"Overflowing" Government Subsidies
. . . Obama administration officials said the subsidies were intended to help renewable-energy plants that were jumbo-sized or used innovative technology, both potential obstacles to getting private financing. But even proponents of the subsidies say the administration may have gone overboard.
Concerns that the government was being too generous reached all the way to President Obama. In an October 2010 memo prepared for the president, Lawrence H. Summers, then his top economic adviser; Carol M. Browner, then his adviser on energy matters; and Ronald A. Klain, then the vice president’s chief of staff, expressed discomfort with the “double dipping” that was starting to take place. They said investors had little “skin in the game.”
Officials involved in reviewing the loan applications said that Treasury Department officials pressed the Energy Department to respond to these concerns.
Officials at both agencies declined to discuss the anticipated financial returns of the clean-energy projects the federal government has agreed to guarantee, saying the information was confidential. . . .
In at least one instance — NRG’s Agua Caliente solar project in Yuma County, Ariz. — the Energy Department demanded that the company agree not to apply for a Treasury grant it was legally entitled to receive. The government was concerned the extra subsidy would result in excessive profit, NRG executives confirmed.
In other cases, the agency required that companies use most of the Treasury grants that they would get when construction was complete to pay down part of the government-guaranteed construction loans instead of cashing out the equity investors.
“The private sector really has more skin in the game than the public realizes,” said Andy Katell, a spokesman for GE Energy Financial Services, which like Goldman Sachs, Morgan Stanley and other financial firms has large investments in several of these projects.
But there is no doubt that the deals are lucrative for the companies involved.
G.E., for example, lobbied Congress in 2009 to help expand the subsidy programs, and it now profits from every aspect of the boom in renewable-power plant construction.
It is also an investor in one solar and one wind project that have secured about $2 billion in federal loan guarantees and expects to collect nearly $1 billion in Treasury grants. The company has also won hundreds of millions of dollars in contracts to sell its turbines to wind plants built with public subsidies. . . .