A shift in focus is coming for a DOE loan program


The Department of Energy’s (DOE) Loan Programs Office (LPO) has issued more than $35 billion in loans and loan guarantees for more than 30 projects to date. In the past decade, the program has largely been dormant, but program director Jigar Shah is calling attention to it as a useful catalyst.

Over $44 billion in funding is available for the advancement of energy infrastructure, with a little more than 10% of that total dedicated to all renewable energy and energy efficiency projects. The remainder is earmarked to vehicle advancement ($17.7b), nuclear ($8.5b), Tribal Energy Loan Guarantees ($2b), and fossil fuels($8.5b). 

That dynamic is set to shift however.

The fiscal year 2022 budget request from the Department of Energy begins the process of ensuring that federal funding no longer directly subsidizes fossil fuels. That shift is required in Section 209 of Executive Order 14008, Tackling the Climate Crisis at Home and Abroad.

The LPO will ensure that its Title 17 program only encourages projects that help achieve a carbon-emission-free electric sector by 2035 and net-zero emissions economy wide by 2050. The program will avoid directly subsidizing fossil fuels by excluding traditional fossil projects from consideration for a loan guarantee.

LPO director Jigar Shah.
Image: energy.gov

The LPO was established as part of the Energy Policy Act of 2005. It provides access to debt capital for large-scale infrastructure projects in the United States.

Qualifying projects must “avoid, reduce, or sequester air pollutants or anthropogenic emissions of greenhouse gases; employ new or significantly improved technologies compared to commercial technologies in service in the United States at the time the guarantee is issued; and offer a reasonable prospect of repayment of the principal and interest on the guaranteed obligation.”

A decade ago, the LPO was a powerful tool that helped launch solar and electric vehicles companies into bankable investments. Commercial debt markets typically are not enthusiastic about putting new technology on their books, so the LPO does it first, said Shah.  

Shah pointed to the LPO’s early investment in Tesla as a major driver of the company’s success.

He said that today, without the help of the LPO, renewable energy projects are entering Wall Street at a rapid rate. While he previously had voiced concerns about the LPO as an effective near-term catalyst for decarbonization, Shah has recently changed his mind.

He said support and leadership from Energy Secretary Jennifer Granholm has reinvigorated interest in the program. Shah said he expects an average of $7 billion a month in applications to flow in. The ramp-up in interest has led to over 400 calls a week being fielded by a newly expanded LPO outreach team, he said.

This new wave of interest presents the LPO with an opportunity to fund the most impactful decarbonization projects on a large scale. One feature the LPO is prioritizing is integrating smart technologies, so that distributed resources are better able to respond to grid supply and demand, and provide reliability services.

LPO isn’t the only federal support available for solar. In fiscal year 2020, DOE’s Office of Energy Efficiency and Renewable Energy dedicated $280 million of its $2.8 billion budget to run its Solar Energy Technologies Office. This office focuses more on the research and development side than commercialization, and tackles issues like advanced solar systems integration technologies, concentrated solar power (CSP) research, PV research and development, and solar workforce initiatives.

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