The Obscure Government Office That Launched Tesla Is Open for Business (Again)

The U.S. Department of Energy (DOE) has already given President Joe Biden a head start on fulfilling his climate action campaign promises. The question now is whether or not the DOE will follow through on Biden’s social and environmental justice pledge, and the agency’s dormant Loan Programs Office (LPO) - which counts Tesla as part of its legacy - could hold the answer.

The Loan Programs Office and the Valley of Death

The DOE is mainly known as a research organization, with 17 national laboratories and a vast, global network of academic institutions and private sector stakeholders under its belt.

Somewhat lesser known is the agency’s role in providing financial assistance to help innovative energy technology cross the “Valley of Death” that separates promising work from the commercial market. When private sector dollars shy away from unproven technology, the DOE can step in with a financial and technical assist.

In support of that mission, the Loan Programs Office was created during the Bush administration through Title XVII, Section 1703 of the 2005 Energy Policy Act. It provides the DOE with broad authority to guarantee loans for innovative projects that serve critical needs, build markets, and create jobs.

As a funder of new technology, the LPO has failure built into its DNA. The program is designed as a balanced portfolio that allows wiggle room for the high risk that comes with high rewards.

On the failure side is the solar manufacturing firm Solyndra. The company was among the very first to apply for a loan in December 2007, just a few months after the loan office released its first round of solicitations. The loan was approved in 2009, under the Obama administration. Unfortunately, Solyndra’s plans for opening a U.S. factory fell victim to global manufacturing forces and it went bankrupt in 2011. A 2015 DOE investigation also accused officials in the company of misleading the LPO on key points.

The LPO success stories that nobody talks about

When Solyndra went bankrupt, Republican members of Congress and their allies in the media seized the opportunity to slam the Obama administration’s clean energy policies. With the “right wing noise machine” dialed up to an 11, Solyndra became a bleating, blaring symbol of failure and waste that persisted all through the Obama administration and continued into the Trump years.

Somewhat ironically, Republican members of Congress were initially eager to see the loan program in action. The DOE cites Republican U.S. Representatives Hastert, Burr, Barton and Simpson, who went on record in public hearings during the Bush administration in 2007 - and during the Obama administration in 2010 - to complain about the slow pace of loan approvals.

They should have kept cheering, as at least two of today’s leading U.S. companies benefited enormously from the LPO.

One is Ford. The company famously refused assistance through the 2009 Recovery Act, but it did win a $5.9 billion loan from LPO that enabled it to upgrade 13 factories in six states.

The other, of course, is Elon Musk’s Tesla Motors. Like Solyndra, Tesla was also among the first to benefit from LPO support. It earned a $465 million loan in 2010 on the strength of its electric vehicle (EV) technology. That would seem to be a high-risk proposition, considering GM’s short-lived dip into the commercial EV field during the 1990s. Nevertheless, by 2013 Tesla repaid the loan in full. And by 2014, the company employed more workers than any other automaker in its home state of California.

The stock price of Tesla has seen some ups and down since then, and the company’s anti-union stance (and Musk’s penchant for Twitter) have provided fuel for critics. Nevertheless, Tesla’s success helped to pave the way for GM and other leading auto makers to pivot into EV technology.

Meanwhile, Tesla has grown considerably since 2014. The company fared reasonably well during the global pandemic, and auto industry observers anticipate that the company’s new service model, and new Tesla factories in Texas and Germany, will add tens of thousands of new jobs to its rolls in the coming years.

Long after Tesla, the LPO tees up for the U.S. wind industry

In 2019 the Bipartisan Policy Center issued a report summarizing LPO’s overall success:

“LPO projects have transformed American energy infrastructure and accelerated growth in clean energy and electric vehicle markets. According to DOE’s website, LPO projects have created or saved over 56,000 American jobs across all regions of the country and have generated over $50 billion in total project investment. Further, LPO projects have prevented 34.7 million metric tons of carbon dioxide emissions and saved 1.7 billion gallons of gasoline and counting.”

The Bipartisan Policy Center also notes that LPO can take credit for kickstarting the utility-scale solar industry in the US.

Now it looks as if the U.S. wind industry is ready to share in all the winning. Earlier this week, the Biden administration announced that LPO stands ready to award a $3 billion pot of loans to offshore wind industry stakeholders, with the aim of building 30 gigawatts in offshore wind capacity by 2030.

The DOE touts the economic impact of the program, explaining that:

“…the goal will spur $12 billion in capital investment annually, leading to the construction of up to 10 new manufacturing plants for offshore wind turbine components, new ships to install offshore wind turbines, and up to $500 million in port upgrades. Achieving the 2030 goal would support 77,000 jobs, including more than 44,000 workers employed in offshore wind and nearly 33,000 additional jobs in community supported by offshore wind activity.”

The DOE adds, “It would also unlock a pathway to deploy 110 GW or more of offshore wind by 2050, supporting 135,000 total jobs, including 77,000 in offshore wind and 58,000 induced in communities with offshore wind activity."

What about social and environmental justice?

With so much at stake, the LPO is the one to watch for fulfillment of Biden’s social and environmental justice pledges.

For all its success over the years, the LPO has not imparted a culture of social responsibility. For example, the Tesla battery factory in Nevada has become a poster boy for the negative impacts of large-scale manufacturing on local communities, and its new battery factory under construction in Germany has already raised concerns over environmental impacts as well as labor organizing issues.

The ongoing non-union stance at Tesla has also drawn the attention of the National Labor Relations Board (NLRB). Last week, the NLRB concluded a years-long investigation of Tesla’s Fremont, California factory with a finding that the company violated labor laws when it fired a union-supporting employee. Musk’s Twitter habit also factored into the decision.

The NLRB does not have the authority to issue fines or other punishment, but the decision underscored the renewed strength of the labor movement in the U.S., which President Biden has publicly endorsed.

Looking forward, earlier this month Energy Secretary Jennifer M. Granholm set a new direction when she tapped Jigar Shah for the position of LPO Executive Director. On Shah’s impressive clean tech resume is membership in the business organization E2, which advocates for environmentally beneficial economic policies.

“E2 supports policies that advance diversity and equity and ensures that the benefits of a clean economy – jobs, savings, opportunities, health – are extended to all communities,” the organization states. “Environmental justice is considered in every policy on which we work, and diversity and inclusivity are tantamount in everything we do.”

E2 has also recognized that it needs to work on its own diversity and equity issues as well.

“Internally, we will prioritize making our membership more representative of America as a whole and addressing internal biases that can keep us from fulfilling our goals,” E2 says.

As the wind industry loan applications come pouring into LPO, look for Shah to keep environmental, equity and diversity issues in focus.

Image credit: Vlad Tchompalov/Unsplash