The Blythe Solar Power Project near Blythe, CA was supposed to be the biggest solar power plant ever, at a massive 1 GW. But Solar Trust, who holds the rights to build the plant, filed bankruptcy last week after their parent corporation, Solar Millennium AG of Germany, did the same. Further complicating matters, Solar Trust is the recipient of a $2.1 billion dollar conditional loan guarantee from the Department of Energy, their second largest ever loan. You bet this is going to get political, especially in the aftermath of the Solyndra bankruptcy.

It was less than a year ago that California Governor Jerry Brown and Secretary of the Interior Ken Salazar dedicated the Blythe plant, promising thousands of new jobs and enough power for 700,000 homes. But in the intervening time, the solar industry has faced withering internal competition, primarily from China, and governments are getting nervous and pulling funding and tax credits.

This does not bode well for California, Arizona, Nevada, and other states that are ramping up solar development. California has mandated 33% renewable energy by 2020 and every gigawatt is important. Some remain optimistic that the plant will be sold and construction will continue.  Blythe City Manager David Lane says “It’s a little blip… when you consider the amount of investment in the project and what it’s got going for it.” Perhaps, but buyers may be scarce in a post-Solyndra world since renewable energy projects are now being scrutinized intently not just by business but by politicians too.

That federal loan guarantee is already being scrutinized. NextEra Energy Resources has provided a $22.3 million credit facility for Solar Trust at steep rates. The often snarky and even more accurate Zero Hedge opines this could be a lead-in to NextEra  buying Solar Trust for pennies on the dollar, and isn’t that just yet another fine show of crony capitalism? Will debts owed by Solar Trust be paid off by the government, which means by us, the taxpayers?  This is something any potential buyer of Solar Trust would certainly benefit from.

We need better oversight of federal energy loans and guarantees. Plus, government needs to be first in line to claim assets in event of a bankruptcy. That’s not what we have now.