Through two separate, but similar programs, the U.S. Department of Energy (DOE) is making $40 billion available for loans and loan guarantees involving deployment of advanced technologies that reduce greenhouse gas emissions from the production of energy or improve vehicle efficiency.  The $40 billion is divided into four specific blocks:

  • $12.6 billion for advanced nuclear projects, including new plants, upgrades and uprates for existing plants, and front-end projects such as fuel and component manufacturing
  • $8 billion for advanced fossil fuel projects
  • $4 billion for renewable energy and energy efficiency projects; and
  •  $16.6 billion for the U.S. manufacture of advanced technology cars and light duty trucks and components for such vehicles

The advanced energy technology programs require both greenhouse gas reduction and the deployment of a technology that is “new or significantly improved” by comparison to existing “commercial technology,” which is defined to mean a technology that has been deployed in three or more projects in the U.S. Beyond those two requirements, there are few limits on eligible projects.  

Vehicle manufacturing projects must be directed at the manufacture of vehicles that provide a 25 percent improvement in fuel efficiency relative to 2005 standards.  Electric, hybrid, alternative fuels, and advanced internal combustion engine technologies can all qualify, as can improvements in aerodynamics and vehicle weight.  Projects involving component manufacture and engineering integration can also qualify.

Recipients need not be U.S.-owned entities. (Nissan and Abengoa are among the prior recipients.) However, the projects must be built in the U.S., and in the vehicle program, “engineering integration” must occur in the U.S.

Between 2009 and 2011, DOE has committed more than $32.5 billion in loans and loan guarantees, with projects ranging in size from less than $50 million for an energy storage project to more than $8 billion for a nuclear power plant.  DOE has committed to no new loans since 2011, largely because of the political fall-out associated with the well-publicized bankruptcy of a solar manufacturing plant not long after its loan guarantee closed.  In recent months, however, DOE has revamped its administration of the two programs, and it is seeking to send a message to the market that it is open for new loan and loan guarantee business.

DOE has issued a new solicitation in each area of its loan guarantee authority:  renewables and energy efficiency, fossil and nuclear. It is also publicizing anew the vehicle loan program, which is open on a rolling basis, rather than through specific solicitations. DOE is making clear its view that these programs are ongoing ones for which it hopes to receive additional funding authority as it depletes the funding it has.  DOE is also emphasizing that it is trying to be more customer friendly than it was in the past.  In particular, it says it has heard the complaints about high fees and costs associated with these programs.  Where it can, it is adjusting the policies and practices that led to those complaints.

These programs extend loans at interest rates pegged to U.S. Treasury rates.  For project developers and manufacturers seeking to deploy qualifying advanced technologies, it offers the potential for a significant interest cost savings in situations where the commercial market might impose a technology risk premium.