Defending Clean Energy Loan Guarantees

on October 06, 2011 at 3:00 PM

Obama and business finally agree. The renewable energy business, that is.

“If we are going to compete in the 21st century, we have to dominate cutting edge technologies,” Obama said at a Thursday morning press conference.

In the press conference, Obama echoed the words of both solar and geothermal industry leaders in saying that the government plays an important role in helping cleantech companies survive the “valley of death” and should continue supporting American businesses with DOE loan guarantees.

In response to a question on the Solyndra bankruptcy, Obama defended the loan program saying it was designed to “meet a specific need in the marketplace” and was intended to back potentially-risky ventures.

The Technology Defense

“What has been true historically is that businesses that rely on new technologies, a lot of the time its going to take a lot of time before they take off and there are a lot of upfront investments that need to be made,” Obama said. “But if we don’t get on top of it now,” Obama added, the US will quickly fall behind China and India and wake up in a crisis.

“We’re not going to start when all heck is breaking loose,” he said. The government, he said, needs to plan ahead for a time when fossil fuels will run out and the pollution they emit will be too much for the environment to handle.

In an interview with Breaking Energy, President and CEO of the Solar Energy Industries Association (SEIA) Rhone Resch also said the loan guarantee was essential to solar success.

“I’m a taxpayer too and I am pissed that [Solyndra] went bankrupt and won’t repay the loan,” Resch said. But, that doesn’t mean the program will not pay off in the long run.

“The loan guarantee program serves a very important role in helping the US expand our innovation and scale of industries,” Resch said. “They do play a critical role of getting companies over that valley of death.”

When Reward Meets Risk

Once a company gets angel-investor backing it can begin to construct simple models and test runs of its products. But to scale up production to a viable business model, companies need millions of dollars in commercial-scale funding. And many in the renewable business are saying that commercial backing has largely evaporated in a struggling economy where investors are terrified of risk. That is where the federal loan guarantees come in, Geothermal Energy Assocation (GEA) Executive Director Karl Gawell told Breaking Energy.

Both Gawell and Resch said the industries they represent are thriving, despite overall economic troubles and stiff competition from both fossil fuel generators and clean tech industries in other countries.

“Our biggest concern is that the entire industry is getting viewed through the lens of one failed company and the truth of the matter is that the solar industry is thriving,” Resch said.

But renewables will need federal backing to continue thriving, Resch said. He pointed to government incentives that have boosted the oil and gas industry, the coal industry and the nuclear industry over the decades. Solar, he said, received the 48C tax credit in February 2009 with the ARRA-Recovery Act, which offered a 30% tax credit for renewable manufacturing, but it expired two years later in February 2011 and was capped at $2.3 billion. The program, he said, was oversubscribed four to one and, though it was significant in helping the solar industry become a household name, did not go far enough is helping the industry compete with fossil fuels.

Furthermore, according to Mintz Levin Partner Mark Riedy, Congress never appropriated more funds to the program and an attempt last year at adding $5 billion for a refund failed to go through.

A 30% solar investment tax credit, which also covers geothermal and wind developments under 100 kW, is still in place however and is set to last till December 31, 2016, at which point it will be reduced to 10%. No expiration date has been set for that incentive.

Resch said he is not seeking special treatment for solar but only for the government to “level the playing field.”

“We’re just looking for a stable policy environment that business can rely on as they grow,” he said.