After Solyndra Loss, U.S. Energy Loan Program Turning A Profit
In 2011, solar panel company Solyndra defaulted on a $535 million loan guaranteed by the Department of Energy. The agency had a few other high-profile bankruptcies, too — electric car company Fisker and solar company Abound among them. But now that loan program has started turning a profit.
Overall, the agency has loaned $34.2 billion to a variety of businesses, under a program designed to speed up development of clean-energy technology. Companies have defaulted on $780 million of that — a loss rate of 2.28 percent. The agency also has collected $810 million in interest payments, putting the program $30 million in the black.
When Congress created the loan program under the Energy Policy Act of 2005, it was never designed to be a moneymaker. In fact, Congress imagined there would be losses and set aside $10 billion to cover them.
Still, when the Solyndra case emerged, Republicans on Capitol Hill had pointed criticism for the Obama administration. Rep. Steve Scalise, R-La., called the Solyndra case "disgusting," and Sen. Lisa Murkowski, R-Alaska, labeled it "a colossal failure." The conservative group Americans for Prosperity produced a television ad accusing President Obama of paying back campaign contributors.
There was an FBI raid on Solyndra's headquarters and an investigation but, so far, no prosecutions. Now that the loan program is turning a profit, those critics are silent. They either declined or ignored NPR's requests for comment. And with that, Energy Secretary Ernest Moniz wants to change people's perception of his agency's loan program.
"It literally kick-started the whole utility-scale photovoltaic industry," Moniz says. The program funded the first of five huge solar projects in the West. Moniz says before that, developers couldn't get money from private lenders. But now, with proven business models, they can.
The Energy Department actively monitors all the companies in its portfolio for potential default risks, "and when there are warning flags, then the disbursements are suspended — possibly ended," Moniz says.
But he says the Energy Department doesn't want to go too far in the direction of only lending to safe investments. "We have to be careful that we don't walk away from risk, because otherwise we're not really going to advance the marketplace," he says.
Moniz points to a small company called Beacon Power as an example. It got an Energy Department loan, went bankrupt and defaulted on about $14 million in debt. Today the company is back in business, providing a valuable service to electricity grids and repaying the rest of its loan.
In eastern Pennsylvania, one of Beacon's facilities sits on 4 acres in an industrial park. Underground are 200 black flywheels that each measure 7 feet tall and 3 feet around, and weigh 2,000 pounds. They spin faster when storing energy and slow down when releasing it.
"We're recycling excess energy that's on the power grid and then putting it back into the grid when it's needed," explains President and CEO Barry Brits. He says the flywheels are essentially mechanical batteries.
But unlike the battery in your cellphone, the flywheel doesn't wear out over time. "What's unique about the flywheel is that it really is unlimited in terms of the number of times it can charge and discharge," Brits says.
Being able to store electricity is important because wind and solar generators only produce power when the sun is shining and the wind is blowing. That can make life difficult for grid operators who must balance the amount of electricity produced with how much is used. Storing power — even for brief periods — gives them more flexibility and makes it easier to include intermittent forms of renewable generation on the grid.
Brits says the Department of Energy loan allowed his company to test and then improve its flywheels. "Our technology is now well-proven. We have over 7 million operating hours," he says, adding that building a plant costs half of what it did three years ago.
Despite early missteps, the Department of Energy is ready to invest in more projects that could advance clean energy technology in the U.S. Moniz says his agency has about $40 billion to lend in coming years.
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Transcript
RENEE MONTAGNE, HOST:
And remember Solyndra? That's the solar panel company that went bankrupt three years ago amid much publicity. It defaulted on a $535 million Department of Energy loan. The agency had a few other high-profile bankruptcies too, including electric car company Fisker, but now the Energy Department has made up all those losses and as NPR's Jeff Brady reports, more successful investments are turning a profit.
JEFF BRADY, BYLINE: Investing in new clean energy technology is risky but that's exactly what the Department of Energy's loan program was designed to do. Each project could end up worth billions or nothing. Still, when Solyndra went bust, Republicans on Capitol Hill blamed the Obama administration.
(SOUNDBITE OF ARCHIVED RECORDING)
REPRESENTATIVE STEVE SCALISE: This is disgusting. I hope you'll go back in your agency and have some heads roll. People need to be held accountable.
(SOUNDBITE OF ARCHIVED RECORDING)
SENATOR LISA MURKOWSKI: We have a colossal failure within the Department of Energy.
BRADY: That was Louisiana congressman Steve Scalise and Alaska senator Lisa Murkowski. The conservative group Americans for Prosperity piled on with this television ad.
(SOUNDBITE OF TV AD)
UNIDENTIFIED MAN: Wealthy donors with ties to Solyndra give Obama hundreds of thousands of dollars. What does Obama give them in return? Half a billion in taxpayer money to help his friends at Solyndra.
BRADY: There was an FBI raid on Solyndra's headquarters but so far, no prosecutions and now that the loan program is back in the black, those critics are silent. They either declined or ignored NPR's request for an interview. Energy Secretary Ernest Moniz wants to change your perception of his agency's loan program.
ERNEST MONIZ: It literally kick-started the whole utility scale photovoltaic industry.
BRADY: Moniz says the program funded the first five huge solar projects in the West. Before that solar developers couldn't get money from private lenders but with proven business models, now they can and Moniz says his agency actively watches all the companies in its portfolio for default risks.
MONIZ: And when there are warning flags, then the disbursements are suspended - possibly ended - but certainly suspended.
BRADY: Energy Department losses from those early loans totaled about $780 million. The program has collected $810 million in interest payments, putting it $30 million in the black, but Moniz says making a profit isn't the only priority.
MONIZ: We have to be careful that we don't walk away from risk because otherwise, we're not going to really advance the marketplace.
BRADY: For example, Beacon Power. It was jump-started by an Energy Department loan, went bankrupt and defaulted on about $14 million in debt but today, the company is back in business providing a valuable service and repaying the rest of its loan. In eastern Pennsylvania, one of its plants sits on four acres in an industrial park. CEO Barry Brits says his company uses something called flywheels to store electricity.
BARRY BRITS: We're really recycling excess energy that's on the power grid and then putting it back into the grid when it's needed.
BRADY: The flywheels look like big batteries - black, seven feet tall, three feet around and weighing 2,000 pounds.
BRITS: Essentially we are mechanical battery. What's unique about the flywheel is that it really is unlimited in terms of the numbers of times it can charge and discharge.
BRADY: Storing electricity is important because wind and solar generators only produce power when the sun is out and the wind is blowing. The flywheels make easier to connect these intermittent renewable sources of power to the grid, where they can replace fossil fuel-generated electricity.
Brits says the government loan allowed his company to improve its flywheels.
BRITS: Our technology is now well proven. We have over 7 million operating hours on our technology. Our cost has reduced significantly. It is less than 50 percent of what it was three years ago.
BRADY: Overall, the Department of Energy says the loss rate for its loan program has been low - about two-and-a-quarter percent - and the agency is ready to invest in more projects that could advance clean energy technology in the U.S. The agency says it has about $40 billion to lend in coming years.
Jeff Brady, NPR News. Transcript provided by NPR, Copyright NPR.
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