How Are High-Risk New Technology Loans Going for Feds?

  • Whether or not the Oba­ma admin­is­tra­tion and the US Dept. of Ener­gy should be offer­ing loans and grants for alter­na­tive fuel vehi­cles and renew­able ener­gy is one of those “chick­en or the egg” top­ics. Aside from the pol­i­tics, how are things going?
  • Tes­la Motors has paid off its $465 mil­lion loans sev­er­al years before required com­ple­tion. It’s cer­tain­ly only a sliv­er of the $34B alter­na­tive ener­gy projects that DOE has com­mit­ted to in loans.
  • But in con­text of the bad news like Solyn­dra bank­rupt­cy and Fisker Automotive’s like­ly bank­rupt­cy, it’s been a relief to hear about.
  • It’s good to keep it all in con­text – Ford has been the largest recip­i­ent of DOE loans – giv­en $6 bil­lion to retool sev­er­al facil­i­ties in US to build elec­tric and hybrid vehi­cles.
  • Company’s sales fig­ures in these cat­e­gories are strid­ing for­ward. Ford has yet to repay its fed­er­al loans but the num­bers are look­ing very pos­i­tive.
  • Solar pow­er has been through rough times, but there are signs of ROI. Sup­pli­er SolarCi­ty just had a break­through by gain­ing a $500 mil­lion invest­ment from Gold­man Sachs to reduce upfront costs for SolarCity’s cus­tomers.
  • War­ren Buf­fet has joined in with Berk­shire Hath­away, invest­ing $5.4 bil­lion in three major solar projects, two of which were start­ed on a DOE loans.
  • At end of the day, DOE loans are tak­ing some big risks. These new clean ener­gy tech­nolo­gies are typ­i­cal­ly unable to find pri­vate investors due to high tech­nol­o­gy risks. Tech­nolo­gies with more than three imple­men­ta­tions that have been active more than five years are exclud­ed.
  • The risk is still there, though the fed­er­al loans do down­size the risk a bit. Occa­sion­al­ly the invest­ments do pay off and pri­vate investors step in and take over, sim­i­lar to how the inter­net was ini­tial­ly start­ed and mush­roomed.


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