Biden’s $400 Billion Green Bank at Risk as GOP Hunts for Next Solyndra

(Bloomberg) -- Congressional Republicans are putting President Joe Biden’s $400 billion green bank in their crosshairs, seeking a repeat of the political victory they scored in 2011 with the scandal over collapsed solar company Solyndra.

The probe of the Energy Department’s green lending arm threatens to slow the rollout of new clean energy technology that can replace fossil fuels, a key piece of Biden’s climate agenda. If Republicans succeed in finding a Solyndra-like failure, it could be a political blow for the president in an election year. 

“Solyndra is going to look like chump change” this time around, Senator John Barrasso, a Wyoming Republican leading efforts to hamstring the program, told reporters.

Barrasso and Representative Cathy McMorris Rodgers of Washington, who chairs the House’s Energy and Commerce Committee, have requested reams of documents from the Energy Department relating to the Loan Programs Office, which is flush with capital thanks to an infusion from the Democrats’ 2022 climate law.

They have also asked the agency’s inspector general to investigate the director of the office, Jigar Shah, alleging his work with an non-governmental clean tech group he founded raises doubts about the program’s impartiality.

Shah has denied those allegations, and in testimony before a Senate panel in October downplayed his role in the office’s decisions to approve loans, saying those were left to staff. A spokesperson for the loan program, meanwhile, said officials give rigorous scrutiny to any company that applies for financing. 

“Some in Congress use every opportunity to attack American companies, rally for their failure, and send good-paying jobs overseas,” the spokesperson said. “We hold all of our borrowers accountable in order to raise national standards for everything from manufacturing processes to sales techniques to consumer protections.”

The GOP efforts are likely “at a minimum” to slow down the loan guarantee process by consuming the bandwidth of agency officials and distracting key decision-makers, the Washington-based consulting firm Clearview Energy Partners wrote in a note to client last month. The office may opt to stave off further scrutiny by delaying potentially controversial decisions, the firm added. 

Fremont, California-based Solyndra Inc. folded and laid off 1,000 employees in 2011, two years after receiving a $535 million loan guarantee backed by the loan office, prompting raids by both the FBI and the Energy Department’s inspector general’s office. Republicans in Congress at the time launched an extensive investigation that included weeks of hearings and sparked negative headlines. Meanwhile, the loan program essentially ground to a halt, and remained dormant for years until the Biden administration revived it. 

The inspector general concluded years later that Solyndra had provided the Energy Department with information that was “inaccurate and misleading,” but also faulted the department’s due diligence as “less than fully effective.”

The controversy had “a chilling effect” on the loan program, said Peter Davidson, who served as its executive director for two years starting in May 2013. “Companies and project developers were shy about applying because they were worried about negative press and being dragged through political battles.”

The current GOP probe comes as the Biden administration races to get funding out the door, ahead of deadlines put in place by the climate law. Another reason to hustle: Republicans could claw back billions of dollars in funding or simply idle the program if they win control of Washington this November. 

Increased scrutiny of the program could deter potential applicants for funding. Shares of Sunnova Energy International Inc. plunged 16% last month after Barrasso and Rodgers requested a host of documents related to a $3 billion partial loan guarantee awarded to the Texas-based company for its efforts to expand rooftop solar to moderate- and lower-income customers in Puerto Rico and elsewhere. The lawmakers wrote they were concerned about reports of consumer complaints and allegations of “troubling sales practices.”

Sunnova’s Chief Executive Officer John Berger, who happens to be a Republican donor, rejected the allegations. “It’s no secret that energy has become a politically divisive issue heading into this year’s election,” he said in a statement to Bloomberg News. “But we remain focused on our mission of expanding consumer choice and championing clean, affordable, and reliable energy services nationwide.”

The lawmakers are also seeking Energy Department documents related to Li-Cycle Holdings Corp., a Toronto-based battery recycler, which paused construction on a first-of-its-kind lithium-ion-battery recycling plant after receiving a conditional commitment for a $375 million loan, though the funding has yet to be finalized. 

Similar to the last go-round in 2011, Republicans are alleging the Biden administration is using the loan program to help political allies and donors.

A Loan Programs Office official said that was impossible because the approval process requires signoff from the Treasury Secretary, as well as the head of the White House Office of Management and Budget, among other layers of review. While the increased scrutiny of the program is taking up staff time, the program has a pipeline of 189 applications totaling $175 billion in loans across 48 states, the official said. 

The Loan Programs Office was designed to provide financial backing to emerging technologies that may not be likely to find funding elsewhere, which can be inherently risky. Still, it has a loan-loss rate on par with commercial banks, and has actually made the government some $4.87 billion in interest payments, according to Energy Department data. 

In addition to Solyndra, the office provided a key $465 million loan in 2010 to a then-struggling Tesla Inc., and it financed some of the first large-scale US solar farms more than a decade ago.

From 2012 until Biden revived the program in 2021, it only approved three loan guarantees for a single nuclear power plant in Georgia.

“They went into shutdown mode,” Davidson, the former loan program head who now serves as the chief executive officer and founder of green asset management company Aligned Climate Capital, said of the Obama administration. “They didn’t want to get more bad press, so they kinda pulled the reins on us.”

“It’s deja vu all over again” with Republicans targeting the program a second time, Davidson said. 

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