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Federal Stimulus Funding Fuels DOE Loan Guarantee Program

By Bill Wolf

The American Reinvestment and Recovery Act (ARRA) appropriated $6 billion to the U.S. Department of Energy's (DOE) Title XVII Loan Guarantee Program to support loan guarantees of up to $60 billion for renewable energy and electric power transmission projects.  The DOE Loan Guarantee Program was established under the Energy Policy Act of 2005 and was designed to support eligible projects that use new and innovative technology to avoid, reduce or sequester air pollutants, including anthropogenic emissions of greenhouse gases .

Instead of simply adding $6 billion to the existing Loan Guarantee Program, the ARRA created a new section under Title XVII for near-term commercial projects that fall into three categories:

• Renewable energy systems, including incremental hydropower, that generate electricity or thermal energy, and facilities that manufacture related components.
• Electric power transmission systems, including upgrades and reconductoring projects.
• Leading edge biofuel projects that will use technologies performing at the pilot or demonstration scale that DOE determines are likely to become commercial technologies and will produce transportation fuels that substantially reduce life-cycle greenhouse emissions compared to other transportation fuels.

Importantly, the $6 billion appropriated for this new section of the Loan Guarantee Program will cover the credit subsidy costs for eligible projects.  While it is impossible to estimate the actual credit subsidy cost for each project, an average of 10% of the total guarantee for each project would lead to $60 billion in loan guarantee funding.  

The Obama Administration and Energy Secretary Stephen Chu have publicly stated their desire to see funds moved quickly into the marketplace to support alternative energy projects.  In line with that desire, Secretary Chu has initiated a process to amend the existing Title XVII regulations and DOE has announced the signing of its first commitment to make a loan guarantee?an important stage in the process.  

Pending further actions by Congress to create a so-called "clean energy bank" to provide financing for alternative energy projects, DOE's Loan Guarantee Program will likely remain the most important conduit for disseminating public funds into the renewable energy sector, and the industry will certainly keep a close eye on projects that grow out of this program.

Full post as published by Energy Legal Blog on May 06, 2009 (boomark / email).