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July 14, 2010

Watchdog demands fairness in $77bn DOE loan program

The Department of Energy should take another look at how it awards loan guarantees, and how it monitors the success of those awards, the GAO advised

The Government Accountability Office has called on the US Department of Energy to reform its $77 billion loan guarantee program for renewable energy projects.

In particular, the Congressional watchdog said the DOE should be treating applicants more consistently.

In a report issued this week, the GAO said the Department had been “favoring” some applicants seeking federal loan guarantees, by granting conditional loan guarantees before full reviews had been completed.

The watchdog also cast doubt on whether conditional approvals should be given before completing reviews of projects.

It said: “DOE conditionally committed to issuing loan guarantees for some projects prior to completion of external reviews required under DOE procedures. Because applicants must pay for such reviews, this procedural deviation has allowed some applicants to receive conditional commitments before incurring expenses that other applicants had to pay.”

Performance targets

The DOE’s loan guarantee program uses Recovery Act funding with the aim of doubling renewable energy generating capacity by 2012.

As of April 2010, it had issued one loan guarantee for $535 million and made nine conditional commitments.

Along with the fairness issues, another key criticism of the scheme so far is that the Department has not set sufficient performance targets, for example goals for the number of jobs that should be created by the program

The GAO also suggested that program does not offer applicants mechanisms to appeal DOE decisions, or even provide feedback on the process.

The Department has told the GAO is is taking steps to address the concerns.

Biofuels industry

Biofuels industry group the Renewable Fuels Association backed the GAO’s calls for a reform of the DOE loan guarantee program.

It said the program was helpful “in theory”, but in practice had “proven difficult if not impossible” – particularly for cellulosic ethanol companies to access.

RFA President and CEO Bob Dineen said: “If the goals of the RFS are to be met, the Obama Administration must make sure loan guarantee programs are workable and accessible for qualified companies, regardless of their technology. Currently, such a scenario does not exist.”