(3 of 4)
But White House policy experts soon grew worried that the program was too unwieldy to deliver as promised. One problem was its unusual structure. Unlike most federal spending, loan guarantees require that bureaucrats calculate the risk of their investments, partly to keep public money from being wasted. This effectively turned Department of Energy officials into betmaking investment bankers tasked with evaluating the technological, financial, legal and operational impact of each project. Since 2009, the number of Energy Department staff members working on loan guarantees grew from about 35 to more than 180, many from the private-sector and investment-banking world, but still not enough to enable the government to disburse all the money Congress had authorized for green-energy projects. "All of the extensive due diligence and legal documentation simply cannot be completed," explained an Energy Department spokesman recently, nearly six years since the program's inception.
After more than a year had passed, internal concern over the loan program made it to the President's desk. In October 2010, national economic adviser Larry Summers and top environmental-policy adviser Carol Browner wrote a memo to Obama arguing that the loan-guarantee program was too slow, too complex, too inefficient and open to abuse by private interests. Some loans appeared to be going to companies that either didn't need government help or were profiting unduly from it. A wind farm in Oregon called Shepherds Flat was granted a $1.3 billion loan guarantee; the company planned to ask private investors to put up just 11% of the project's cost, while offering a whopping 30% estimated return. Summers recommended several remedies, including rerouting the unspent funds to a less onerous tax-credit program. But Obama, who was then weeks away from a wipeout in midterm congressional elections, decided against any major changes.
A Grim Legacy
Solyndra's abrupt fall also raised questions about the job promises of green energy. When the company shut its doors in late August, about 1,100 employees were laid off. That equates to about $479,000 in federal investment for every lost full- and part-time job--not exactly the stuff of economic renaissance. Solyndra was not alone in its scant record of direct job creation. High-tech factories tend to require relatively little human labor after their initial construction phase. Energy Department documents show that the $1.3 billion investment in the Oregon wind farm expected to create only 35 permanent jobs, while many other loan recipients hired fewer than 100 people. In fact, from 2003 to 2010, the number of clean-energy jobs in the U.S. grew at an annual rate of 3.4%, slower than the 4.2% growth in jobs for the economy as a whole, according to the Brookings Institution.