DOE Loan Guarantees
September 23, 2010
10:25 AM
Opening Statement – Sept. 23, 2010
Department of Energy Loan Guarantee Program
“Thank you all for coming here today to give us your thoughts on the Department of Energy’s Loan Guarantee Program. This is a topic of great concern to members of this Committee. It is also a very complex and technical topic, so I appreciate your efforts to help us understand the situation and what we can be doing. Unfortunately, though we invited the Office of Management and Budget to attend and comment on their role in this process, they were unable, or unwilling, to provide a witness for us here today. We have asked them to submit written testimony for the record and will ask them to also respond to any questions for the record that Members submit after the hearing.
“Since this is not the first hearing we’ve had on this topic, I’ll not go into great depth on the history of implementation challenges this program has faced. In short, in the five years since this program was authorized 14 loan guarantees have been issued – all of them in the last 14 months. Ten of those within the last year.
“While the Department, under Secretary Chu’s leadership, should be commended for its obvious commitment to getting this program moving, it’s impossible to ignore the enormous gap between our efforts and those of our competitors overseas. Just last week, The New York Times had an extensive article on the aggressive support China is providing to new clean energy ventures, which includes everything from rich tax credits, to subsidized land, to exceptionally cheap capital. While we are arguing about whether or not we can afford to restore the $3.5 billion that was withdrawn from the $6 billion program set up less than two years ago, they’re offering support that is measured in the hundreds of billions.
“I would not argue that we need to match their level of support to maintain our competitive edge – there are many other reasons why companies would like to locate in the United States – I would argue that we must lift the barriers that currently make it impossible to develop and manufacture new clean energy technologies here. I’m concerned that there are those, including some in the Administration, that view financing as merely another benefit, like tax credits, to be cut when other needs dictate, rather than a remedy to a fundamental market failure that is acting as a barrier to domestic technology development.
“What I believe these skeptics fail to recognize is that, though banks are often happy to finance the next factory of an established company or the tenth deployment of a developed technology, they have little interest or inclination to participate in the first deployment. There is simply too much uncertainty, both in the technology and in the market, and too many other attractive investments to spend the significant time required to isolate the risks. As our international competitors have already recognized, the government must step in.
“Biofuels provides a good example. Though we have passed laws that would seem to create a stable market for biofuels in the United States, companies are finding it impossible to get financing for large-scale operations. Banks, investors and buyers won’t commit unless they’ve seen commercial-scale production and until competing technologies have sorted themselves out. The result is that our biofuels targets go unmet, as companies remain stuck in the pilot-project stage of development.
“This risks forcing domestic companies to look elsewhere to develop and subsequently manufacture their technologies – beginning the cycle of further research and refinement and continuing production there rather than here, where the technology was originally developed. I believe it is this risk that we must balance against any perceived risk of failure of a given project.
“Congress has repeatedly committed itself to taking on this market failure in the 2005 and 2007 energy bills, in the Recovery Act’s funding, and in this Committee’s bi-partisan efforts to develop a more robust successor program in the Clean Energy Deployment Administration. What I’d like to explore today is level of the Administration’s commitment to this effort, not just at the Department of Energy, which I am persuaded does have a commitment in this area, but at other key decision-making centers, like the Office of Management and Budget.
“As the President has said on more than one occasion, the American people are not satisfied with second place in the race to develop clean energy technologies. I believe financing support is fundamental to American competitiveness in this area, and I look forward to your thoughts on how we are doing.”
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