“Vindication” is the word from many clean energy advocates these days, thanks to Tesla.

In the past month, the electric car company has become profitable, had its Model S crowned “the best car ever tested” by Consumer Reports, and paid back its $465 million federal loan in full. Tesla is proof, boosters crow, that the Department of Energy’s clean technology loan program is a winner and that its products are ready for prime time.

But vindication isn’t victory. One success story – even a big one – isn’t enough to erase the DOE loan program’s lousy reputation after a string of very visible bankrupt cash recipients that include solar panel maker Solyndra, battery manufacturer A123 and electric car company Fisker Automotive, analysts say.

Tesla is also very different from most of the clean technology companies in DOE’s loan guarantee portfolio with billionaire Elon Musk as its media-savvy CEO, an extravagantly priced electric car, and the glow of a hotshot startup similar to that of Silicon Valley’s IT firms.

Tesla’s success might also have a downside for the clean technology sector, which has worked hard to dispel the notion that green technology is more expensive than traditional technology.

Just how or if clean-tech companies should use Tesla as their poster child is uncertain, experts say.

“Tesla is not a clean energy company. It is a luxury goods company,” said Bill Aulet, managing director of the Martin Trust Center for MIT Entrepreneurship at the Massachusetts Institute of Technology’s Sloan School of Management and chairman of the MIT Clean Energy Prize. “They are buying a car with cachet with it.”

“I am not against Tesla, but it is what it is,” Aulet added. People interested in clean technology and the environment “could do a lot more with the money” than spend $70,000 on a Tesla, he added.

Matt Stepp, a senior policy analyst at the Information Technology and Innovation Foundation (ITIF), added, “Even with Tesla today selling at a profit, there is still a negative perception” of DOE loan support and the clean energy program.

“The problem is that a lot of the companies that got loans are still in the build-up phase,” Stepp said. “I think we need five, six, maybe 10 Teslas before the narrative doesn’t stick anymore. It would be different if Tesla was selling a million vehicles a year and everyone was driving them. But the view is that only the wealthy get to buy it, even with the tax credit, and the average Joe isn’t able to step near it in a car lot. It needs to overcome that in order to become a really groundbreaking success story for clean energy in general.”

Tesla has delivered almost 5,000 Model S cars in the first three months of 2013 and expects to deliver 21,000 Model S cars worldwide this year. The company has sold more than 10,000 of its Model S and Roadster, the sports car that was Tesla’s first model it sold, beginning in 2008, and which it ceased to produce at the end of 2011.

The Roadster cost about $100,000 and the basic Model S about $70,000 (the Model X, an electric SUV expected out next year, is likely to be about the same price) before the tax credit of $7,500. The Model S with the extended electric battery that provides the full 265-mile range is closer to $90,000 before the tax credit. The company has a network of “superchargers” across the country, although mainly in California, Nevada and the East Coast, that are free for the extended battery, or $2,000 extra for the basic model. Musk is expected to make an announcement about an upgrade to the network this week.

Tesla reported its first profit last quarter and generated $562 million in revenue. The company was able to translate that into a little more than $1 billion in a recent stock and securities sale. The unexpected windfall enabled the company to pay off its federal loan debt nine years early (Greenwire, May 23, 2013).

Tod Hynes, president and founder of XL Hybrids, a company that converts fleet vehicles to hybrids, said the importance of Tesla’s profitability and quality shouldn’t be overlooked, given the high costs and risks of entry into the automotive sector. Tesla is the first new U.S. car company to go public in more than half a century.

“One reason they are successful is they are not only providing an electric car, they are providing a better vehicle and a better solution,” Hynes said. “To have an impact, you need to be better than what is out there. It is very important to focus on profitability, but also having a better solution and having very happy customers that will be advocates for you to help alternative solutions become mainstream.”

Getting to mass market

Tesla’s success “definitely helps answer and silence the critics who have doubted the appeal and performance of EVs [electric vehicles]. That opens opportunities for other innovators to follow, not just with EVs but along the value chain of batteries, smart grid, engine design, new materials, software, policy, etc.,” Amy Francetic, executive director of the Clean Energy Trust, said in an email.

The performance of the Model S that earned it Consumer Reports’ “best car ever tested” and “best car of 2013” relies on the fact that it is electric, Musk said.

“In creating an electric car, the responsiveness of the car is really incredible. It’s like you have a mind meld with the car,” he said during an interview for TED Talks in February. “You can do that with an electric car because of its responsiveness; you can’t do that with a gasoline car. I think that’s really a profound difference, and people only experience that when they have a test drive.”

Stepp said Tesla had no illusions about its product and market, and that was key for its success.

“Tesla was realistic about performance. It is an amazing car,” Stepp said. “They were also realistic about the price in a niche market.” The company’s long-term viability, however, will rely on bringing down the cost but maintaining quality, he said.

This very much tracks with Musk’s statements about where Tesla is going.

“When I first started out, I stated a very clear mission that we were on, which is to create a compelling, mass-market electric car,” Musk said in an interview last week with Bloomberg News.

“With the way things are right now, with the Model S you have a compelling car, but it is too expensive for most people. And then you have the [Nissan] Leaf, which is cheap, but it’s not great. What the world really needs is a great, affordable electric car,” he said.

It usually takes three versions of a new technology before it can penetrate the mass market, Musk explained. The first model will have a high cost and small market; the second will have a medium cost and a medium-sized market; and the third will have a low cost and a large market.

“So we are at step two at this point,” Musk said.

But he expressed confidence that step three, the “compelling mass market” electric vehicle, is only three or four years away.

And Musk also added that with the recent $1 billion fundraising and projected sales of the Model S and X, he doesn’t foresee the need to raise more funds to get the $1 billion needed to develop this mass market car.

Musk added he wouldn’t sell Tesla “no matter what people offer” until he completes this mission, attempting to dispel rumors that there had been discussions along that line with Apple or Google.

There has been more than one comparison of Tesla to Apple and Google recently, and Musk’s recent hint that he would be interested in working with Google on creating an automated car certainly fueled more. Musk later noted on Twitter that “creating an autopilot for cars at Tesla is an important but not yet top priority … still a few years from production.” Google founders Larry Page and Sergey Brin are both Tesla investors.

John Suh, managing director for Hyundai Ventures, the investment arm of Hyundai Motor Co., said recently at the TechConnect Conference in Washington, D.C., that it would make more sense for an IT company like Google than for a traditional auto manufacturer to buy Tesla because their skills and thinking are more aligned.

This kind of spotlight gives Tesla and clean technology entrepreneurs more of a voice and sway back in Washington, said Jeff Cramer, co-founder of 38 North Solutions, a public policy firm that advocates for clean energy technology and innovative enterprises.

“It demonstrates a certain level of growing maturity. We have our own incumbents,” Cramer said, listing Tesla, as well as First Solar, Vestas, Gamesa, SolarCity, SunRun, SunPower, Nest and OPower. “This is sort of filling out the clean technology suite” of who could bring resources and leverage to bear upon innovation and clean technology issues, he said.

Loan payment a ‘moral obligation’

Advocates also hope that Tesla’s success could open the door to and awaken interest in reviving the clean technology loan program.

“Tesla’s early loan repayment confirms what independent analysts – from Bloomberg News to John McCain’s former national finance chair Herb Allison – have been telling us for years: The DOE loan programs are very low-risk and will cost taxpayers much less than Congress expected,” said Richard Caperton, managing director of energy at the Center for American Progress. “It’s clear that Solyndra was an anomaly in a portfolio of strong investments.”

DOE hasn’t conditionally committed to or closed on a loan or loan guarantee since Solyndra declared bankruptcy in the fall of 2011. But according to a recent Government Accountability Office report, there is still $34.8 billion remaining in loan guarantee authority and $16.6 billion in loan authority available under the Advanced Technology Vehicles Manufacturing (ATVM) loan program, from which DOE loaned Tesla $465 million in June 2009, as well as $529 million to Fisker, $5.9 billion to Ford Motor Co. and $1.4 billion to Nissan Motor Co. (E&ENews PM, March 15, 2013).

Although it’s still accepting applications, DOE told GAO it’s currently not considering any applications for using the ATVM remaining authority and has rejected the remaining seven applications because of “insufficient equity or technology that is not ready.”

GAO said applicants and manufacturers didn’t want to apply because the costs of participating outweigh the benefits.

Although long wait times and bureaucratic red tape are often noted, Musk alluded to other costs in his interview with Bloomberg and said paying off the loan nine years early was a priority to “relieve a moral obligation.”

“There were a lot of people who criticized us for having a government loan at all. Even though we received the smallest loan of anyone, we have done the most and repaid it first. Nonetheless, we received a lot of flak for it, and people held it against us, and against the car,” he said. “I just feel better having done it. I did it because it felt right.”

Musk also said he had to put the last of his money, most of which came from selling his company PayPal to eBay in 2002 for $1.5 billion, into Tesla in 2008 to keep the company going before the DOE loan in 2009. Taxpayers earned $15 million to $20 million in interest on Tesla’s loan, Musk said.

“One of the reasons Tesla is successful is it got a huge loan from DOE. But DOE is no longer doing it. There are clean energy companies that need it, but the agency is no longer doing it,” said Patrick Von Bargen, former chief of staff for retired Senate Energy and Natural Resources Chairman Jeff Bingaman (D-N.M.) and another co-founder of 38 North Solutions.

“The clean technology sector faces enormous challenges, one of them being financing. With the loan program pulling back, it really leaves a void that is not yet filled and is a big problem for an American clean energy company. One way it is solved is to go to China to get money,” Von Bargen said.

Added Cramer, “I bet if Elon Musk himself went to a bank and wanted another $400 million loan he wouldn’t get it. They are not willing to take on that risk.”

When Tesla repaid the loan last week, Energy Secretary Ernest Moniz noted, “More than 90 percent of loan loss reserve Congress established remains intact, while losses to date represent about 2 percent of the overall $34 billion portfolio.” Congress set aside $10 billion to cover expected losses, of which 10 percent has been used to cover bankruptcies like Solyndra and Fisker, according to DOE.

MIT’s Aulet said the loan programs were very important for innovation in the energy sector, which is inherently in conflict with one of the energy sector’s key concerns – reliability.

“The U.S. government should have a position on clean energy, as almost all governments do. How else do you get energy security?” Aulet said. “The loan program was an attempt to do that.”

If Tesla’s success can help reignite the clean energy loan program, he said, “that is bad logic for a good end.”

Toward ‘less cynical’ politics

XL Hybrid’s Hynes also noted that almost all industries get “tremendous subsidies” worth billions of dollars, even if they aren’t in the form of a government loan program.

“Every company on the Fortune 500 list is taking subsidies,” he said. “The reason this is an issue is the highly politicized nature of the program.”

Senate Energy and Natural Resources Chairman Ron Wyden (D-Ore.) and ranking member Lisa Murkowski (R-Alaska) are interested in holding hearings on the loan program, their spokesmen confirmed.

“It is obviously great news that Tesla has repaid its loan,” Wyden spokesman Keith Chu said. “DOE’s loan programs continue to present real concerns, however, and Senator Wyden intends to address those issues in his role as Energy Committee chairman. He wants to ensure that taxpayers are protected.”

It’s not clear whether Musk and Tesla would get involved in political battle of the loan program if Congress focuses on it again. Tesla declined to comment for this story.

At the Advanced Research Projects Agency-Energy’s fourth annual innovation summit in February, Musk declared, “If people are going to attack DOE for bloody Solyndra, for God’s sake, then there should be some praise for the DOE when there is success.”

But Musk recently withdrew from a Silicon Valley advocacy group that is calling for changes to the nation’s immigration laws and that paid for ads to support senators who touted their backing of the Keystone XL oil pipeline and drilling in Alaska.

When asked about his decision, Musk told Bloomberg he believed in arguing issues on the merits.

“We want a political system that is less cynical over time, not more,” he said. “Even if you can play to the cynical elements of the system, I don’t think one should.”

He added, “At the end of the day, the people of the country will get the politicians they deserve. Whatever behavior we encourage in our politicians, that is the behavior they will have. I think we should insist on a less cynical political system and not do anything to encourage it to be more so.”