Energy companies to Obama: Break loan logjam

In a letter, representatives of solar, wind, geothermal, and other energy industries urge Obama to start dispensing loan money or risk a major slowdown in new projects.

Martin LaMonica Former Staff writer, CNET News
Martin LaMonica is a senior writer covering green tech and cutting-edge technologies. He joined CNET in 2002 to cover enterprise IT and Web development and was previously executive editor of IT publication InfoWorld.
Martin LaMonica
3 min read

A group of energy industry associations has warned President Obama that bureaucratic delays could sink large-scale projects and derail Obama's goal of doubling renewable-energy supply in the next three years.

In a letter dated Tuesday, seven industry groups urged Obama to intercede so that already-authorized loans are made available quickly. The letter was signed by the heads of the American Wind Energy Association, the Solar Energy Industries Association, the Biomass Power Association, the United States Clean Heat & Power Association, the Nuclear Energy Institute, the Geothermal Energy Association, and the National Hydropower Association. (Click for PDF)

The credit crisis has made financing large-scale renewable-energy projects, such as wind and solar farms, far more difficult than one year ago. The stimulus act passed earlier this year changed the subsidy so renewable-energy companies can finance projects with loans from the U.S. Department of Energy.

Another loan guarantee program, established in 2005, is designed to give young green-technology companies expansion funds. Solar start-up Solyndra in March received a $535 million loan to build a larger factory and many others, including Tesla Motors, have applied for loans.

However, despite the Department of Energy's stated plans to move quickly, the loan money from either program is not yet flowing, the industry associations complained. Creation of the loan guarantee program called for in this year's stimulus plan, officially called the American Recovery and Reinvestment Act (ARRA), is blocked by the Office of Management and Budget, they said.

"Three months have passed since enactment of ARRA, and we have little confidence that ongoing discussions between DOE (Department of Energy) and the Office of Management and Budget over these regulations will produce a satisfactory result in a timely manner," the letter said.

The industry associations said that if the authorized funds are not made available quickly, some projects, such as a large wind farm, will be delayed or canceled.

"Further delay endangers the planned role of the green energy economy in the nation's economic recovery and undermines the effort to meet your Administration's energy policy goals, including the doubling of renewable energy supply in three years," the letter said.

No visibility?
The letter reflects the complaints about loan programs from company executives in industry. The CEO of Schott Solar North America, Gerald Fine, said earlier this month that since the stimulus plan loan guarantee program is not yet operating, projects are on hold while project developers and manufacturers await "clarity."

In a conference call with investors in late April, the CEO of panel maker First Solar, Michael Ahearn, said that the loan guarantee program is "subjective" and not available to the market in general.

"The rules and criteria aren't even developed let alone published and so when companies like us start thinking about how you put project finance in place to facilitate a large project, due late 2010 or beyond, we can't rely on that program. There's no visibility around it. No assurance, we will be entitled to participate," he said.

"I think we speak for a number of companies on these points and would like to deploy big volumes here. We just need a few of these pieces to be in place," Ahearn said.

Energy Secretary Steven Chu established a special board within the DOE in an effort to streamline the loan guarantee process. Chu said last week that the DOE will be asking academics to take a leave of absence to help with loan vetting.

"This is a huge load on the system and we need the best help we can get," Chu said after giving a speech at MIT. "The quality of reviews has to go up. It's very important we get it right."

Some entrepreneurs, meanwhile, have complained that local officials simply aren't aware of the changes to the loan programs. "Obama says, 'OK, we're going to cut through all the red tape.' In the actual environment, it ain't happening," said a person seeking loans for a biofuel project.