Following the announced bankruptcy of Abound Solar, which borrowed about $70 million against a $400 million loan guarantee from the Department of Energy, the Associated Press is giving oxygen to attacks from Republicans saying the clean energy program shows the Obama administration “wasting taxpayer dollars.” While passing along GOP talking points, AP forgot to report these key facts:
1. Abound Solar was one of the few higher-risk loan guarantees. Over 87 percent of the funds for the Department of Energy's 1705 loan guarantee program went to low-risk power generation projects, which are required to secure contracts with power purchasers before receiving a loan guarantee, virtually eliminating the risk of default. Like Solyndra, Abound Solar built solar panels and struggled to compete with Chinese manufacturers.
2. Congress set aside $2.47 billion to cover defaults. For a loan guarantee, the DOE is only on the hook if the company defaults on the loan, and the DOE is not able to recover the funds during the bankruptcy process. Even if all of the higher-risk (non-generation) projects defaulted on the full amount of their loan guarantees and “no assets were to be recovered, the DOE would still have $446 million remaining to cover additional project losses,” according to a Bloomberg Government analysis. Here is a chart comparing the amount that Congress budgeted for the 1705 program versus the current losses:
3. Four Indiana Republicans pressed the Energy Department to support Abound. In addition to the four Indiana Republican Congressmen who urged DOE to grant the loan guarantee to Abound, Mitch Daniels supported a tax credit for the company and two major Republican donors were Abound investors.
HotAir, a popular conservative blog, concluded from Abound's bankruptcy that “investing in solar energy was a bad idea” because otherwise, “the free market would take care of it.” But the loan guarantee program is designed to address a market failure. A Bloomberg New Energy Finance report stated that there is a “dearth of capital for potentially lower-cost breakthrough technologies” that need to scale up, reflecting “fundamental, structural markets short comings.”
And while the drop in solar panel prices hurt some solar manufacturers like Solyndra and Abound, it benefitted many of the solar generation projects and helped solar installations surge, contrary to the right-wing narrative that solar energy as a whole is failing.
Reporters' eager pursuit of failing clean energy companies may have a self-fulfilling dynamic. As GreenTechMedia reported, Abound Solar was partially hurt by “a flinchy DOE” wary of letting Abound continue to draw down from its loan, and “a media faction hungry for Obama DOE scandals.”