The First Bank of Solar

Export-Import Bank subsidizing exports of green energy technology, raising concerns of market meddling

March 19, 2013

The Export-Import Bank’s involvement in the green energy sector has renewed criticisms of the program and rallied defenders to its side.

The Export-Import Bank of the United States, typically referred to as Ex-Im, helps finance the export of American goods into foreign markets in support of American jobs, according to its website and charter.

The bank financed $355.5 million for renewable energy in fiscal year 2012, down from $721 million in 2011, according to data provided by the bank. The bank financed almost $36 billion total in fiscal year 2012.

Critics of the bank say the experience of two solar energy companies illustrates how politics unfairly props up connected industries.

First Solar cut 2,000 jobs and announced a factory closure last April. Just a few months later, the federal government financed a deal between the struggling solar panel manufacturer and two Indian companies wanting to buy First Solar’s products.

The Ex-Im also approved financing for companies seeking to purchase solar panels from SolarWorld, another struggling solar panel manufacturer. The companies ultimately rejected the Ex-Im financing, a move described by a bank spokesman as rare. SolarWorld announced layoffs and the closure of one of its manufacturing plants at the beginning of September 2011.

The green energy sector has struggled with high costs and strong competition from overseas despite generous help from the Obama administration. The Competitive Enterprise Institute’s William Yeatman said solar panel manufacturers were the worst performers in the Department of Energy’s 1705 loan guarantee program, part of the 2009 stimulus.

Both SolarWorld and First Solar received stimulus money.

"In terms of any federal ‘stimulus,’ SolarWorld has participated for a little more than a year in two federally matched research projects, the results of which we must share with the entire industry," SolarWorld spokesman Ben Santarris said, regarding money from the 2009 Recovery Act, commonly referred to as the stimulus.

He said the federal government has not helped SolarWorld develop its manufacturing operations.

He acknowledged that SolarWorld has received subsides from the state of Oregon, but he contended that any help SolarWorld has received from the federal or state government pale in comparison to the massive subsides China gives to its solar industry. SolarWorld recently won a trade case that levels tariffs on Chinese solar panels.

Dan Holler of Heritage Action cited the bank’s "market-distorting effect" as one reason for his opposition to the bank, while Barney Keller of the Club for Growth called the bank a "taxpayer-funded slush fund for corporate welfare."

"It’s the government picking winners and losers in the free market … and it’s backed by the taxpayers," Keller said.

Even if the financing does not require the bank to spend any money, it still skews the market by reducing artificially the risk of business deals, said Heritage Foundation economist Nick Loris.

Holler also said that American taxpayers are liable for the bank’s losses.

Ex-Im spokesman Phil Cogan said the critics are mistaken.

The bank has two related goals, Cogan said. It gives American businesses access to markets that are not robust or stable enough to support American exports, and it offsets subsides from other governments.

First Solar’s project in India fit Ex-Im’s first goal exactly, said First Solar spokesman Alan Bernheimer.

"Solar power project capital costs are all up-front and … financing is often the largest portion of expense for a project. In countries with relatively high financing costs, such as India, this can be an especially large hurdle," Bernheimer said.

The assistance that SolarWorld and First Solar receive helps them compete with their heavily subsidized Chinese manufacturers, Ex-Im supporters say.

"We are to supplement what the market will do, not replace it," Bernheimer said. The bank is not allowed to displace existing markets with its financing, he emphasized. Additionally, private entities come to it seeking financing; Ex-Im does not "pick" companies or sectors to support, he said.

Claude Barfield, a former consultant to the office of the U.S. Trade Representative who is now an expert at the American Enterprise Institute, said that while he does not like the idea of the government subsidizing exports, there is a place for Ex-Im’s work.

"In the best of all possible worlds, I would very much oppose it," Barfield said, noting he has a "visceral, intellectual opposition to corporate welfare."

But, Barfield said, "You look at the real world, you’ve got other countries intervening" in the market on behalf of their companies.

While the bank has enjoyed longstanding political support since its inception in 1934, some congressmen raised concerns about its intervention in the markets during the debate over the bank’s reauthorization last year.

Congress reauthorized the bank last year only after reaching a deal requiring the Department of the Treasury to begin negotiating with other governments to reduce and ultimately eliminate subsidies, especially for airplanes.

"Export subsidies distort the free market and global trade. And in a perfect world the Ex-Im Bank and its counterparts in Europe and Asia and elsewhere would not exist," House Majority Leader Eric Cantor (R., Va.) said at the time.

Update, Wednesday 5:35 p.m.: This story has been updated to clarify the Ex-Im's relationship with SolarWorld and to include a statement from SolarWorld on the nature of their stimulus funding.