The implosion of government-backed solar firm Solyndra has handed Republicans both the tools for a slow-burn inquiry that keeps the White House on the defensive and a ready-made target for ideological barbs at federal loan guarantee programs.
But beneath the bombast of GOP pleas to stop government from "picking winners and losers" is near-party unity in favor of nuclear loan guarantees, and even a support base for keeping the Department of Energy in the renewable-power business.
As a result, the Obama administration's sharpest critics on Solyndra must walk a fine line when it comes to the future of a program created by a Republican-controlled Congress and White House. Watching with interest, the nuclear industry is growing concerned that broad shots at DOE loan guarantees could catch them in the cross fire, despite key differences between the program's treatment of their sector versus renewables.
Rep. Joe Barton (R-Texas), who helped craft the loan guarantee program in 2005 as House Energy and Commerce chairman, recalled yesterday that adding a component for renewable power was a matter of "basic fairness" to lawmakers who first conceived of the new DOE effort as geared toward nuclear.
"I still support there being a loan guarantee program for new energy -- alternative energy and nuclear energy," Barton said in an interview. "But I do think it's fair to go in and look at the law, put more safeguards in, put caps in it."
Such a legislative reassessment of DOE loans could gain momentum thanks to the ongoing flap over Solyndra, but whether Congress would tackle the guarantee program for nuclear as well as renewables remains an open question. House Oversight and Government Reform Chairman Darrell Issa (R-Calif.) warned in a C-SPAN interview last month that the guarantee program overall could be "unfixable," but he drew a brighter line yesterday between DOE's pot of nuclear loan money and its two separate funds for efficient autos and renewables.
"All loan guarantees have to be narrowly constructed, have to be targeted, have to be necessary, and have to be done without political interference," Issa said in an interview, adding that lawmakers from both parties should be free to "send letters to DOE" without distracting from the underlying question of "do we absolutely need a loan guarantee?"
The viability of nuclear loans was established, Issa asserted, before the 2005 energy bill thanks to the 20 percent share of U.S. electricity generation that the sector shouldered despite not building a new plant since the 1970s. Even though nuclear loans are "different," he added, "that doesn't mean they should not follow the same scrutiny" that renewable-power guarantees have.
In fact, the intense political heat surrounding DOE loan guarantees this fall often appears to scald not just the renewables funds but the entire program.
Illustrating the depth of conservative frustration with the federal role in energy markets, Rep. Kenny Marchant (R-Texas) warned during a House Ways and Means Committee hearing last month that the Solyndra collapse "has hurt the entire energy credit reputation."
Constituents and local businesses in Marchant's district, he added, advise him to "do away with all of these credits, lower our tax rate, and let the best product win ... get out of the whole business of subsidy."
Those shades of policy schism among Republicans have not escaped Democrats, particularly liberal lawmakers critical of nuclear loan guarantees despite the Obama administration's $36 billion vote of confidence in them as part of its 2012 budget request.
Rep. Ed Markey (D-Mass.) last month called for a House inquiry into the taxpayer risk of nuclear guarantees, for which DOE holds $18 billion in authority and has used $8 billion for a conditional commitment to a Southern Co. project in Georgia (E&E Daily, Sept. 15).
The top Democrat on Energy and Commerce, Henry Waxman of California, hailed Barton for maintaining his support for DOE guarantees and warned the GOP against overreaching in their Solyndra-spiked zeal.
"Republicans act as if they're against all these loan guarantees -- it's a bit hypocritical," Waxman said in an interview this week. "Whatever the mistakes were [on Solyndra], I don't think we ought to point fingers at one party or another, because both parties supported these loan guarantees and taking these kinds of risks."
'Baby out with the bathwater'
A nuclear-sector source who spoke on condition of anonymity gave voice to simmering concerns within the industry that the current controversy surrounding renewable loan guarantees, and a lack of understanding about how the program works, has misled lawmakers into thinking the entire DOE program could put taxpayers at risk.
A "'throw the baby out with the bathwater' mentality that seems to be pervading throughout Capitol Hill," the source said, "makes explaining the two different programs difficult."
Solyndra received its now-infamous $500 million-plus loan guarantee through DOE's Section 1705 program, created in 2009 economic stimulus law to foster renewable energy development, including biofuels, wind, geothermal and solar projects. Under Section 1705, the government covers a renewables company's debt obligation in the event the borrower defaults or the project fails, while also paying credit subsidy fees associated with the projects.
Those credit subsidies are "essentially loan loss reserve," then-DOE loan guarantee program director Jonathan Silver told lawmakers last month. Silver resigned his post yesterday amid mounting political pressure over the Solyndra bankruptcy, giving House Republicans a first scalp of sorts in their investigation (see related story).
Since the stimulus law was passed, DOE has paid $2.4 billion in credit subsidies for 28 projects under the 1705 program, an amount equivalent to provide loan guarantees of up to $25 billion, the agency said.
But fossil fuel and nuclear projects are only eligible for guarantees under a separate section of the program, numbered 1703, that requires companies to pay the credit subsidy fees and therefore share more risk. DOE has approved four conditional commitments worth $10.6 billion under 1703, including the Georgia nuclear reactor project and a $2 billion loan guarantee to support French nuclear giant Areva's uranium enrichment project in Idaho.
Because few on Capitol Hill are aware that 1703-funded companies must pay the credit subsidy fee as well as their equity stake in the project, nuclear companies are growing uneasy about the prospect that divisiveness over renewable loan guarantees could lead to an elimination of the entire program, according to the industry source.
The USEC case
Perhaps the most high-profile example of a DOE loan winning Republican favor is the U.S. Enrichment Corp. (USEC), which warned last month that it would significantly slash investment and cut jobs at an Ohio uranium enrichment facility if the Obama administration did not come through with a $2 billion guarantee commitment by November (Greenwire, Sept. 30).
House Speaker John Boehner's (R-Ohio) office followed that announcement with a blog post pressing the White House to rebuild post-Solyndra credibility by expediting the USEC guarantee.
"[I]n stark contrast to the 'stimulus'-centric Solyndra saga, the Piketon project offers the chance to bring thousands of good-paying, long-term jobs to an area suffering from the Buckeye State's highest jobless rate," Boehner aide Michael Ricci wrote.
Ellen Vancko, nuclear and climate program director at the Union of Concerned Scientists -- a vocal critic of DOE's nuclear loan guarantee program -- countered that USEC bears more similarity to the Solyndra case than its congressional supporters acknowledge.
Just as Solyndra entered an uncertain market for its cylindrical solar cell modules thanks to falling silicon prices after its DOE loan came through, the planned Areva plant in Idaho and another, non-DOE-backed uranium-enrichment facility set for New Mexico leave USEC's fiscal future uncertain, Vancko said.
"[W]hat is the ultimate market demand for all this fuel once all three plants get up and running?" she added in an email. "Given the lack of transparency in the program, we have no way of knowing whether this risk is being factored into DOE's calculations."
The Piketon, Ohio, plant planned by USEC, which has enlisted congressional support on both sides of the aisle for its DOE loan application, would be one of the first to use domestic gas centrifuge technology to produce low enriched uranium for nuclear reactors. Company spokesman Paul Jacobson blasted the suggestion that USEC and Solyndra could face similar financial struggles as "out there on the edge of reality."
Jacobson said USEC had $3 billion in presold sales, which Solyndra did not. USEC also implemented cost control at fixed and firm construction contracts, whereas Solyndra could not reduce their costs, he said.
Ultimately, the degree of Republican and Democratic support for both pots of loan guarantee funding at DOE suggests that the program is well-positioned to survive Solyndra. But some top Republicans remain prepared to embrace the level playing field that Marchant envisioned despite the depth of energy-industry ire it might incur.
"As far as I'm concerned, the government could eliminate all loan guarantee programs," Rep. Ed Whitfield (R-Ky.), a subpanel chief on Energy and Commerce, said in an interview.
"If you're not going to eliminate them," he added, the only explanation for the White House's fast-tracking of the Solyndra loan would be "to show favoritism." Comparing that case to USEC, Whitfield added, would be "like comparing oranges to grapes."