DOE Lending Programs Update: New Leadership and Potential Legislative Extensions | Holland & Knight LLP
As noted in previous Holland & Knight Alerts, authorities that exist within the Office of Loan Programs (LPO) of the United States Department of Energy (DOE) can be used by the Biden administration to lead the commercial deployment of the technologies. innovative energy and advanced manufacturing needed. for the United States to achieve net zero carbon emissions by 2050. This authority is more important to note than ever as the LPO has arguably the most authority the Biden administration has to carry out initiatives related to the climate without congressional action. However, it is also important to note that in order to successfully use authority and deploy loans, strong leadership is essential and additional guidance from Congress may be essential.
New DOE and LPO leadership
During Energy Secretary Jennifer Granholm’s confirmation hearing and subsequent comments to the press and DOE, it became clear that using LPOs to the greatest extent possible would be essential to achieving the goals of administration. From the start, the Biden team bolstered Granholm’s enthusiasm for LPO by appointing Jigar Shah, a successful clean energy entrepreneur, as the new executive director. Although this is his first attempt at public service, Shah’s expertise in financing clean energy and decarbonization technology makes him fit to lead a program that is positioned to commit the $ 40 billion. of dollars remaining in loan authorization for projects that will help meet Biden’s clean energy goals.
The most recent example of the LPO’s return to the limelight was its inclusion in the Biden administration. recently announced joint initiative between the departments of commerce, energy, interior and transportation to support the burgeoning US offshore wind industry. During a White House roundtable discussion, the administration announced a national goal of deploying 30 gigawatts (GW) of offshore wind by 2030. In an effort to help achieve this goal, LPO released a fact sheet highlighting how the $ 3 billion renewable energy authority available in the Title XVII loan guarantee program can be leveraged to build a commercial wind industry in the United States, including infrastructure financing support such as:
- foundation fabrication facilities
- staging areas and dockside drop-offs
- blade manufacturing facilities for offshore wind turbines
- construction of specialized vessels that will operate exclusively on American projects
The current eligibility criteria for Title XVII differ from what was available under the American Recovery and Reinvestment Act of 2009, which removed the “innovative technology” requirement for the program and added additional loan authorization for the program. renewable energy projects.
Action proposed by Congress
DOE loan programs represent the best, and often the only, way for innovative technologies, as well as emerging and existing U.S. manufacturers, to break through the barrier from development to the deployment of new and improved technologies in the United States – and ultimately to export. The favorable dynamics of the private and public sectors and the long-term fixed price contracts that existed from 2009 to 2011 which allowed the DOE to build a strong portfolio of mainly solar, wind and automotive transactions do not exist today for emerging industries such as carbon capture, hydrogen. , batteries for electric vehicles (EV) and stationary storage, manufacturing of cleaner products, critical materials and rare earths. As a result, many companies, industry experts, and congressional staff who engage with the LPO on projects believe congressional action may be needed to fully unlock the program and enable the technologies. new generation.
With the introduction of the CLEAN Future Act, the House of Commons Energy and Commerce Committee decided to build on recent reforms to the Title XVII Innovative Clean Energy Loan Guarantee Program (Title XVII). XVII) which were included in the 2020 Energy Law and Technological Vehicle Manufacturing (ATVM) Direct Loan Program, which has not been revised since 2010.
First, the Energy and Trade Committee defined the crucial eligibility criteria for DOE lending programs: “Reasonable prospect of repayment”. A definition of this term was not included in the original authorization status for Title XVII or ATVM programs, but it is one of the main criteria that the DOE must assess in determining whether or not a project is eligible for. receive a loan or a loan. guarantee. Due to the lack of a definition of “reasonable prospect of repayment”, the interpretation of this term has often varied from interpretations based solely on market signals to more cautious and risk averse interpretations. Over the past decade, as clean energy markets have evolved and matured, new financing structures, contractual conditions, and regulatory regimes have been tried and tested. By defining “reasonable repayment prospects”, the DOE will have more precise guidelines for assessing the financial viability of projects.
Second, the CLEAN Future Act responds to a long-sought expansion of ATVM eligibility to include manufacturers of certain medium and heavy vehicles, as well as suppliers of components of those vehicles. Today, the ATVM program is only available to manufacturers of light passenger vehicles, as well as to component suppliers who can contractually demonstrate that a majority of their products are used in qualifying light passenger vehicles. In 2018, transportation was the largest source of greenhouse gas emissions in the United States, and of that figure, 41% came from vehicles that were not light vehicles.1 By expanding ATVV eligibility, this would not only allow manufacturers of more efficient or zero-emission vehicles to be eligible, but would also significantly reduce the burden on manufacturers of EV batteries and battery components to prove that. they are also eligible for ATVM financing.
Holland & Knight Insights
As Congress and the Biden administration continue to assess and elevate existing solutions and funding to meet the country’s urgent economic and climate needs, establishing strong DOE and LPO leadership, and defining and modifying existing authority terms within DOE’s lending program makes sense and a powerful next step. Building on the major achievements of the 2020 Energy Law, the implementation of the additional Title XVII and ATVV improvements is expected to continue to unlock nearly $ 40 billion of existing funds to help raise energy, climate and economic challenges of today.
As the DOE again turns to the LPO as a tool for broad deployment of clean energy technology, companies will want to keep track of how quickly billions of dollars in loan authorization are committed to new projects and the types of technologies receiving these funds.
1 United States Environmental Protection Agency (EPA), Highlights on greenhouse gas emissions from transportation.