Biden’s big climate bill isn’t a venture fund


The Cut Inflation Act, signed into law last month by President Biden, earmarks about $370 billion for clean energy development and adoption. But it’s not a venture capital fund, despite the viral tweets to that effect.

Why is this important: $370 billion is a ton of taxpayers’ money, and it will deserve careful scrutiny that starts from a place of common understanding — rather than a strawman’s top.

Tweets: David Sacks, founder of Craft Ventures, wrote:

“The biggest venture capital fund ever, except for no LP reporting, no measurable IRR, and no NYT or WSJ blockbuster stories about how managers of funds fell short of expectations. By comparison, the total value of all venture capital investments in the United States was $330 billion. And that was a bubble year. It was $167 billion. dollars in 2020 and $145 billion in 2019.”

Reality check: More than $200 billion of the $370 billion are tax credits over the next decade, including for solar power farms, electric vehicle purchases, and energy-efficient appliance purchases. Some of these measures include extensions of existing tax credits.

  • There are also additional appropriations for things like agriculture conservation programs ($20 billion), wildfire management ($2 billion), and coastal protection and restoration ($2.6 billion). billions of dollars).
  • Yes, tax credits can help boost the fortunes of private companies, such as those developing electric vehicles or microgrid hardware. But they are not in the same vein as equity investments in specific companies, either structurally or philosophically.

Sacks did not return a request for additional comment.

Capital risk : The closest thing to a “venture capital fund” in the IRA would be $11.7 billion for Department of Energy loan guarantees, which allows for a loan guarantee authority of 350 billions of dollars.

  • Yes, these are the same types of DOE loans that once supported Solyndra. But notice that $281 billion delta? This is because the overall default rate on these loans is extremely low, particularly because the DOE does not see itself as taking technology risks for a venture capitalist. Even in the 2000s, the program’s biggest loan was not to Solyndra, but rather to help Georgia Power build a pair of next-generation nuclear reactors.
  • Moreover, even the Solyndra-era DOE loan guarantee program generated about $30 billion in profits. And we know that because there were public accounts.

The bottom line: Governments often stumble when trying to play venture capitalist. Fortunately, that’s not a problem in this case, no matter how you feel about the Global IRA or its climate goals.

[Correction: An earlier version of this story had an incorrect dollar figure for the DOE loan guarantees included in the IRA.]


About Author

Comments are closed.