In 2005, Congress established a federal loan guarantee program for eligible energy projects that employed innovative technologies. Title XVII of the Energy Policy Act of 2005 authorized the Secretary of Energy to make loan guarantees for a variety of types of projects, including those that “avoid, reduce, or sequester air pollutants or anthropogenic emissions of greenhouse gases; and employ new or significantly improved technologies as compared to commercial technologies in service in the United States at the time the guarantee is issued.”
The Department of Energy loan guarantee program was expanded by the American Recovery and Reinvestment Act of 2009, which added billions of dollars of new authority to support renewable energy, electric transmission, and advanced biofuels projects. The Department's Loan ProgramsOffice has supported a portfolio of more than $30 billion in loans, loan guarantees, and commitments covering more than 30 projects across the United States.
The Department made its first award under this program in September 2009, approving a $535 million loan guarantee to a company called Solyndra, Inc. Solyndra said it would build a solar photovoltaic equipment manufacturing facility in Fremont, California. The Energy Department disbursed over $500 million to Solyndra through the program. But just two years later, Solyndra showed signs of failure, as it ultimately stopped operations and manufacturing, let 1,100 employees go, and filed for bankruptcy. U.S taxpayers lost over $500 million.
The Solyndra matter drew significant public attention, with even the Department calling it an "ordeal" and many labeling it a scandal. What went wrong? Should the government have guaranteed Solyndra's loans? Was the loan guarantee program flawed? Or was it acceptable bad luck that the first awardee failed?
Since 2011, the Department of Energy's Office of Inspector General has investigated the Solyndra matter. Its special report released August 24, 2015, describes the Inspector General's findings:
Our investigation confirmed that during the loan guarantee application process and while drawing down loan proceeds, Solyndra provided the Department with statements, assertions , and certifications that were inaccurate and misleading , misrepresented known facts , and, in some instances, omitted information that was highly relevant to key decisions in the process to award and execute the $535 million loan guarantee. In our view, the investigative record suggests that the actions of certain Solyndra officials were, at best, reckless and irresponsible or, at worst, an orchestrated effort to knowingly and intentionally deceive and mislead the Department.In particular, the report identified "notable misrepresentations and omissions made to the Department by Solyndra" relating to Solyndra's sales contract commitments and ability to command a premium market price for its panels. The report suggests this false and misleading information led the Department to approve the loan guarantee, when it might not have done so with the right information. The report found that Solyndra failed to meet contractual obligations from the loan guarantee documents relating to truth and full disclosure.
The Inspector General's special report also found that the Energy Department's due diligence efforts were "less than fully effective", with missed opportunities to detect and resolve indicators that portions of the data provided by Solyndra were unreliable. Nevertheless, the report concludes that ultimate blame should fall on the company: "the actions of the Solyndra officials were at the heart of this matter, and they effectively undermined the Department’s efforts to manage the loan guarantee process. In so doing, they placed more than $500 million in U.S. taxpayers’ funds in jeopardy."
The Department of Energy continues to offer loan guarantees for a variety of technologies and projects. The report suggests that the Department strengthen its due diligence process, and reemphasize to loan applicants their absolute obligation to be truthful, complete, timely and transparent.