This excerpt was originally published in U.S. News and World Report. Read the full text here.
The very public failure of energy company Solyndra has focused a lot of attention on the Department of Energy's loan guarantee programs. Beyond Solyndra's failure, it's interesting to take a closer look at these programs. The economic justification for any government-sponsored lending or loan guarantee program must rest on a well established failure of the private sector to allocate loans efficiently, meaning that deserving recipients could not have obtained capital on their own. Absent such a private sector deficiency, the Department of Energy's activities would simply be a wasteful at best, politically motivated at worst, subsidy to this sector of the economy.
To measure the Department of Energy results, I looked at the flow of Department of Energy credits to evaluate who receives them and whether the department is meeting its stated policy objectives, such as promoting new start-ups or companies that have a hard time accessing capital, and encouraging the creation of green jobs.
Since 2009, Department of Energy has guaranteed $34.7 billion in loans, 46 percent through the 1705 loan program, 30 percent through the 1703 program, and 14 percent through the Advanced Technology Vehicles Manufacturing loan program.