You may have heard about Solyndra, the solar start-up that went belly up in August.

Solyndra received a $535 million loan guarantee in September of 2009 from the embattled Department of Energy (DOE) Loan Guarantee Program. Announced with much fanfare, it was the first commitment to come from the program, which was created by the 2005 Energy Bill.

It’s pretty clear, especially to the 1,100 workers who lost their jobs when the company folded, that Solyndra had a slew of problems, but we can’t lose sight of the forest for the trees. We shouldn’t be shocked when a bad process yields bad results. Solyndra is part of a fundamentally flawed loan guarantee program that we and others have warned could cost taxpayers billions.


Created first as a program to fund nuclear reactor construction, the Title XVII loan guarantee program has morphed to expedite financing for coal, biofuels, transmission, energy efficiency, and renewable projects. After getting beefed up in several appropriations bills and finally the stimulus package, it now provides loan guarantees for just about every energy form.

The program has generally lurked in the shadows, but the Solyndra debacle has brought it into the light of day. Before the sun sets on this particularly troubled solar project, the entire Title XVII program should come under serious scrutiny or taxpayers will lose billions more.

As the program expanded during its six-year life, the few taxpayer protections originally provided were slowly burned away. In October 2007, the Energy Department issued a final rule detailing the processes and parameters of the program. Originally the agency proposed guarantees covering 90 percent of the risk of the loan. Since taxpayers covering 90 percent of that risk just wasn’t enough for some, at the behest of industry and lawmaker pressure, DOE increased the coverage to 100 percent of a guaranteed loan’s value.

Then in August 2009 it appeared DOE wanted to move quickly and quietly on a second industry sweetener — a blow to taxpayers’ ability to recoup lost assets. Shadily, this came up while Congress was out of town. A few lawmakers complained, so DOE delayed the closing of the public comment period until Congress returned to Washington. Unfortunately, DOE shrugged off any concerns raised and plowed ahead.

In the end, the taxpayers’ claim on our portion of the defaulted loans was weakened. No longer were we guaranteed the first place in line when a project went belly up — even when we put up the most cash in the first place.

Now DOE is on the line for billions of dollars in pending and committed loan guarantees for other projects that were poorly vetted and leave taxpayers carrying far too much risk. They’ve already committed us to an $8-billion nuclear reactor that’s facing significant legal and technical hurdles while all negotiations have been held behind closed doors.

We need to put the brakes on this program before it’s too late. Solyndra will likely cost taxpayers hundreds of millions of dollars in losses. But the losses won’t stop there if the Solyndra case is used only to score political points and not address a larger systemic problem. This default is a warning that Congress and the Obama administration must heed. Taxpayers must not be burned again.

Ryan Alexander is president of Taxpayers for Common Sense, a nonpartisan federal budget watchdog.

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