Why Is The Government Creating So Many Alternative Energy Hurdles?

Received this email from a venture capitalist who has financed existing solar-power startups and would like to do more.   He is frustrated that despite all the talk from Washington about alternative energy being our economic future, projects are slow to develop because of economic and credit hurdles put in place by the Department of Energy and other government agencies.

It may explain why we haven't seen many new jobs created in this space despite all the optimistic talk.

Read on:

The Department of Energy is a key factor in how fast renewable energy projects will be built, since banks are shrinking their loan portfolios under tight federal credit requirements.

However, the DOE is primarily the Nuclear Regulatory Commission.   The U.S. has not built a nuclear reactor for 30+ years, and the people at the DOE are frankly incapable of feeling a sense of urgency, or working at a commercial pace.  In face-to-face meetings, we have been told that the four-year delay before granting the first DOE loan guarantee was “to be expected from a new program”.

Congress has provided $125 billion of loan guarantee and grant funding to the DOE for the purpose of mitigating risk and obtaining bank financing for new energy projects.  However, the program requires that banks take 20% of the loan as risk on the bank’s book, and that most projects receive a credit rating from a credit agency.

Imagine building a new renewable energy project that uses newer solar panel technology, and trying to obtain an institutional-level credit rating from Moody’s.  Doesn’t work, since the accountants can’t look at earnings from ten years of prior commercial deployment.

If the DOE could open the door to meet and negotiate with project developers and their banks, the DOE could have a very positive impact on solar, wind, biofuels and other renewable energy projects in the U.S.

The lack of attention to this issue has allowed the DOE to continue to propose unworkable debt guarantee solutions that are not being drawn down by grantees due to their non-commercial terms.