A new report from the Reason Foundation examines the Department of Energy’s loan program, which brought us Solyndra among many other taxpayer boondoggles, and finds poor investment decisions, payoffs to politically connected firms, extensive lobbying, and lost money:
Over the past decade, federal and state governments have significantly increased their support for nonconventional energy technologies, ranging from wind-powered electricity generators to battery-powered cars. One of the largest such programs was the Department of Energy’s Section 1705 Loan Guarantee Program—the subject of this study.
The $16 billion dollar program “invested” in various failed enterprises, including Solyndra and Abound Solar. But those are just the tip of the iceberg of the DOE’s poorly diversified portfolio of mostly “junk” grade investments, many of which, years later, are still “under construction.”
So why did the DOE systematically make loan guarantees to companies that are financially unsound? We found that many recipients had close ties to those in charge of approving the loan guarantees. Moroever, we found that the DOE allocated funds broadly in proportion to applicants’ lobbying expenditures. In other words, it is likely that loan guarantees were allocated not on the merits of the projects but, rather, according to the degree to which the applicants were able to use political connections.
Color me shocked!
What struck me as interesting was the connection between the amount of money spent lobbying and the eventual Department of Energy loan. The chart below is reproduced from the report:
The financial return on the money spent lobbying is pretty significant for some of the firms at the top. NRG energy spent roughly $10 million in lobbying but received a loan for over $5 billion dollars!
What does the Reason study conclude?
To protect taxpayers from further waste and to increase the sustainability of investments in technologies that result in environmental protection, the government should stop guaranteeing loans for “green” energy projects immediately.
Someone alert the Department of Energy. Click here to read the report.