Key Takeaways
The Energy Department has canceled almost $3 billion in loan guarantees to Sunnova Energy, a residential rooftop solar installer with a troubled past, which had recently backed away from commitments under the agreement.
Sunnova prefers to market directly to residential consumers and obtain tax credits, rather than pursue less lucrative loan credits for its low-income installation proposal that attracted the guarantee.
Sunnova is restructuring its debt in the solar panel distribution and leasing sectors.
Its decreasing interest in the loan guarantee may ultimately save taxpayers enormous sums, akin to the infamous Solyndra failure in 2011.
The DOE is also reviewing other loan guarantees and has canceled a number of them, some of which were previously canceled by their sponsors.
The Trump administration has canceled a partial loan guarantee of $2.92 billion that had been awarded to troubled residential solar panel installer Sunnova Energy, as part of its review of government financing for alternative energy. The Department of Energy (DOE) had ‘de-obligated’ the loan guarantee, which means that the federal government is not responsible for the financing. Sunnova is restructuring its debt and has warned that it may not be able to continue to stay in business. In a regulatory filing in March, it indicated that it did not intend to use the DOE facility, Project Hestia, for the foreseeable future. Sunnova sold $371 million in bonds that are backed by the Project Hestia loan guarantee, but those notes were not included in the debt that the company is seeking to restructure.
The Biden administration announced a partial loan guarantee of up to $3 billion to support financing for approximately 100,000 rooftop solar installations, primarily for low-income homeowners, in April 2023. Biden’s Energy Department declared the facility as the largest ever commitment to solar power made by the U.S. government. The loan program became less attractive to Sunnova because the company could market cheaper, leased systems to homeowners using tax credits from the Inflation Reduction Act (IRA). The credit for loans involved with Project Hestia is a less lucrative subsidy.
Project Hestia is a 568-megawatt project comprising rooftop solar installations, residential battery systems, and intelligent software. Hestia was expected to provide loans for these technologies to homeowners in the United States and Puerto Rico. After receiving the federal loan, Sunnova faced congressional scrutiny for its alleged history of predatory practices and scamming elderly clients. The company was accused of scamming dementia patients on their deathbeds into signing five-figure, multi-decade solar panel leases, according to interviews and state consumer complaint records obtained by the Washington Free Beacon.
Since 2009, the DOE loans office has issued more than $35 billion in loans and loan guarantees, and has been repaid by some companies, including Tesla. In 2011, during the Obama administration, a $535 million federal loan to Solyndra failed, and many are worried that other solar company failures will follow.
Under the Biden administration, the DOE loan office sought to accelerate the development of the “clean” energy sector and provided loans to companies that struggled to secure private financing. Residential solar has struggled as higher interest rates have pushed up financing costs. If the House budget bill passes in its current form, the residential solar industry will continue to falter as tax credits will be going away, rather than being uncapped as in the IRA.
Sunnova Is Not the Only Loan Cancellation By DOE
The Energy Department is cancelling seven major loans and loan guarantees that had been conditionally approved under the Biden administration. Besides Sunnova’s Hestia project, two other projects include a transmission project by a New Jersey utility company and a Monolith Nebraska factory to produce low-carbon ammonia.
Monolith received a $953 million conditional loan guarantee to accelerate its clean hydrogen and carbon utilization project in Nebraska. The company received backing from BlackRock and NextEra Energy, was valued at over $1 billion in 2022, and produces hydrogen fuel using renewable energy (which can be used to make ammonia for fertilizers) and carbon black. In September 2024, the Wall Street Journal reported that the company was “running short on cash and facing project delays.”
New Jersey’s Clean Energy Corridor, which is run by Jersey Central Power & Light Company, received a conditional loan guarantee of up to $716 million in January to support the state’s goal of introducing 11,000 megawatts of offshore wind-generated electricity by 2035. When Jersey Central’s owner First Energy announced the project in 2022, Danish energy company Orsted was planning two large wind projects off New Jersey’s coast, but the projects were canceled in 2023. Another offshore wind project in New Jersey was stopped after the Environmental Protection Agency rescinded the project’s environmental permits.
The other four projects, which collectively received over $3 billion, include three battery factories and a plastics and recycling facility, all of which were previously canceled by their companies.
Conclusion
DOE is canceling seven “clean” energy projects for which the Biden loan office provided loan guarantees. The largest funding was allocated to Sunnova, which aimed to provide residential solar energy to low-income households in the United States and Puerto Rico. Sunnova, however, is restructuring its debt and does not plan to use Project Hestia in the foreseeable future. The company has also been accused of scamming the elderly into signing up for residential solar projects, which has led to scrutiny by Congress. The accusations have brought to mind a solar company called Solyndra that failed during the Obama administration, costing American taxpayers $535 million.
