Damn the torpedoes! Source: iStockphoto.comIn a recent radio address, President Obama attacked the GOP for criticizing his renewables loan program that costs taxpayers billions of dollars and has been central to Obama’s plan to create “green” jobs under the stimulus package:

[t]here are some in Washington who want to shut [renewable power projects] down.  In fact, in the Pledge they recently released, the Republican leadership is promising to scrap all the incentives for clean energy projects, including those currently underway – even with all the jobs and potential that they hold. 

It turns out, however, that some of those in Washington who want to shut them down include President Obama’s own top advisors. In a leaked White House memo, first reported last week by Stephen Power of the Wall Street Journal, the unlikely trio Larry Summers, Carol Browner, Joe Biden’s chief of staff Ron Klain recommend the President either revamp the renewables loan-guarantee program or scrap it.

Chief among the numerous problems outlined in the memo? It obligates billions in tax dollars for costly projects that would have happened anyway:

Three near-term risks characterize this program: rescission of non-obligated funds; criticism from Hill supporters and stakeholders for slow implementation; and making commitments to projects that would have happened anyway and thus fail to advance your clean energy agenda.

The memo also outlines the problems of “double-dipping” (more accurately, should be called “quadruple-dipping”—program recipients receiving numerous sources of taxpayer dollars for the same project), and providing little of their own “skin” while government coughs up huge tax-financed subsidies.

As an example, the memo refers to the Shepherds Flat wind project in Oregon, sponsored by Caithness Energy LCC and General Election, and once completed, slated to be the largest wind farm in the nation.

According to Summers, Browner, and Klain, the backers of the Shepherds Flat project are “double-dipping” into the government troughs, receiving $500 million in federal grants, $238 million in state aid, and $200 million in federal and state tax benefits, on top of the $300 million loan guarantee.

Furthermore, they write, “The government would provide a significant subsidy (65+%), while the sponsor would provide little skin in the game (equity about 10%).”

They also point out this project would have occurred anyway:

This project would likely move without the loan guarantee. The economics are favorable for wind investment given tax credits and state renewable energy standards. GE signaled through Hill staff that it considered going to the private market for financing out of frustration with the review process. The return on equity is high (30%) because of tax credits, grants, and selling power at above-market rates, which suggests that the alternative of private financing would not make the project financially non-viable.

Finally, the memo points out that the project is not even environmentally beneficial because it would not have a significant impact in reducing carbon emissions.

Interestingly, as Stephen Power of the Wall Street Journal reminds us, DOE Secretary Steve Chu praised the project just a month ago as an example of the stimulus plan’s success in “creating the clean energy jobs of the future”:

Thanks to the Recovery Act, we are creating the clean energy jobs of the future while positioning the U.S. as a world leader in the production of renewable energy. This project is part of the Administration’s commitment to doubling our renewable energy generation by 2012 while putting Americans to work in communities across the country.

The President’s response to all this criticism of his pet “green jobs” project? Through Deputy White House Press Secretary Bill Burton: “The Administration is committed to the 1705 loan program and the role it plays in helping us bring about a clean energy economy and creating jobs in this burgeoning industry.”

In other words, business as usual. Perhaps, as The Daily Caller’s Jonathan Strong suggests, this is a perfect case study in how President Obama is likely to make policy decisions for the remainder of his term. Torpedoes be damned. Warnings from top economic advisor, top energy advisor, and VP’s top staffer be damned.

It’s also quite possible President Obama got the willies when considering the political fallout from the Democratic leadership’s wrath, also spelled out for him in the same memo:

Failing to make progress on renewables loan guarantees could upset the Hill (Sen. Bingaman, Speaker Pelosi), as well as renewables stakeholders, and draw criticism of the White House, which has been singled out as a roadblock on past loan guarantees.

Beware the lame-duck session which starts when Congress returns next week. The best policy for taxpayers would be to fully de-fund this and other costly renewables programs that fail on their promise to deliver jobs. However, with Democrats still in control till the end of the year, there could be an effort to transfer the funds to the renewables cash grant program or investment tax credit program, which would cost taxpayers billions and do precious little in creating much needed jobs.