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Energy and the Marketplace

By Sheila Kennedy on December 2, 2014 in Civic Blog
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Potus_solyndraCongressional critics made sure that Americans heard about the “scandal” of Solyndra, the green energy start-up that failed and defaulted on its government loan. But we haven’t heard much about the federal government’s renewable energy loan program since then–probably because there hasn’t been a subsequent opportunity to twist results in order to make political hay.

Since 2005, the Department of Energy has loaned $34.2 billion to a variety of businesses to spur development of clean-energy technology. A recent NPR report notes that– while there have indeed been defaults (amounting to $780 million, or 2.28 percent of the total)– DOE has also collected $810 million in interest payments, for a profit of $30 million.

The default rate on these loans is well below the rate of commercial loan defaults typically experienced by traditional banks, according to data maintained by the Federal Reserve. NPR went back to those who criticized the loan program three years ago, but none of the critics would comment for the record.

Energy Secretary Ernest Moniz pointed out that the loan program had funded the first of five huge solar projects in the West. Before that, developers couldn’t get money from private lenders, but now they can.

“We have to be careful that we don’t walk away from risk, because otherwise we’re not really going to advance the marketplace,” Moniz told NPR.

This is precisely the way government loans are supposed to work: to “prime the pump.” When new technologies are deemed too risky for the private marketplace, when the rehabilitation of depressed neighborhoods makes it impossible to get traditional mortgages–in short, when the private sector is not willing to encourage the sort of entrepreneurial activity that benefits us all–governments can step in and jump-start the process.

Of course, once the pump has been primed–once a market has been established and risk moderated–government needs to withdraw and allow the private marketplace to operate. The problem in our (increasingly oligarchical) system is that industries are happy to continue (excuse my vulgarity) sucking at the public tit. So we end up continuing to subsidize companies that have enjoyed years of obscene profits, are sitting on huge cash reserves and have absolutely no problem obtaining necessary financing.

Fossil fuel companies, for example.

In the United States, credible estimates of annual fossil fuel subsidies range from $10 billion to $52 billion annually. These numbers do not include the significant costs attributable to externalities related to the climate, or to the other environmental and health impacts of the fossil fuel industry. We taxpayers also pay those costs, which are another form of subsidy.

Here’s my question to all the critics who screamed bloody murder about Solyndra and the DOE program generally: where’s your indignation about the immense and counterproductive costs of continued fossil fuel subsidies?

A4_1_10_SheilaKennedySheila Suess Kennedy, J.D. is Director of the Center for Civic Literacy and Professor of Law and Public Policy in the School of Public and Environmental Affairs at Indiana University Purdue University at Indianapolis. She is the Executive Editor for the Journal of Civic Literacy. This post was originally published at sheilakennedy.net on December 1, 2014 and is republished here with the author’s permission.

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