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May 16, 2014

DOE Inspector General Report On Loan Guarantees


On May 7, 2014, the U.S. Department of Energy's (DOE) Inspector General (IG), Gregory H. Friedman, issued an audit report on "Implementation of Recommendations from the January 2012 Independent Consultant's Review of the Department of Energy Loan and Loan Guarantee Portfolio." A copy of the report is available online.

In the fall of 2011, following the high-profile bankruptcies of alternative energy companies that had received DOE loan guarantees, including Solyndra, Inc. (Solyndra) and Beacon Power, LLC, the White House requested an independent review of the DOE loan guarantee program for alternative energy. In January 2012, that Independent Consultant issued his report, including 12 recommendations for improving the administration of the DOE loan guarantee program. The current IG report assesses whether the DOE implemented those recommendations.

The IG found that DOE had either made constructive changes pursuant to the recommendations, or had sufficient reasons explaining why it had not yet implemented them. In addition, the IG makes several suggestions to improve the program further.

This report is positive for the DOE loan guarantee program for alternative energy, as it is important that DOE appears responsive to the Independent Consultant's recommendations for improving its administration. The loan guarantees are among the few potential federal sources of funding for the development of biofuels. The program faced — and is still recovering from — significant public relations challenges following the announcement of Solyndra's bankruptcy. It provided, and continues to provide, program opponents with arguments against providing continued federal support for DOE loans and loan guarantees for alternative energy.