Nov. 2 (Bloomberg) -- A lack of ready projects impeded U.S. Energy Department efforts to create jobs with $35.2 billion from the economic stimulus, with as much as 45 percent unspent as of Oct. 22, the agency’s watchdog said.
While the Recovery Act was designed to back “shovel-ready” projects, “in most cases, execution was more challenging and time-consuming than had been anticipated,” Gregory Friedman, the department’s inspector general, told the House Oversight and Government Reform regulatory affairs panel today.
Republicans, including Representative Darrell Issa of California, the oversight committee’s chairman, have cited the collapse of Solyndra LLC to challenge the administration’s initiatives to promote clean-energy sources. The solar-panel maker, based in Fremont, California, filed for bankruptcy protection on Sept. 6, about two years after being awarded a $535 million loan guarantee financed with money from the stimulus backed by President Barack Obama.
The administration has “wasted vast sums of taxpayer dollars,” Representative Jim Jordan, an Ohio Republican and chairman of the regulatory affairs panel, said as the hearing opened.
Friedman said an “intense effort” to meet what he called challenging goals set by the stimulus act placed “an enormous strain” on the Energy Department.
Staff in state and local government who would have implemented the stimulus programs were furloughed as their agencies’ budgets were cut, Friedman said in his testimony.
“Infrastructure at the state and local levels were overwhelmed,” he said.
The $35.2 billion the Energy Department received was more than the $27 billion it got in fiscal 2011 for its annual budget, Friedman said.
The department had trouble with programs to increase home-energy efficiency, such as installing insulation.
“Weatherization work was often of poor quality,” he said. Nine of 17 houses that received upgrades failed recent inspections by his office, Friedman said.
A March inspector general’s report said the Energy Department didn’t properly document how it was managing risks in its loan-guarantee program, according to Friedman.
Friedman’s staff joined agents from the Federal Bureau of Investigation in a Sept. 8 raid on Solyndra’s headquarters. Friedman declined to answer the panel’s questions related to the inquiry. After the hearing, he told reporters that it wasn’t close to a conclusion.
Democrats said setbacks shouldn’t be used to discredit all clean-energy aid.
“If we are going to remain competitive in the global economy, we must be willing to make investments going forward,” Representative Elijah Cummings of Maryland, the oversight committee’s top Democrat, said.
Government support for clean-energy technology is creating “enterprises whose continued existence demands continued infusions,” said W. David Montgomery, senior vice president of NERA Economic Consulting, a subsidiary of Marsh & McLennan Companies in New York.
While the government should back early phases of research, it needs to reduce its role as projects advance, he said.
Solyndra’s default could have been avoided if the U.S. had reviewed the project more closely, Montgomery said.
The Energy Department forecast a default rate of 12.85 percent for the loan-guarantee program, said Gregory Kats, who served for five years as the department’s director of financing for energy efficiency and renewable energy. The bankruptcy filings of Solyndra and Beacon Power Corp., an energy-storage company that received $43 million in backing from the same program, will put losses at about 1 percent after some costs are recouped, Kats said.
Kats, who is president of Capital-E, a Washington-based venture-capital firm, called the loan-guarantee program successful.
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