The rapid expansion of a federal lending program aimed at supporting green energy projects, poses “tremendous risk” to taxpayers, according to a report from the Office of Inspector General (OIG) for the U.S. Department of Energy (DOE).
The LPO program has seen its lending authority expand rapidly during the Biden administration, which the OIG said raises alarms over the possibility of loan defaults, potentially leaving taxpayers on the hook for billions in losses.
“There is tremendous risk to the taxpayer from the recent historic expansions of Department of Energy programs,” the OIG wrote, adding that it is particularly concerned about the heightened financial risks embedded in insufficient oversight and vulnerabilities to foreign influence.
Originally managing $17.2 billion in loans as of 2021, the LPO’s portfolio has expanded to over $400 billion following the passage of key legislation under President Joe Biden, including the Infrastructure Investment and Jobs Act, the Inflation Reduction Act, and the Puerto Rico Energy Resilience Fund. This nearly half a trillion dollars in lending authority has led to a massive expansion in the LPO’s loan portfolio, exacerbating risks, according to the OIG.
One of the primary risks identified by the OIG in the report is the compressed timeline for allocating loans under the LPO’s expanded authority.
A significant portion of the loan authority—$290 billion—will expire by September 2026, creating intense pressure to approve and finalize deals rapidly. This urgency, the watchdog warns, increases the likelihood of insufficient due diligence, potentially resulting in poorly vetted loans that could lead to significant financial losses. Accelerated decision-making might also hinder thorough evaluation of alternative projects with lower risk.
Another issue is the sheer volume of applications.
In August 2024, the LPO reported 211 loan applications worth $296 billion, with new applications being submitted regularly.
“This volume of applications, looming deadlines to enter into inherently risky deals, and the hundreds of billions of dollars at stake make this one of the most urgent and significant management challenges” facing the DOE today, the OIG stated.
Additionally, the report flagged the inherent uncertainty of financing innovative green energy projects that are unlikely to secure private sector funding. These projects often involve untested technologies and unproved business models, which require rigorous technical and financial assessment. The watchdog expressed concern that such scrutiny could be compromised under the current pace of project expansion, raising the risk of defaults and taxpayer losses.
The OIG also highlighted the potential for funds to inadvertently benefit entities tied to foreign adversaries.
Although the DOE established a dedicated vetting center to check grant and loan applicants for foreign adversary entanglements, the OIG noted that weaknesses in oversight have already allowed several grants to be approved for organizations with suspected foreign adversary ties. While these awards were later canceled, they amounted to $400 million, highlighting the challenges in ensuring taxpayer dollars are not being exploited by entities with interests that run counter to America’s national interests.
The watchdog called for immediate action on the part of the DOE to strengthen internal controls, enhance due diligence processes, and enforce stricter oversight to protect public funds.
The DOE did not respond to a request for comment on the report.
