far more temporary construction jobs than permanent jobs. For example, First Wind of Hawaii--with a loan guarantee of $117 million to construct a wind power plant currently generating 30 megawatts of electricity--created about 200 construction jobs, but only supports 14 permanent jobs [2]. The disproportionate creation of temporary and permanent jobs does little to aid a struggling economy that desperately needs long-term investment. Irresponsible investment of taxpayer dollars in nonviable projects, similar to that of Solyndra and Abound Solar, are also failing to aid a struggling economy and failing to move the United States toward the future. (IER Summer Associate Maura Kolkmeyer contributed to this post)

Institute for Energy Research——Bio and Archives

The Institute for Energy Research (IER) is a not-for-profit organization that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets. IER maintains that freely-functioning energy markets provide the most efficient and effective solutions to today’s global energy and environmental challenges and, as such, are critical to the well-being of individuals and society.