by Mitch Kokai
Senior Political Analyst, John Locke Foundation
It’s official, the Energy Department’s green energy loan program is actually expected to lose money despite media reports that such loans would net the government a profit.
The Government Accountability Office says the DOE’s oft-touted $28 billion loan program will cost taxpayers $2.21 billion over the lifetime of the loans. Not only that, the costs to taxpayers for green loans has risen about $500 million as “the result of loan guarantee defaults” from companies like Solyndra and Abound Solar.
The “credit subsidy cost of the loans and loan guarantees in its portfolio” is expected “to be $2.21 billion, including $807 million for loans that have defaulted,” GAO reports. “The fees DOE has collected have not been sufficient to cover all of its administrative expenses for the program” because the “fees on the current loan guarantees were too low to cover ongoing monitoring costs.”
This stands in sharp contrast to media reports from last year suggesting the DOE’s green loan program would net taxpayers $5 billion. Last year, the Washington Post’s Wonkblog ran with the headline, “Remember Solyndra? Those loans are making money.” The liberal news watchdog Media Matters exclaimed that “Solyndra Scandal-Mongering Hasn’t Stopped The Energy Dept’s Loan Program From Turning A Profit.” …
… The DOE has tried to deflect from large-scale failures of companies it has backed with taxpayer dollars by pointing to the $5 billion it projects to rake in over the years. The DOE’s loan program, however, was not designed to be profitable and the agency has never claimed to be making a profit.
“In other words, DOE reports gross interest received, not the net interest taxpayers have earned after subtracting Treasury borrowing costs,” according to Urban Institute economist Donald Marron — who previously served on the president’s Council of Economic Advisers.
“But when we account for Treasury borrowing costs, taxpayers are actually well behind,” Marron wrote last year, debunking claims the DOE was making a profit on its loans. “DOE loans are typically made at small, sometimes zero, spreads above Treasury rates… So a large portion of DOE’s ‘interest earned’ must have been offset by borrowing costs. That puts taxpayer losses in the hundreds of millions of dollars.”