The Energy Policy Act of 2005 was a Republican bill, passed by a Republican-controlled Congress, and signed by Republican President George W. Bush. It created a program in the Department of Energy to give loans to “help support innovative energy projects to reduce greenhouse gases and air pollution.”
It’s an example of a conservative and free-market-friendly climate policy (despite its fossil fuel focus), in that it provided loans for alternative and lower-emission energy sources, like nuclear power and biofuels, as well as new approaches to fossil fuels, like so-called clean coal, that the private market would otherwise consider too risky for investment.
The purpose of the policy is to scale-up emerging technologies, knowing full well that while some businesses may not thrive even with support, overall it will be money well spent if most of the companies pay back the loans, with interest. It’s the embodiment of not picking winners and losers, in that it lets the free market determine which technologies can turn a profit, and which can’t.
As of 2014, the Obama administration had expanded the loan program's renewable energy lending, and the program had earned more in interest than it’d lost from bankrupt companies it lent to. While misinformation about bankruptcies like Solyndra were used by fossil fuel promoters to denounce the program in bad faith, those failures only accounted for 2% of its otherwise successful portfolio, meaning it actually performed better than private banks. The average annual repayment is expected to be $1 billion over the next five years, and as of 2016, successful companies had repaid twice as much money in interest than the program had lost to the companies whose technologies didn’t pan out, so the program hadn’t come close to spending all of the $10 billion that Congress had set aside for failed loans.
Keep all that in mind when you consider Friday’s news that Tonopah’s Crescent Dunes solar thermal power plant recently declared bankruptcy and may only pay $200 million back on the remaining $425 million it owes the DOE.
While people like the Republican National Committee’s Liz Harrington are going to blame this free market failure on Democrats (Joe Biden, specifically), the reality is that a certain amount of failure is absolutely an intended part of the policy design- that’s why Congress put $10 billion aside to cover the cost of failed loans like these.
Because if the companies the DOE loaned to were sure to make back the money, they could get the loans from private banks. The entire purpose of the program is to spur innovation by funding emerging technology, and letting the free market sort out what works best.
In this case, the Crescent Dune solar thermal power plant’s emerging tech was not the photo-voltaic panels that many now associate with solar power, but instead a field of 10,000 mirrors in the desert that focused the sun’s rays on a central pillar filled with salt. The concentrated solar rays reflected by the mirrors heat the salt to over 1,000 degrees F, at which point it could be used to turn a steam generator.
But storing molten salt is trickier than hoped, and the plant shut down soon after it began operations because of leaks in the salt storage tanks that they’re still trying to fix to bring the site back online. Meanwhile, though, as a result of the loan program’s similar investments in photo-voltaic solar panels have exceeded expectations as prices have fallen 70% over the past decade, and in 2019 the industry generated $18.7 billion in investment in the American economy. Since 2010, the DOE Loans Program has reduced carbon pollution by over 50 million metric tons.
So anyone who wants to say that they support innovation as a climate solution better not point to this as an argument against renewables!
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