Ken Silverstein | Sep 26, 2011

Republicans are outraged by the loan guarantee given to the failed solar cell maker Solyndra, calling it symptomatic of government largess and favoritism. Careful, now. The same lessons also apply to the nuclear and coal companies that are seeking to get a leg up.

No energy form is puritanical. And all the hand-wrenching should be viewed for what it is -- part of an enduring effort to bring down President Obama. But that does not mean that the points raised are not valid, even though their motives are dressed up. Indeed, anytime taxpayers are put on the hook for businesses that can’t repay their loans, questions need to be asked -- questions that executives of Solyndra have refused to answer before a congressional panel.

In the case of Solyndra, cynics are inquiring whether the $528 million loan, originally applied for in 2005 and which was received in 2009, was rushed to a firm that was doomed from the outset.

Was it cronyism or was it the concern for a truly sick economy? Obama was elected on the promise of creating 5 million new jobs in the green sector -- the vehicle that would lift the nation out of despair and into prosperity. The General Accountability Office has said that the administration skipped steps, however, the White House says that it had to cut red tape in a hurry.

"Taking office amidst the worst recession since the Great Depression, President Obama confronted an unemployment crisis by focusing on the promotion of 'green jobs,' says a House Oversight Committee report on job creation. "Nearly three years and billions of taxpayer dollars later, Americans have received scant return from President Obama's investment."

But that conclusion has been met with equal vigor by those who support such green endeavors. Solaria Corp. teleconferenced with reporters to point out that the solar industry now employees 100,000, which is more than any single traditional energy form. Solyndra, they note, fell victim to cheap overseas labor and was unable to recover its production costs.

Exposing Hypocrisy

To be clear, a loan guarantee is not an outright subsidy. Rather, it is a form of insurance that is needed to get projects going and to entice Wall Street to also invest. Altogether, the U.S. Department of Energy is at some stage of awarding $30 billion in loans to 42 alternative energy projects, which according to the administration have saved or created 66,000 jobs.

Some of those deals may get cut off in the latest budget battle. But if lawmakers reason that loan guarantees are “wasteful spending,” then they would also have to apply the same logic to other energy programs: coal gasification with carbon capture and sequestration as well as nuclear.

Consider nuclear energy: Under the 2005 Energy Act, Congress authorized loan guarantees and then instructed the Energy Department to devise the program. At the time, $18.5 billion had been allocated for such purposes. Now, the Obama administration is proposing to increase that level to $54.5 billion -- with the first two totaling $8.3 billion for reactors to be built in Georgia.

Opponents of those guarantees, conversely, say that nuclear plants are expensive and uncompetitive and have a proven track record of cost overruns. If they are unable to receive private financing then taxpayers should not become a backstop.

“With hundreds of billions in bailouts already on the shoulders of U.S. taxpayers, the country cannot afford to move forward with a program that could easily become the black hole for hundreds of billions more,” writes the National Taxpayers Union and other conservative groups to the president.

The bottom line is that those who argue that loan guarantees are risky and wasteful must not be hypocrites. Key differences exist, of course: While traditional energy has proved more reliable, the associated financial and safety risks have been much greater.

Consistency aside, the federal pie is only so big, notes the Union of Concerned Scientists. Lawmakers must therefore decide how to allocate available funds. The scientists are advocating for green energy, pointing out that taxpayers and ratepayers have already shelled out billions for abandoned nuclear projects as well as $200 billion to compensate for the industry’s cost overruns. 

Taxpayers lost $528 million on Solyndra. But that pales in comparison to what other energy businesses have cost taxpayers, solar supporters say.

Still, the fundamental question is whether government should assist any energy project or technology beyond the research and developmental phase. Without such help, advocates say that many qualified projects could not get out of the lab and into the market. Others, though, contend that anything further is tantamount to Uncle Sam picking winners and losers.

Look for politics to trump economics concerns, however, allowing pet energy projects from both parties to get their federal funding.

EnergyBiz Insider has been been nominated in 2010 and 2011 for Best Online Column by Media Industry News, MIN. Ken Silverstein has also been named one of the Top Economics Journalists by Wall Street Economists.

Follow Ken on www.twitter.com/ken_silverstein

energybizinsider@energycentral.com

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