United States

United States

Solyndra bankruptcy scandal spills over into wind projects

UNITED STATES: Four wind farms, totalling over 1GW installed capacity that benefited from a $16 billion loan programme, are under investigation.

Intense partisan scrutiny of a government loan guarantee programme has extended to a quartet of wind farms. This was prompted by the $535 million bankruptcy of solar manufacturer Solyndra.

All 28 companies that secured guarantees are under investigation by the Congressional House Oversight and Government Reform Committee - a powerful body under the control of Republicans.

The guarantees, totalling $16.1 billion, were approved by the US Department of Energy (DOE) as part of Democratic President Barack Obama's response to the financial crisis of 2009. The programme has been widely misrepresented as an overall failure because of the Solyndra bankruptcy last year.

Little attention has been paid so far to the wind farms under investigation. They are the 30MW Kahuku project in Hawaii which received a guarantee of $117 million, the 50.6MW Record Hill project in Maine at $102 million, the 99MW Granite Reliable project in New Hampshire with a partial guarantee of $168.9 million and the massive 845MW Caithness Shepherds Flat project in Oregon with a partial guarantee of $1.3 billion.

In the past month, Republicans have highlighted the wind farms and, in particular, the Record Hill project - which they allege, among other things, did not need the loan in the first place.

Four wind projects had power purchase agreements (PPAs) at the time of the loan, making them low risk. Despite this, the wind projects have been lumped in among other higher-risk projects under investigation by the committee.

"The House Republican investigation into this is solely done for partisan political purposes," said Richard Caperton, director of clean-energy investment at the left-leaning Center for American Progress. "I don't think there's any doubt about that."

The 28 projects are not as risky as claimed by Republicans and much of the right-leaning press. In the unlikely scenario that all ten manufacturing projects considered higher risk were to default, they would be covered by a $2.4 billion reserve specifically set aside by Congress and still leave a $446 million surplus. An independent report, published in December by analysts Bloomberg Government, that pointed out this safety net has received almost no coverage.

The report also deemed the focus on Solyndra as disproportionate, as it only represents roughly 3% of the $16.1 billion programme. "The media has done a relatively bad job of explaining the facts on this and has treated it as a political scandal story instead of a factual story about financing renewable energy," Caperton said. "It should be about how the loan guarantee programme has moved projects forward - and done so at low risk to taxpayers."

Other observers acknowledge the partisan nature of the investigations. "I don't doubt that both sides have some political inclinations one way or another," said Lance Dutson, CEO of the conservative Maine Heritage Policy Center.

Political intrigue

An added twist regarding Record Hill is the high profile of Angus King, a two-term former governor of Maine who, in anticipation of running for a vacant US Senate seat, sold his share of the wind farm to partner Rob Gardiner. King, who has yet to declare party affiliation, is considered likely to run as an independent but vote with the Democrats if elected.

Scrutiny of Record Hill comes on at least two fronts - including whether the project actually needed a loan. According to Dutson, the committee's report found that Record Hill maintained a bank account showing more than $127 million in private funding before the guarantee was negotiated. "It was an unnecessary transfer of risk from private capital to taxpayers," Dutson said.

But Gardiner, president of Independence Wind, a Record Hill partner, said the money was never intended to finance the project - it was required to secure permitting from Maine's Department of Environmental Protection. "We simply had our major investor put it in the bank account to prove we had the ability to raise the money," Gardiner said. "It wasn't a commitment of financing - it belonged to the investor."

Gardiner added that the committee never inquired about the money. "If they had asked, we could have explained it to them very easily," he said. "But they didn't seem to want to know the answers - they seemed to want to make the accusations."

The investigation further centres on whether technology used for Record Hill is "innovative" - a requirement of the programme. The project uses 2.3MW Siemens turbines and control software that maximises their output. Although the software has been tried in other countries, Record Hill is the first project to employ it in the US. "The committee found it wasn't innovative," Dutson said. "And the DoE shouldn't have given them a loan."

Gardiner strongly disagrees. "I don't think members of Congress have any idea whether it's sufficiently innovative or not," he said. "Congress wrote the rules and asked the DoE to interpret them. DoE did that and judged that our project was innovative. That's the way the system is supposed to work."

Gardiner further believes DoE was extremely cautious in guaranteeing the loan - and that the programme was a vital cog in helping projects survive during the moribund days following the financial crisis. "The guarantee was absolutely crucial to our project," he said. "But this is a political investigation and it's about trying to embarrass the Obama administration."

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