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Today the White House released a 60 day review of the Department of Energy (DOE) Loan Guarantee Program. The review, conducted by former Treasury official Herb Allison, was done at the Administration’s request following the default of solar panel manufacturer Solyndra, and energy storage company Beacon Power.

Since Solyndra’s default, the Loan Guarantee Program has come under the attack of lawmakers calling for additional oversight and more public engagement. We couldn’t agree more. Since its creation in 2005, TCS warned the DOE program was headed for a train wreck. And unless things change, Beacon and Solyndra are only the beginning of the taxpayer losses. We think the program should come to a halt before taxpayers lose billions more.

The White House review concurs with many of the issues we have raised. Among its recommendations:

• Proactively protect the taxpayer
• More clearly define policy and financial goals
• Strengthen management
• Create independent risk management
• Improve reporting to the public
• Engage in long-range strategic planning

Although we agree with many of the problems raised in the report, we come to very different conclusions. The overall program is fundamentally flawed. Under the current rules, taxpayers can guarantee up to 80% of the project’s overall cost. This provision saddles taxpayers with far greater risk than any other project investor. Furthermore, taxpayers are not guaranteed the first right to recoup lost assets if a project defaults. While it is unclear if this program could ever “proactively protect taxpayers” as the report recommends, with provisions like, this we are guaranteed to lose.

For more information, please contact Autumn Hanna autumn[at]taxpayer.net
February 2012