Report: Most Energy Dept. loan support is low-risk

A new analysis of the Energy Department’s (DOE) embattled loan guarantee program finds that most of the loan portfolio’s value is made up of lower-risk projects than Solyndra, the DOE-supported solar panel manufacturing company that went bankrupt this year.

The analysis by Bloomberg Government notes that most of the loan guarantee portfolios value is devoted to electricity-generation projects, not manufacturing ventures.

Sixteen billion dollars worth of loan guarantees have been provided through a stimulus law initiative — the Section 1705 program — that built upon the existing loan guarantee program, which was authorized in a 2005 energy law.

From the study:

This study finds that default is much less likely for power generation projects, which are 87 percent of loan guarantee value under the 1705 program, because DOE required them to find buyers for the generated power. As a result, these projects have a committed revenue stream that gives lenders confidence that project backers will be able to pay off debt. Manufacturing, fuel production and storage projects, which make up the remaining 13 percent of the portfolio value, were not required by DOE to find buyers to receive guarantees.

Power-generation projects – mostly solar projects – comprise 18 of the 28 stimulus-backed projects.

The report comes amid GOP attacks on DOE green-energy programs following the collapse of Solyndra, which went bankrupt in September and received a $535 million loan guarantee in 2009 (DOE guaranteed a loan from the Treasury Department's Federal Financing Bank).

A second loan guarantee recipient, the energy storage company Beacon Power Corp., went into bankruptcy in late October.

Obama administration officials highlighted the report Friday.

“This report reaffirms that the loan program is working as Congress intended, and highlights the strength of the Department’s overall portfolio of clean energy loans,” the Energy Department said in a statement.

“Ultimately, this debate comes down to a simple choice: will America compete for and win the jobs of the future, or will we stand on the sidelines and allow China and other countries to dominate a market that Americans have pioneered,” the department said.

The report — written by Alison Williams, a Bloomberg Government energy analyst who previously worked at DOE — also notes that previously appropriated funding exists to cover losses.

“The DOE was appropriated $2.47 billion in credit subsidy costs — essentially an insurance fund to cover project losses. Beyond the two current project defaults, this fund could cover total defaults of all eight of the remaining higher-risk projects and have money in reserve,” it states.