The much-maligned government program that funded the failed solar tech company Solyndra is expected to make taxpayers a $5 to $6 billion return, Bloomberg Businessweek reported on Wednesday.
The loan program is run out of the Department of Energy (DOE), and covers a large umbrella of investments to encourage green energy and low-carbon technologies. According to Businessweek, the expected positive returns on those investments are detailed in a new report DOE will be releasing, perhaps as early as Thursday, on the loan program’s performance — the first such estimate the agency has made of the fruits of its efforts.
The program has the authority to spend as much as $40 billion, and has allocated $32.4 billion of that to a portfolio with dozens of specific projects. Half of the $32.4 billion has already been paid out, in loans that average a 22-year lifecycle. The Energy Department expects the full $5 to $6 billion return to come in over that total time period. But $3.5 billion of the principal for those loans has already been paid back by the various companies that received them, and the government has already garnered over $810 million in interest payments. The portfolio’s losses only amount to $780 million so far, and they aren’t expected to rise above $2 billion once everything is said and done — a fraction of the $10 billion in losses the government anticipated when it originally designed the program.
This stands in stark contrast to the image critics painted of the program. In 2011, the solar tech company Solyndra collapsed after receiving $528 million from the program, setting off a political feeding frenzy and embarrassing the White House.
In the 2012 presidential campaign, Republican candidate Mitt Romney said he thought “about half” the businesses the program invested in had gone out of business. On Tuesday, Rep. Marsha Blackburn (R-TN) declared that “most of these companies are bankrupt and are no longer in existence, and the taxpayer is left holding the bag.” In point of fact, as of November 2012 only three companies out of several dozen had folded, though a few others were facing financial difficulties. That number has ticked up one more to four failures since. Investigations into the loan program have found no evidence of political manipulation or wrongdoing.
The expected returns on DOE’s investment portfolio are especially noteworthy since venture capital is an inherently risky endeavor, and it was the explicit purpose of the loan program to seek out promising green energy projects that the private markets were unwilling to support. The issue is the so-called “valley of death,” the time when a firm has already spent all its capital on research, development, and capacity — and is thus at maximum debt — but has to see any market success and thus get the revenue to pay that debt down. This is the period DOE’s loan program was meant to shepherd companies through, and no loans were given out unless private investors made up at least 20 percent of the investment pool. “When these project developers took their projects to conventional financing sources, those lenders said, ‘Sorry, there’s too much risk here.’ That’s the gap that we’ve filled,” Peter Davidson, the program’s director, told Businessweek. He also pointed out that the loan applicants tended to look at the program as a last resort, after private investment options had been exhausted.
“People make a big deal about Solyndra and everything, but there’s a lot of [private venture capital] that got torched right alongside the DOE capital,” added Michael Morosi, an analyst at Jetstream Capital LLC, a firm that invests in renewable energy projects. “A positive return over 20 years in cleantech? That’s not a bad outcome.”
Estimates put the number of jobs created by the program at 20,000 — and it increases to 60,000 once the loans for advanced low-carbon automobiles are thrown in. The program stopped issuing loans in March of 2011, but then restarted in July of 2014, looking to hand out another $4 billion as part the Obama Administration’s second-term effort to cut the country’s greenhouse gas emissions.