Brad Plumer of The Washington Post has a great post on Solyndra, loan guarantees, and energy policy more generally that hit on something I’ve been thinking about since the Solyndra announcement. Writes Plumer:
Ever since Solyndra went bankrupt in August, there’s been a pseudo-debate in Washington over loan guarantees for energy projects. It’s a pseudo-debate because neither party really believes that energy should be left to the whims of the free market. The GOP has long backed loan guarantees for nuclear power plants, and, as the New York Times reports today, key Republicans such as Sen. Mitch McConnell (R-Ky.) have been begging the Energy Department for loans for clean-energy projects in their own districts. In practice, the Solyndra squabble is more about scoring a political hit on the Obama administration than a genuine policy dispute.
This is exactly right, and it’s a shame. The DC debate is mostly divorced from the legitimate debate taking place in business and policy circles. That debate isn’t new and has few easy soundbites. The debate amounts to this: we know there is a critical gap in scale-up financing for innovative clean energy companies. No one familiar with the sector disputes this. So the question being debated is: what are the most effective mechanisms for closing that gap? The loan guarantee program is one such possible mechanism, but it’s far from the only one. The “Green Bank” is probably the alternative that has received the most attention, but there are others.
Here at NECEC we view this debate as tremendously important; it’s one of the most serious crimps in the energy innovation pipeline. But it looks nothing like the political firefight taking place in Washington over Solyndra. Which is a real shame. We will have more to say on these issues as we discuss them with our community, and we hope to have more substantial recommendations later this fall. In the meantime, I’ll excerpt some of our Federal Policy Platform put together this summer:
3. SCALE-UP FINANCING FOR COMMERCIAL TECHNOLOGIES Most clean energy innovations require significant capital for manufacturing, project deployment and first commercial scale-up. Currently, private capital is not filling this gap, being deployed at later stages after scale-up risks have been addressed, or in other countries that reduce the risk of market adoption. Several federal programs and proposals have aimed to address the scale up and deployment financing gap. The Clean Energy Development Authority (CEDA) or “Green Bank” has been an active proposal in Congress. NECEC has strongly supported the intent of CEDA, as well as the efforts of the DOE Loan Guarantee Program. While DOE has made substantial progress in issuing loan guarantees, the program has fallenshort as a scalable mechanism to deal with more than 170 applications seeking over $175 billion in loan guarantees. NECEC recognizes the need to develop “Green Banks” and maintain Section 1703 for projects in review, but NECEC also stresses the need for an alternative financing mechanism that utilizes private capital and market-based solutions for the vast array of manufacturing, generation, scale-up and deployment projects with economic potential. The RACE Initiative presents such a mechanism.
