The Department of Energy issued two funding announcements on July 29 designed to provide a total of up to $30.75 billion in loan guarantees for energy efficiency, renewable energy, and transmission and distribution projects. The guarantees will use funds appropriated for the Renewable Energy and Transmission Loan Guarantee Program under the American Recovery and Reinvestment Act of 2009,[1] as well as Departmental authority provided in 2009 Appropriations legislation.

These guarantees are intended to enable projects that create jobs, spur the development of innovate, clean energy technologies, and help ensure a smart, strong and secure grid that will deliver renewable power more effectively and reliably. By investing in both renewable energy technology for generating electricity and technologies to modernize the U.S. transmission system, the Renewable Energy and Transmission Loan Guarantee Program targets the full integration of renewable energy sources into the grid.

As discussed below, the two funding announcements differ in the technologies eligible for guarantees and the criteria for awards. One covers innovative energy efficiency, renewable energy, advanced transmission and distribution technologies, and leading edge biofuels technologies (the Innovative and Advanced Technologies Solicitation); and the other is for more conventional electric power transmission infrastructure projects (the Conventional Electric Transmission Solicitation).

Applications under both solicitations are divided into two parts: a Part I and, subsequently, a more detailed Part II. The Part I submission is expected to provide the Department of Energy ("DOE") with a summary level description of the project, project eligibility, financing strategy, and project schedule. The Part II submission will consist of the complete, detailed application.

Under the Innovative and Advance Technologies Solicitation, the Part I application for the first round of loan guarantees must be submitted by September 14, 2009.

Under the Conventional Electric Transmission Solicitation, the Part I application must be submitted by September 16, 2009.

Renewable Energy and Transmission Loan Guarantee Program

The two new Loan Guarantee solicitations implement authority granted to DOE under Title XVII, Section 1703 of the Energy Policy Act of 2005 ("EPACT05") and Section 1705 of that Act, which was added by the Renewable Energy and Transmission Loan Guarantee Program under the American Recovery and Reinvestment Act of 2009 (the "Stimulus Package Act").

Section 1703 authorizes loan guarantees for projects that "avoid, reduce or sequester air pollutants or anthropogenic emissions of greenhouse gases; and employ new or significantly improved technologies as compared to commercial technologies in service in the United States at the time the guarantee is issued." There is no time limit on when projects funded by these guarantees must be under construction. DOE issued implementing regulations under Section 1703 in 2007.

Section 1705 authorizes guarantees for three kinds of projects: (1) renewable energy systems, including incremental hydropower, that generate electricity or thermal energy, and facilities that manufacture related components; (2) electric power transmission systems, including upgrading and reconductoring projects; and (3) leading edge biofuel projects that will use technologies performing at the pilot or demonstration scale that are likely to become commercial technologies and will produce transportation fuels that substantially reduce lifecycle greenhouse gas emissions compared to other transportation fuels.

Section 1705 is a new section of the Energy Policy Act created by the Stimulus Package Act. Projects funded by Section 1705 guarantees must meet three mandatory criteria: (1) construction must commence by September 30, 2011, (2) the project site must be identified, and (3) the applicant must demonstrate that private financing on standard commercial terms is not available for the project. Additional criteria are outlined in each solicitation.

An applicant that receives a loan guarantee authorized under Section 1703 must pay a Credit Subsidy Cost, which is the net present value of the estimated cost to the U.S. government of the loan guarantee. However, Credit Subsidy Costs for Section 1705 projects will be covered by the Stimulus Package Act funds.

Innovative and Advanced Technologies Solicitation

The loan guarantees under this solicitation are funded partly through the Stimulus Package Act, and partly through 2009 Appropriations. All the loan guarantees issued under this solicitation will focus on non-commercial projects that (1) avoid, reduce or sequester air pollutants or greenhouse gas emissions; (2) employ new or significantly improved technologies, as compared to commercial technologies already in service in the U.S.; and (3) provide a reasonable prospect of repayment of the principal and interest.

Section 1705 eligible projects under this solicitation are funded by the Stimulus Package Act, and will fall into one of five technology categories:

  • Biomass (designed to produce transportation fuels)
  • Efficient Electricity, Transmission, Distribution, and Storage  
  • Geothermal  
  • Solar  
  • Wind and Hydropower  

Projects which are not Section 1705 eligible are funded by 2009 Appropriations. Those projects may be encompassed by one of the five technology categories listed above, or one of the following four additional technology categories:

  • Alternative Fuel Vehicles
  • Energy Efficient Building Technologies and Applications  
  • Hydrogen and Fuel Cell Technologies  
  • Energy Efficiency Projects  

A project in any of these technology categories must also fall within one of the following two general, but distinct, project types: (1) manufacturing projects, and (2) stand-alone projects.

A manufacturing project is a manufacturing facility that uses new or significantly improved technologies, either as the manufactured product or in the manufacturing process. The project should result in long-term reductions in manufacturing and product costs, higher factory throughput, and improved product performance compared to the manufacturing technologies already on the market.

A stand-alone project is a renewable energy technology that produces energy from renewable resources or builds an advanced efficient electricity transmission and distribution system.

Applicants applying for loan guarantees under Section 1703 must comply with all the requirements of Title XVII of EPACT05, except Section 1705. Under this solicitation, projects authorized under Section 1705 must comply with all the requirements of Title XVII of EPACT05, including Section 1703 and 1705.

Conventional Electric Transmission Solicitation

All loan guarantees under this solicitation are designated for Section 1705 authorized projects, and will be funded entirely through the Stimulus Package Act. Eligible projects will consist of a commercial technology used in a complex electric transmission systems project located in the U.S.

Additionally, eligible projects must employ one of the following eight criteria:

  • New or upgraded lines of at least 100 miles of 500 kilovolts or higher or 150 miles of 345 kilovolts
  • At least 30 miles of transmission cable underwater  
  • A high voltage direct current component  
  • A major interregional connector  
  • Designed as a National Interest Electric Transmission Corridor by the DOE  
  • Associated with offshore generation, such as open wave energy, ocean thermal, or offshore wind  
  • Mitigate a substantial risk for a major population center  
  • A set of improvements to an integrated system within a State or region that together aggregate to new or upgraded lines of at least 100 miles of 500 kilovolts or higher, or 150 miles of 345 kilovolts.  

Eligible applicants must satisfy all the requirements of Title XVII of the Energy Policy Act, including 1705, but notwithstanding 1703.

Application Due Dates

Under both solicitations, applications will be reviewed on a rolling basis, and applicants applying earlier will enjoy an advantage in review priority. The DOE has attempted to streamline its application and review processes to expedite these new loan guarantees.

Renewable Energy, Transmission, and Biofuels Technologies. This solicitation contains seven rounds for Part I and Part II submissions. Under Round 1, the Part I application must be submitted by September 14, 2009. The Part I and Part II application due dates are listed below: see table

Electric Power Transmission Infrastructure Technologies. This solicitation contains one round for Part I and three rounds for Part II. All Part I applications must be submitted by September 16, 2009. The Part II application due dates are as follows: see table

Additional details regarding loan guarantee solicitations and the Stimulus Package Act's Renewable Energy and Transmission Loan Guarantee Program will be forthcoming in future guidance to be posted by the DOE to www.recovery.gov and www.energy.gov/recovery.

The loan guarantees for renewable energy and electric power transmission technologies, large transmission infrastructure projects, and leading edge biofuels technologies can create critical opportunities for your company.