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DOE to offer $8 billion in clean fossil-fuel project loan guarantees

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DOE to offer $8 billion in clean fossil-fuel project loan guarantees


The US Department of Energy will announce in the next two weeks the opening of a solicitation for up to $8 billion in loan guarantees for fossil-energy projects that will use innovative technologies to reduce carbon emissions, the head of the department's loan guarantee program said Monday.

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The solicitation is aimed at technology that has not been deployed in the US, and could be for projects in the oil, coal and gas, from extraction to generation, Peter Davidson, executive director of the loan program office at DOE, said during at appearance before the United States Energy Association in Washington.

It will be the first new solicitation in the DOE loan guarantee program in two and a half years, said Davidson, who joined DOE six months ago. He said new Energy Secretary Ernest Moniz is seeking to increase activity of the DOE in loan guarantees, which target clean energy technologies that are first of a kind and have trouble getting bank financing.

DOE received billions of dollars in loan guarantee authority in the 2005 Energy Policy Act, but much remains unused. Critics blasted the program when one of the leading recipients, solar energy company Solyndra, filed for bankruptcy protection in 2011.

Only 2% of the DOE's loan guarantees and commitments have been lost, well within a cushion set by Congress, Davidson said.

DOE is eager to see applications for the new fossil energy solicitation that reduce greenhouse gas emissions, Davidson said, citing as examples technologies that reduce methane leakage at wellheads and those that reduce water use in hydraulic fracturing. He said energy-efficiency measures related to fossil fuels could also be eligible, giving as an example, combined heat and power projects, in which heat from power generation is sold to industrial customers.

The solicitation is the first for a DOE loan guarantee program in which municipalities, universities and port authorities will be eligible, Davidson said. Universities could apply for microgrid projects, he said.

Unlike previous loan guarantee programs for renewable energy, nuclear power and advanced automobile technologies, where the average loan guarantee was $1 billion, the fossil solicitation is aimed at large and small borrowers, Davidson said. The loan amounts could be as little as $25 million, although there is no upper limit, he said.

The program will require borrowers to pay a so-called credit subsidy fee, a percentage of the loan amount collected by the government to compensate it for the cost of extending the guarantee. In previous loan guarantee solicitations for renewable power and advanced automobile technologies, Congress appropriated money to cover the credit subsidy. Nuclear energy projects must pay the fee themselves.

Davidson said DOE is considering a new solicitation next year for nuclear energy projects including small modular reactors. The solicitation would come from the unused loan guarantee authority from the 2005 energy bill.

DOE provided $8.3 billion in conditional loan guarantees for partners in the 2,200-MW Vogtle nuclear plant expansion in 2010, although the loan guarantees have not been finalized. There remain $10 billion in unexpected authority for new advanced nuclear power technologies that could be used in a new solicitation, Davidson said.

"We're trying to figure out how we can be helpful to the nuclear industry," he said.

There could be news on the Vogtle loan guarantees "in the next two to three weeks," he said, declining further comment.

Oglethorpe Power, one of the recipients of a conditional loan guarantee for the Vogtle expansion in Georgia, said last month it had reached new terms for a deal with DOE. Other partners in the Vogtle expansion that received conditional loan guarantees are Georgia Power and the Municipal Electric Authority of Georgia.

--William Freebairn,
--Edited by Derek Sands,