Venture capital fund? No. Loan guarantees? Yes.
In the process of updating President Barack Obama's campaign promises, we've found that many components of his platform were ultimately folded into the massive $787 billion stimulus package signed at the beginning of his presidency.
Take his pledge to create a Clean Technologies Venture Capital Fund that would help launch new clean energy technologies; we could find no mention of such a fund, and the White House confirmed that it does not exist. Instead, Obama opted for a more robust loan guarantee program for clean energy innovation, a mandate he folded into the stimulus bill.
Before we dig into this promise, a word about loan guarantees. The government won't literally give money to a company to support a fledgling project. Instead, the government guarantees to pay back commercial loans should the company default. Another important point: When officials talk about loan guarantees, they talk in terms of loan guarantee authority, meaning the amount of debt the government is authorized to cover, not how much is literally given to the department or agency to administer the program, which can be a much smaller sum.
So, for example, in 2007, the program was granted about $4 billion in loan guarantee authority. In 2008, that figure shot up to $38.5 billion, with an additional authority of $8.9 billion through the annual appropriations process. In 2009, Obama can take credit for granting the department $48.6 billion in additional loan guarantee authority, bringing the total to $99.6 billion.
But before the administration could approve projects for the loan guarantees, the Department of Energy had to overhaul the program, which was originally authorized by Congress in 2005. Under the Bush administration, the department was notoriously slow in green-lighting projects.
"The loan guarantee program has been completely overhauled," Secretary of Energy Steven Chu told National Public Radio on April 29, 2009. "What would have taken about four years — we're trying to compress that to months."
For example, quick turn-around allowed the administration to grant a $535 million loan guarantee to a new solar panel manufacturing facility in California in March 2009.
Where does all this information leave us with Obama's original promise?
Clearly, there's no venture capital fund like Obama promised, but those in the renewable energy industry say his focus on the loan guarantee program effectively does the same thing.
"While a venture capital fund was not created, the loan guarantee program in stimulus package was indeed a very good thing," said Emily Mendell, vice president of strategic affairs for the National Venture Capital Association.
Mendell pointed out that loan guarantees typically go to companies that are further along in the innovation process, which means the new technology has a better chance of getting to market faster and with less risk to the government.
Monqiue Hanis, communications director for the Solar Energy Industries Association, agrees that expanding and streamlining the loan guarantee program has been a major step forward. An even bigger boon to the industry have been some tweaks to an existing tax credit program run by the Treasury Department, also included in the stimulus bill. Previously, the IRS offered hefty tax credits for new renewable energy projects. But in the current economic climate, Hanis said the program wasn't very popular. Now, new projects can receive grants in lieu of the tax credit, which makes it easier for investors to cobble together a financing package.
We struggled with how to rate this promise. On one hand, industry is quite pleased with Obama's efforts to boost the clean energy industry. But on the other, Obama promised a venture capital fund and he has not created one. Boosting loan guarantee authority and changing the terms of the IRS tax credits could prove to be a great success, and we'll be watching to see where this one goes. For now, however, we'll give Obama a Compromise on this promise.
The Wall Street Journal, Next Challenge on Stimulus: Spending All That Money, By Stephen Power and Neil King Jr. Feb. 13, 2009
Reuters, DOE offers first loan guarantee to solar firm, by Tom Doggett and Ayesha Rascoe, Mar. 20, 2009
The Department of Energy, Obama Administration Offers $535 Million Loan Guarantee to Solyndra, Inc.,March 20, 2009
The Internal Revenue Service, Implementing the American Recovery and Reinvestment Act of 2009 (Recovery Act), accessed Jan. 7, 2010