United States: DOE Title XVII Loan Guarantee Program Overview

Taite McDonald is a Senior Policy advisor and Stephen Bolotin is a Public Affairs Advisor in Holland & Knight's Washington D.C. office

The U.S. Department of Energy (DOE) supports the commercial development of innovative clean energy technologies through its Loan Programs Office (LPO). Authorized by the Energy Policy Act of 2005, the Title XVII Loan Program enables the DOE LPO to issue loans ranging from several million to over a billion dollars for advanced fossil, advanced nuclear, renewable energy, and energy efficiency projects that employ "new or significantly improved technology." Since late 2013, DOE has announced nearly $25 billion in new loan guarantee authority across three solicitations, which remain open and actively seeking qualified applicants. While numerous companies have applied, we have confirmed with senior LPO officials that significant capital remains.

Under Title XVII program authority, DOE can guarantee loans for up to 80 percent of total project costs for eligible proposals. As a condition to issuing a loan guarantee, however, Title XVII required DOE to obtain an appropriation from Congress for the Credit Subsidy Cost (CSC)1 of issuing a loan guarantee, or otherwise obtain a deposit from the borrower in the amount of the CSC. As of 2015, LPO maintains $28.7 billion in total loan guarantee authority with $170 million appropriated to cover CSC renewable energy and energy efficiency projects. Application fees for all three solicitations are now the same: $50,000 for a Part I submission and $350,000 for a Part II submission. For loan applications that do not exceed $150 million, the Part II submission fee is reduced to $100,000.

Renewable Energy and Energy Efficiency Solicitation

In mid-2014, LPO issued a solicitation for up to $4 billion in loan guarantees for innovative renewable energy and energy efficiency projects that reduce greenhouse gas (GHG) emissions. Key technology areas of interest include advanced grid integration and storage, drop-in biofuels, waste-to-energy, and/or efficiency improvements. This solicitation is unique in that $170 million has been appropriated to help cover CSCs above 7 percent. The final Part I submission deadline is December 2, 2015, and the final Part II deadline March 2, 2016.

Advanced Fossil Energy Solicitation

In late 2013, LPO issued a solicitation for up to $8 billion in loan guarantees for innovative fossil energy projects that reduce GHG emissions through resource development, carbon capture, low carbon power system, and/or efficiency improvements. The final Part I submission deadline is October 31, 2015, and the final Part II deadline to February 28, 2016. This opportunity may provide key support for innovative energy, materials, and fossil-derived biofuel technologies, which might otherwise find limited options in commercial finance markets and do not qualify under the renewables solicitation.

Advanced Nuclear Solicitation

In late 2014, LPO issued a solicitation for up to $12.5 billion in loan guarantees for innovative nuclear energy and front-end nuclear projects that reduce GHG emissions. Key technology areas of interest include advanced nuclear reactors, small modular reactors, uprates and upgrades at existing facilities, and front-end nuclear projects. The final Part I submission deadline is March 16, 2016, and the final Part II deadline October 19, 2016.

Unlike the U.S. Department of Agriculture's (USDA) Loan Guarantee Program, which requires applicants to secure a lender of record, DOE issues loans directly through LPO and manages its own portfolio of energy investments. While the DOE's loan guarantee program is relatively more expensive that the USDA's, the program has become more company-friendly and easier to navigate due to the increased process efficiency and an experienced team. At the end of the day, the program continues to provide an attractive financing option for commercially ready yet otherwise not financeable, first-of-a-kind energy projects at commercial scale.

Footnote

1. The Credit Subsidy Cost is the net present value of the estimated long-term cost to the U.S. government of a loan guarantee, as determined under the applicable provisions of the Federal Credit Reform Act of 1990. In other words, it is the "premium" paid to the government in return for its guarantee.

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