Nov. 3, 2010 — -- While President Obama has touted his deep commitment to a clean energy industry, the administration has quietly drained more than half of the $6 billion allocated to a key renewable energy program and senior White House officials have proposed either fixing or scrapping one of the President's most widely heralded initiatives involving solar and wind power.
An internal White House memo sent to the President from key advisors on Oct. 25, obtained by ABC News, outlines the shortcomings of the administration's renewable loan guarantee program, which was to set aside millions of taxpayer dollars to backstop private efforts to build robust power plants that rely on solar, wind, and other renewable resources.
The memo was drafted by Obama's top environmental advisor, Carol Browner, top economic advisor Lawrence Summers and the chief of staff to Vice President Joe Biden, Ron Klain. It acknowledges what some environmental and congressional leaders have quietly complained about for months -- that the loan program has moved too slowly to approve projects and now is in trouble.
The program faces "near term risks," it says, and the senior advisers offer four options for addressing the problem. Among them is a plan to eliminate the initiative by folding the money into a different energy grant program. Obama's advisors bluntly concede in the memo that canceling the program would likely enrage environmental groups and anger key Democrats in Congress. "The White House will bear this criticism," it says.
Just three weeks before the memo landed on Obama's desk, the president used his weekly radio address to tout his commitment to the clean energy sector, saying "our future as a nation" depends on it. Obama used the occasion to criticize Republicans for "promising to scrap all the incentives for clean energy projects, including those currently underway, even with all the jobs and potential that they hold."
"To go backwards and scrap these plans means handing the competitive advantage to China and other nations," he said. "It means that we'll grow even more dependent on foreign oil, and in a time of economic hardship, it means forgoing jobs we desperately need."
The White House Wednesday released a statement saying the president remains committed to the program "and the role it plays in helping us bring about a clean energy economy and creating jobs in this burgeoning industry."
In the statement, Deputy Press Secretary Bill Burton said the memo was intended to "tee up a wide array of options and issues for consideration." He said the president is planning to take steps to help streamline the process "while still protecting taxpayers who, ultimately, are the ones investing in these projects."
Cash Diverted To Cash For Clunkers
But in recent weeks, much of the criticism about the government's commitment to renewable energy has been directed at the White House. Industry insiders have complained that the administration has drained the loan guarantee initiative of its initial funds, and processed applications so slowly that some investors have lost patience.
Sen. Jeff Bingaman, D.- New Mexico, the chairman of the Senate Committee on Energy and Natural Resources, told ABC News the administration received dozens of applications, but then made little progress in getting them processed. So far, less than 3 percent of the money set aside for loan guarantees has actually been formally assigned to an actual renewable energy initiative.
As a result, he said, the $6 billion pot of money dedicated to the program began to look attractive to everyone in Congress who had a program that needed money.
"Whenever someone is looking to pay for something, they see that money sitting there and it's a very tempting target," Sen. Bingaman said.
And that's precisely what happened last year when the president had a sudden and urgent need to find funding for the unexpectedly popular Cash for Clunkers program. In dire need of a funding source, the administration and Congress decided to divert $2 billion to pay for the popular vehicle exchange incentives. Then, when the administration faced pressure to pay for an aid package for state teachers, they dipped in again for another $1.5 billion. In both cases Obama pledged to restore the renewable energy funds. But, Sen. Bingaman said, none of the money has been restored.
"I think [President Obama] is very sincere in his commitment to expand our use of renewable energy," Sen. Bingaman said. "But I don't think the concrete programs that will help accomplish that are being processed by the congress and the administration as quickly as they should be."
Tim Newell, a senior advisor for the private equity firm US Renewables Group, told ABC News he believes some of the greatest challenges to this particular program have come "from within the administration itself, and indeed from within the White House."
While Congress played a role in redirecting billions of dollars in energy money, Newell blames the administration for letting it happen. That happened "with White House support, if not their urging," he said. David Hamilton, directof of the Sierra Club's global warming and energy programs, agreed, saying the cuts served as "another piece of evidence that the U.S. is not serious about pursuing the renewable energy industry."
Jonathan Silver, who has overseen the loan program at the Department of Energy (DOE), defended the administration, saying the money was needed for other "critical issues." DOE has had to "scale the program" to account for the current economic crisis, he said, but added that "we have enough capital currently for what is in our pipeline."
The World's Largest Wind Farm
Silver was vigorous in defending DOE's record pointing out the progress made since the Obama administration took office. The original loan guarantee program was passed in 2005, but no deals were done until the middle of 2009. Since that time, 22 conditional commitments, totaling over $2 billion. The day he spoke to ABC News, Silver's program voted to approve the Shepherd's Flat transaction, which will set up the world's largest wind farm in Oregon.
Newell conceded that Silver has made progress. "We have seen a huge change for the positive in the program" since Energy Secretary Steven Chu brought Silver in, Newell said. His tenure has seen "approval times go down, transparency go up."
But Newell and others said applications have continued to get bogged down, and they blame the complex process in which Energy officials submit applications to the Office of Management and Budget for secondary review. Scott Sklar, president of the renewable energy marketing and policy firm The Stella Group, said the mysterious and slow process used to evaluate applications for the government loan guarantees has led to a slow erosion of industry confidence in the administration's commitment.. Sklar said the government agencies that handle the review – the Energy and Treasury department and the Office of Management and Budget -- "meet secretly, have no interactive dialogue with the folks having the problem, and make arbitrary rulings or decisions."
Officials at OMB, who agreed to speak at length with ABC News about the program under the condition they not be identified by name, said they are not trying to undermine the program. At the same time, they said, they do not want to approve multi-million dollar loan guarantees for high risk projects using unproven technology without first conducting a thorough review.
"We are talking about really big projects that are very complicated, in some cases dealing with novel or untested technology," one OMB official said. "It takes a lot of time to do the due diligence in order to adequately protect the taxpayers interest."
Tyson Slocum, director of the Energy Program at the advocacy group Public Citizen, defended OMB. "OMB has been holding things up to contain risks to taxpayers," he said, pointing out that the agency "could not just allocate billions and billions of dollars" without ensuring that the money was a good investment.
But the memo sent to the president last week appears to acknowledge that OMB is slowing down the process. Among the solutions offered to the president is a move to "limit OMB and Treasury Oversight." Another option is to "streamline and accelerate OMB/Treasury reviews."
The Sierra Club's Hamilton said he believes the program could work. "I don't fault OMB for making sure it's not giving out risky loans, but I do fault the lack of priority for getting the issues resolved," he said.
Almost two years after the program was created, Hamilton said it remains an open question whether wants the program to work. With control of the House about to shift and many clean energy provisions about to expire, he said, time may be running out.