The Energy Department’s Inspector General has recommended that the loan guarantee program that financed Solyndra be placed on a department “watch list.” The IG’s report raises concerns over the “exposure to risk” created by the program, but stops short of recommending its repeal.
Solyndra secured a $535 million loan guarantee through the program. It is still unclear whether taxpayers will see any of that money repaid, now that the company is making its way through bankruptcy proceedings. An initial Solyndra asset auction served only to repay private investors, whom DOE – in an unprecedented, potentially illegal move – placed at the front of the line for repayment.
With respect to DOE’s loan program, the IG’s report states:
…this year we have added the Department’s Loan Guarantee Program to the watch list. Given the significance of the funds involved and the Government’s exposure to risk, we believe that heightened and continued focus on this program is necessary.
Asked to respond to the IG’s concerns, Heritage’s Nick Loris had this to say:
It’s nice to see the DOE IG concerned about the welfare of our taxpayer dollars by keeping an eye on the loan guarantee program, but what we really need is a critical look at why the program exists in the first place. The government is not equipped to determine commercial viability and can retard the process by misallocating resources to inefficient uses. It is not the role of the federal government to force certain technologies into the marketplace or to subsidize their commercialization and that’s exactly what the loan guarantee program does.
Loris authored a Heritage backgrounder in July recommending a neutral energy policy – one that does not favor certain technologies or sectors over others, and allows normal market pressures to determine winners and losers. Such a policy could go a long way towards mitigating “the Government’s exposure to risk” highlighted by the Inspector General.