“I’m now famous for getting the largest loan guarantee and then turning it down,” Schmidt said. “For very sound business reasons, we opted not to go forward.”
The Obama administration’s vaunted initiative to catalyze the U.S. clean-energy industry — under attack for betting half a billion dollars on the solar-panel manufacturer Solyndra, which closed last month — has become a case study of what can go wrong when a rigid government bureaucracy tries to play venture capitalist and jump-start a nascent, fast-changing market.
Schmidt concluded in early 2011 that the influx of inexpensive flat solar panels was undercutting his company’s year-old proposal to use a field of parabolic mirrors that focus the sun’s energy to heat liquid-containing tubes. Despite market changes, however, the terms of the federal loan guarantee wouldn’t let Solar Trust switch in midstream to flat panels. So Solar Trust sought private financing.
“We look at a lot of technologies, and I don’t care which one we build — I want to build the one that makes the most financial sense,” Schmidt said.
The inflexibility of the terms for Schmidt’s project was just one of the troubles that have plagued the Energy Department’s $38.5 billion loan-guarantee program from its beginning in 2009. Inundated with proposals, the small Energy Department loan office was initially overwhelmed, and companies complained that it was moving too slowly, not too quickly as has been alleged recently in the case of the now-bankrupt Solyndra.
While Chu was striving to get things moving, top White House economic officials, including Lawrence H. Summers, then director of the National Economic Council, doubted the government’s ability to shape a new industry, and some wanted to tighten up oversight by the Office of Management and Budget — even if that meant some guarantees would never be given out.
Meanwhile, tumbling prices for silicon and turmoil in the financial world were changing project assumptions faster than the bureaucracy could make decisions.
“The Department of Energy supports a process that would limit OMB and Treasury review,” said an Oct. 25, 2010, memo to the president. “OMB and Treasury support the establishment of clear policy principles for project review, recognizing that this may pose a risk that some program funds may not be obligated by the program’s Sept. 30, 2011 sunset date.”
Now, with only a week to go, the Energy Department is scrambling to get billions of dollars out the door. But time is running out. Last week, it told two pending solar projects that there wasn’t enough time to complete the deals.