Tesla's Loan Payoff Underscores Potential of Federal Loan Guarantee Program

The Department of Energy's guaranteed loan program has made headlines as automotive company Tesla paid back over $450 million in federal loans nine years ahead of schedule. Tesla's move highlights the potential of federal loan programs to support the growth of renewable energy industries by investing in companies that are developing new technologies such as lithium batteries and electric cars.

Tesla announced last week that it will pay back immediately its outstanding balance of $451.8 million to the federal government, with interest, nine years ahead of schedule. The 2009 Advanced Technology Vehicle Manufacturing loan originated from the Department of Defense but is part of the Department of Energy's portfolio of guaranteed loans. Tesla produced a quarterly profit for the first time this quarter, posting earnings of $11.2 million on $561.8 in revenues. Tesla had begun paying off the loan last year, but found the money to pay off the entire loan by raising over $1 billion in stock offerings this past month.

The program orginally was signed into law by President George W. Bush in 2005 with the intention of reducing financial costs for large-scale, renewable energy infrastructure projects by offering government-backed loans. The Department of Energy currently has a portfolio of 28 companies, several of whom (including Tesla), have paid back their loans ahead of schedule. The latest data from the Department of Energy indicates that the $26 billion loan–guarantee program now has created more than 20,000 clean energy jobs and provided clean energy access for nearly three million U.S. households.

However, the loan program also invested in Solyndra, the now infamous defunct solar company that created a scandal for the Obama administration in 2011 by defaulting on its government-backed loans. The Department of Justice seized $21 million from the automotive company Fisker after it failed to pay back a $529 million loan guarantee. While these failures are an outlier of the general success of the program, the program currently is producing 0.8 jobs for every $1 million of tax dollars spent.