On August 24, 2015, the U.S. Department of Energy's (DOE) Loan Programs Office (LPO) announced an additional $1 billion of funding and guidance for distributed energy projects. LPO has released supplements to its existing renewable energy and efficient energy projects and advanced fossil energy projects solicitations to provide guidance on the kinds of distributed energy projects it can support under the Title XVII loan program.

To date, distributed energy projects have been deemed eligible under these solicitations, but LPO has issued additional guidance for distributed energy projects since such projects require financial structures that are different from the financing structures that LPO has used for financing large, centralized projects.

Distributed Energy Project Guidance

Technologies such as rooftop solar, energy storage, smart grid technology and methane capture for oil and gas wells are eligible under the guidance, as well as other distributed projects proposed by companies. Previously, there was some question as to how the DOE LPO could aid such projects, as each installation or project would be too small, if individually financed, to benefit from a DOE-guaranteed loan due to the transaction costs. To be an eligible distributed energy project, the project should involve distributed energy technology and deploy installations of facilities at multiple sites utilizing that technology pursuant to a master plan.

Overview of Additional Funding Authority

The announced $1 billion in authority will be split equally between the renewable energy and efficient energy projects and the advanced fossil energy projects solicitations, which are already open. The $1 billion of loan guarantee authority was originally appropriated by Congress in the FY 2007 Revised Continuing Appropriations Resolution. The funds had previously been programmed for a 2006 solicitation for “Projects that Employ Innovative Technologies in Support of the Advanced Energy Initiative” that is now closed. Accordingly, the loan guarantee authority will not formally become available until after a 45-day Congressional notification period.

LPO also clarified that state-affiliated financial entities, including state green banks, may submit applications for eligible projects, provided that they meet all other requirements for qualification as a borrower. This guidance applies to all projects, not just distributed energy projects.

H&K Insights

This new guidance and the associated funding announcement is the first substantive outward facing action taken by the newly appointed LPO Director, Mark McCall. Undertaking this effort, especially at this point in the political cycle, confirms our previous statements and feedback regarding the LPO’s appetite for new projects and innovative project structures.

Moreover, it is important to recognize that while distributed energy projects had previously been eligible under the program, the new guidance released by DOE signals that the LPO continues to operate in a very company-friendly manner. It is important to also note that this additional funding is not dedicated solely to distributed generation but can be used for any eligible project under the two solicitations.