Published on May 23rd, 2013 | by Tina Casey1
Tesla’s Early Loan Repayment Gets Props From Energy Dept
The US electric vehicle manufacturer Tesla Motors announced this week that it has paid off its federal clean energy loan years earlier than required, and brand new Department of Energy (DOE) Secretary Ernest Moniz could not resist a little celebration at the expense of the loan program’s critics. In one of his first press releases since taking office, Moniz used the Tesla loan success to make the case that his agency’s portfolio of 30 loans, all aimed at cutting edge energy technologies, was “delivering big results for the American economy while costing far less than anticipated.”
That reminds us, after the 2009 auto industry bailout some of those aforementioned critics lauded Ford for its refusal of federal funds…so what do you call the $5.9 billion (yes billion, not million) DOE loan the company got to retool its factories?
The Tesla Loan Is History
Tesla Motors is the US electric vehicle company co-founded by Elon Musk of PayPal and SpaceX fame. It received a DOE loan of $465 million back in June 2009, less than a year after the Wall Street meltdown of 2008 left the US auto industry deprived of private sector financing and on the verge of imploding.
Tesla used the loan to transition its business model from building high-end roadsters (which probably would have done quite nicely, if 2008 had not happened) to accelerate the development of its relatively affordable Tesla Model S sedan.
The rest is history. Aside from one misguided “test drive” earlier this year, the car has gotten rave reviews, sales are strong compared to other EVs in its price range, and Tesla Motors finally turned a profit this year.
Earlier this week, Musk announced that Tesla had repaid the full remaining balance of the loan five years early, though by DOE’s calculation the Tesla loan was repaid nine years earlier than required.
It’s also worth noting that the development of advanced EV battery technology, which is also supported by DOE, will bring the price of EVs down even farther into the affordability range, opening up new markets for Tesla and other EV manufacturers.
DOE Loan Program A Success Story
The DOE loan program actually dates back to the Bush Administration, but it took a heavy beating in the early years of the Obama Administration as critics focused on the demise of one of the loan beneficiaries, the solar company Solyndra.
However, the key thing to understand is that risk was built into the loan program from the get-go, and it was designed to absorb a reasonable amount of loss without hitting taxpayers in the pocket. The whole idea was to get beneficial, cutting edge technology off the ground and into the hands of the public, when private sector financing was unwilling or unable to provide the seed money.
With that in mind, let’s look at Moniz’s rundown of the loan program to date, as detailed in Wednesday’s DOE press release:
“More than 90 percent of loan loss reserve Congress established remains intact, while losses to date represent about 2 percent of the overall $34 billion portfolio. The other 98 percent of the portfolio includes 19 new clean energy power plants that are adding enough solar, wind and geothermal capacity to power a million homes and displace 7 million metric tons of carbon dioxide every year – roughly equal to taking a million cars off the road.”
Breaking it down a little more, the loan program has supported some of the world’s largest solar power and thermal energy storage facilities and one of the world’s largest wind farms.
In addition to supporting Tesla as the first all-electric vehicle manufacturer in the US, the loan program has also supported Nissan’s all-electric US manufacturing.
As for Ford, though you could make the case that the company was not “bailed out” by the federal government through the same financial pathway as GM, the fact is that DOE provided a $5.9 billion loan to Ford, enabling it to modernize 13 factories and boost the fuel efficiency of its fleet (thanks in part to the very interesting C-Max Energi hybrid EV series).