In a move to help prevent tens of thousands of police officers, teachers, and other government workers from losing their jobs and to maintain Medicare and other social services, President Barack Obama signed a $26 billion funding bill passed by the House of Representatives in special session on Tuesday.
What was good news for stuggling public sector employees was not so good for the solar industry. To help fund the bill, the House decided to take $1.5 billion from the coffers originally designated for the Department of Energy’s renewable energy loan guarantee program.
This marks the second time that Congress has taken monies from the loan program, following a $2 billion withdrawal to help extend the “Cash for Clunkers” initiative last summer—monies that have yet to be paid back to the loan fund, despite assurances from lawmakers. As a result of the two reallocations, the program’s account has shrunk to $2.5 billion from the originally budgeted $6 billion.
Comments from the renewable energy community expressed concern over the latest move.
“These rescissions put into jeopardy the green jobs that the administration have touted as part of our clean energy future and put us further behind the rest of the world,” wrote Al Gore on his blog.
“This reduction in funding severely limits the DOE’s ability to support the suite of renewable resources through the loan guarantee program,” SEIA and other renewable energy associations said in a letter to House Speaker Rep. Nancy Pelosi (D-CA). “Further, a solicitation for manufacturers of commercial renewable energy technologies has not even been released yet by DOE.”
“The proposed cut makes it likely that manufacturers of commercial renewable technologies will not be able to take advantage of the DOE loan-guarantee program,” the letter noted.
A spokesman for Rep. Pelosi said that the speaker “has been assured by the Obama Administration that it will work to restore these funds so that loans planned for later this year can move forward.”
Not every industry observer saw the news in such dire terms.
“Although this data point appears to be a headline negative, we believe the overall impact on end demand is likely to be fairly insignificant,” said Vishal Shah of Barclays Capital in a note. “So far, only about $4.1 billion in closed or conditional loan guarantees has been made, which would require $400 million in funding. The remaining $2.1 billion in available funding can support up to $20 billion-$25 billion of loan guarantees.”
“Since most of the recent loan guarantees have been provided to solar manufacturing projects, we expect some diversification into other technologies (wind/geothermal etc),” he continued. “Moreover, loan guarantees for downstream project development appear to have greater possibility of approval since the cash flow risk appears to be somewhat lower compared to guarantees for manufacturing projects.
“Our checks also indicate that applications for solar project development (by First Solar, SunPower) have been generally under the innovative technologies program as ‘scale’ counts towards innovation in downstream solar project development….Moreover, at this point, the primary challenge for most companies appears to be Sept 2011 construction start date deadline and not the amount of available funds, in our view.
“Comments made by the DOE representatives at our recent conference suggest that $800 million loan guarantees per month may be likely over the next 24 months,” noted Shah.