Loan Guarantees from Economic Stimulus Package Due to Expire Soon

Wall Street Journal
August 30, 2011

For Solar, No Guarantees: Government Backing for Loans Fuels Critics as Panel Manufacturers Struggle
Ryan Tracy

The 2009 economic stimulus package committed enough funding to guarantee about $60 billion in loans for renewable energy and transmission projects. The Department of Energy has until September 30, the end of the federal government’s fiscal year, to allocate the remaining funds or lose them. In addition to the $197 million guarantee for SoloPower, Inc. of San Jose, CA announced earlier this month, two more guarantees for solar manufacturers valued at a combined $425 million are due to be approved before the September 30 deadline. As reported in the Wall Street Journal, the government’s granting of loan guarantees has been criticized as giving the government a role in picking winning technologies, rather than letting market forces work. An alternative approach, used in many European nations, is to adopt “feed-in tariffs,” which are technology neutral. Feed-in tariffs guarantee renewable energy producers electricity rates over a fixed period at prices high enough to provide a margin to stimulate development of renewable energy. Although California and Vermont currently have feed-in tariffs in various forms in place, this incentive mechanism has generally been rejected at the federal level in the U.S. Another means of stimulating renewable energy development would be a “clean energy bank” being proposed by Senator Jeff Bingaman (D., N.M.), the Chairman of the Senate Energy Committee. Rather than providing loan guarantees, his proposed clean energy bank would be allowed to make direct loans or take a stake in projects. It is designed to be self-sustaining, after an injection of start-up funds authorized by Congress. Given the nation’s current fiscal situation, however, those start-up funds are not likely to be appropriated.