Posting in Energy
Three solar companies that received loan guarantees in the final hours of the federal program have been swept up in the investigation of now defunct Solyndra.
Three solar companies that received loan guarantees in the final hours of the federal program have been swept up in the investigation of now defunct Solyndra. GOP Rep. Darrell Issa, of California, chairman of the House oversight committee, has demanded the Energy Department turn over documents relating to the $4.75 billion in loan guarantees that were approved the day the program ended, the Hill reported.
The development not only marks an increasing suspicion of the clean energy loan guarantee program, but also threatens to delay four utility-scale solar power generation projects.
The loan guarantees now being questioned were awarded to First Solar, SunPower and Prologis to build three utility-scale power projects in California and one massive rooftop solar project that will involve up to 28 states. The loan guarantee program ended Sept. 30 mired in controversy over the DOE's backing of Solyndra, a solar manufacturer that filed for bankruptcy last month.
The Hill obtained an Oct. 7 letter to Energy Secretary Steven Chu from Issa, who expressed concern about the four solar power projects approved at the end of September. He wrote:
$4.75 billion in loan guarantees given on the last day of the program raise similar concerns that the evaluation of loan guarantee may have been rushed to meet the deadline.
The risk profile for utility-scale projects is very low compared to providing loans to clean energy manufacturers like Solyndra, GTM Research Senior Analyst Brett Prior told me in a phone interview last month regarding the DOE loan program. Large-scale project developers lock in long-term contracts with a single utility to sell it power. The upfront cost of building the project might be high. However, they have a low operating cost, Prior said at the time.
Photo: Flickr user zzzack, CC 2.0
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Oct 10, 2011
Normally your comment about utility scale projects would be accurate, if no government loans guarantees are involved. As you said, averaging costs over time minimizes random events and makes risk more predictable. Because both parties are fully exposed if they make an error, they tend to be very conservative in their cost and time-to-market estimates. But when you take away risk because of a government loan guarantee, long-term projects are just as prone to making poor choices as we did with Solyndra. If I'm an utility and the government gives me a 100% loan guarantee on a long-term project, why not ignore all caution and just build it? What's my downside? The government will pay up anyway. Even if I don't get a 100% loan guarantee, but say, a 50% loan guarantee I'll be a little bit more cautious but still a lot less likely to care about how accurate my estimates are. Removing the risk in mortgages via government-backed financing from Fannie and Freddie was how we got the housing bubble. Nobody cared about the credit worthiness of borrowers, they just made the loans because the money came from Fannie and Freddie which would just go to the government if the loan failed. The big financial institutions then bought securities based on these mortgages, because deep down they knew that if the securities failed, they were "too big to fail" and the government would bail them out. And with the exception of Lehman Bros. that's exactly what we did. Removing risk with government guarantees is a drug. It always seems to have great short-term advantages (you get a house, and you get a house, and we all get a house!!), but in the end it will kill you.
Utility projects might not be the sound investments once envisioned. Several utility scale solar projects have been scaled back, held up because they were sold to other companies in mid-project or cancelled out right in just the past 6 months.
The key to the future of energy is the decentralization of power generation. Too much money is wasted in subsidized schemes. If people could generate more power from home, things would be a lot better. There are plenty of guides out there on how to achieve this. Here for example is a good impartial review site on some of these guides: http://www.diyenergyathome.com/index.php/category/home-energy-guides/