The (Other) Value of the DOE
/If you haven’t read any Michael Lewis books and have an interest in government, I highly recommend his latest titled “The Fifth Risk”. In the book Lewis uses seemingly mundane cabinet level federal departments to highlight the risks those same departments mitigate each day.
Image courtesy of Greentech Media.
In one chapter, Lewis interviews John MacWilliams who became the first DOE Chief Risk Officer from 2013 to 2017. Besides discussions on the risks posed by nuclear weapons (over half the DOE budget is allocated to nuclear energy management, one of it’s core values to the American public), MacWilliams describes his investigation into the department’s $70 billion loan program. Yes, this is the same loan program that provided a load to Solyndra who later filed for bankruptcy. Lewis states:
“Politically, the loan program had been nothing but downside. No one had paid any attention to its successes, and its one failure - Solyndra - had allowed the right-wing friends of Big Oil to bang on relentlessly about government waste and fraud and stupidity. A single bad loan had turned a valuable program into a political liability. As he dug into the portfolio, MacWilliams feared it might contain other Solyndras. It didn’t, but what he did find still disturbed him. The DOE had built a loan portfolio that, as MacWilliams put it, ‘JPMorgan would have been happy to own.’ The whole point was to take big risks the market would not take, and they were making money! ‘We weren’t taking nearly enough risk,’ said MacWilliams.”
The DOE loan program was intended to invest in new commercially ready technology that could change the energy landscape. Energy is a commodity business with low margins, something that inhibits investment into new and different things. There are few financially stable businesses that can sustained multi-year (or multi-decade) research programs for the next new energy technology AND recoup their investment in the market. What MacWilliams was saying is that the program worked and worked well. Not only was the DOE making their money back but they were changing how our society approached energy generation and delivery.
Since the late 2000s, renewable energy technology has penetrated almost all market sectors with success. A new study published by Lazard clearly shows that utility scale PV levelized cost of energy/electricity (LCOE) ($36-46/MWh) meets or exceeds the LCOE lower bound for gas combined cycle plants ($41-74/MWh), one of the cheapest fossil-fuel generation options, a clear success for the DOE.
I designed and installed a commercial rooftop Solyndra system in the Philadelphia region around 2010. Yes, it “works”. Yes, it was different than a flat panel install, but it still “worked”.