There are many areas that are mature from a technology standpoint but not mature from an access to capital standpoint — that’s a nexus where there’s a clear mandate for DOE’s Loan Programs Office (LPO) to participate.
While significant capital is available for decarbonization technologies, these projects can still lack access to adequate debt capital. LPO fills this gap in commercial deployment by serving as a bridge to bankability for innovative and high-impact energy technologies, providing them with access to needed loans and loan guarantees when private lenders cannot or will not until a given technology has reached full market acceptance. Currently, LPO has billions in available loan authority through three loan programs: Innovative Clean Energy (Title 17), Advanced Technology Vehicles Manufacturing, and Tribal Energy.
LPO provides a bridge to bankability for those technologies to cross the final milestones to commercialization:
- The first commercial-scale deployment, to address the engineering scale-up challenges and demonstrate technology effectiveness at scale;
- The next few commercial-scale deployments, to demonstrate the ability to mitigate construction risks and address engineering optimization;
- Commercial scale-up, to progress along the learning curve, lower costs, and establish customer demand;
- Commercial debt market education, to overcome private debt market misunderstanding and gain commercial debt access.
Recently, LPO has announced several projects that fall along the bring to bankability, including:
- Advanced Clean Energy Storage, which would be the largest clean hydrogen storage facility in the world, capable of providing long-term low-cost, seasonal energy storage, furthering grid stability.
- Monolith, which would be the first-ever commercial-scale project to deploy methane pyrolysis technology, which converts natural gas into carbon black and hydrogen — two products that are frequently used in difficult to decarbonize industrial sectors like tire and ammonia fertilizer production.
- Syrah Vidalia and Ultium Cells, which would help scale up processing of critical materials and lithium-ion battery cell manufacturing, respectively, in the U.S. to meet the growing demand for EVs.
After loan closing, LPO’s Portfolio Management Division, in coordination with the Technical and Project Management Division, maintains this borrower partnership through construction, project operation and maintenance, and eventual final loan repayment. This approach is essential to achieving project milestones and overall project success while protecting taxpayer interests and has been successful: of the nearly $32 billion that has been disbursed to date, $13.61 billion in principal has been repaid, along with $4.21 billion in interest, which exceeds losses by more than $3 billion.
In addition to strong financial performance, LPO projects are making an impact. In total, these projects have created 37,000 permanent jobs. And through FY 2021, LPO electricity generation projects have combined to generate over 84 million MWh cumulatively, which is equivalent to displacing nearly 40 million tonnes of CO2 emissions. Meanwhile, ATVM-supported projects have cumulatively displaced 19.2 billion gallons of gasoline, or the equivalent of 25 million tonnes of CO2.
With 77 active applications for $80.8 billion in requested loans and loan guarantees across a variety of sectors, LPO is poised to continue building on that success and contribute to driving capital formation to deploy the clean energy and advanced transportation technologies needed to reach the Biden Administration’s goals of decarbonizing the economy by 2050.
Original source can be found here.
