White House advisors call for loan guarantee change

UNITED STATES: The federal loan guarantee program for renewable energy projects should either be fixed or scrapped, according to an October 25 memo from senior White House advisors to President Barack Obama.

Obama's special adviser on energy and environment Carol Browner, outgoing National Economic Council Director Lawrence Summers and vice-president Joe Biden's chief of staff Ron Klain identified what they see as shortcomings of the section 1705 Energy Loan Guarantee program.

The program, part of a massive $787 billion stimulus package signed into law in February 2009, was meant to address concerns about tightening credit markets for renewable energy projects.

However, advisors warn it has been criticized for moving too slowly to give final approval for projects and risks subsidising projects that would have happened anyway.

The program has seen its original $6 billion budget scaled back to $2.5 billion to fund other priorities of the administration and is at risk for further cuts, the advisors say.

At the time the memo was written, only 2.5% of that smaller budget had been awarded. Another nine projects had received conditional commitments, which would bring the total obligations to $500-900 million.

The memo suggests four potential remedies, three of which would expedite the review and approvals process. The administration could also consider working with Congress to move the remaining loan guarantee funds into an extension of the more-effective cash grant program, the advisors wrote, which is due to expire at the end of the year.

This approach, though, could upset some members of Congress and "signal the failure" of a Recovery Act program supported prominently by White House, the advisors said.

The American Wind Energy Association would like to see the loan program fixed, said Rob Gramlich, its senior vice-president of policy. At the same time, he says, "it's a good sign" that administration officials are looking for ways to fund an extension of the cash grant program.