Tucked into the Inflation Reduction Act that President Biden signed last week is a serious expansion of federal loan programs that might help the fight against climate change by channeling more cash to wash energy and converting plants that run on fossil fuels to nuclear or renewable energy.
The law authorizes as much as $350 billion in additional federal loans and loan guarantees for energy and automotive projects and businesses. The cash, which can be disbursed by the Energy Department, is along with the more well-known provisions of the law that provide incentives for the likes of electrical cars, solar panels, batteries and warmth pumps.
The help could breathe life into futuristic technologies that banks might find too dangerous to lend to or into projects which are just in need of the cash they should get going.
“It is a sleeping giant within the law and an actual gold mine in deploying these resources,” said Dan Reicher, a former assistant energy secretary within the Clinton administration. “This massive amount being made available is an enormous deal.”
But like all government efforts to assist industry and advance latest technologies, the expansion of the loan authority carries risks for Mr. Biden and the Democrats, who passed the bill with none Republican votes. A couple of decade ago, conservatives seized on the failure of Solyndra, a solar company that had borrowed about $500 million from the Energy Department, to criticize the Obama administration’s climate and energy policies.
Backers of this system have argued that despite defaults like Solyndra, this system has been sustainable overall. Of the $31 billion the department has disbursed, about 40 percent has been repaid and interest payments within the fiscal yr that ended on Sept. 30, 2021, totaled $533 million — more cash than the failed Solyndra loan.
The Energy Department’s loan programs began in 2005 under the George W. Bush administration but expanded significantly within the Obama era. The department provided a vital loan that helped Tesla expand when it only sold expensive two-door electric sports cars; the corporate is now the world’s most beneficial automaker.
Under the Trump administration, which played down the risks of climate change, the department’s loan office was much less lively. The Biden team has been working to vary that. Last month, the department said it planned to loan $2.5 billion to General Motors and LG Energy Solution to construct electric-car battery factories in Michigan, Ohio and Tennessee.
The department’s loan program office is currently reviewing 77 applications for $80 billion in loans sought before the brand new climate law was approved. The Inflation Reduction Act will add $100 billion to existing loan programs for financing production of electrical vehicles, as an example, and for projects on tribal lands. It can also add as much as $250 billion in latest loan guarantees and $5 billion in grants.
“We’ve established that the private sector wants to make use of our resources again,” said Jigar Shah, the director of the Energy Department’s loan programs office who’s a former solar energy entrepreneur. “We still should do plenty of work. We’ve to discover all of the areas that qualify.”
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One beneficiary of the brand new loan money may very well be the Palisades Power Plant, a nuclear facility on Lake Michigan near Kalamazoo, Mich., that closed in May. The plant had struggled to compete within the PJM energy market, which serves homes and businesses in 13 states, including Michigan, Recent Jersey and Pennsylvania, and Washington, D.C.
The Biden administration has made nuclear power a point of interest of its efforts to eliminate carbon dioxide emissions from the ability sector by 2035. The administration has offered billions of dollars to assist existing facilities just like the Diablo Canyon Power Plant — a nuclear operation on California’s coast that is about to shut by the tip of 2025 — stay open longer. It’s also backing latest technologies like small modular reactors that the industry has long said could be cheaper, safer and easier to construct than conventional large nuclear reactors.
The owner of the Palisades facility, Holtec International, said it was reviewing the loan program and other opportunities for its own small reactors in addition to bringing the shuttered plant back online.
“There are various hurdles to restarting the power that will should be bridged,” the corporate said in a press release, “but we’ll work with the state, federal government, and a yet to be identified third-party operator to see if it is a viable option.”
Along with nuclear projects, the loan money could spur development of other clean energy sources, including converting dams that don’t produce electricity into latest power facilities like those by Rye Development, an organization based in West Palm Beach, Fla., that’s working on several projects within the Pacific Northwest.
Some researchers and developers are exploring conversion of old fossil fuel plants into clean energy facilities. That would mean using old oil and gas wells for geothermal power; old coal power plants as sites for big batteries; and old coal mines for solar farms. Such conversions could reduce the necessity to construct projects on undeveloped land, which frequently takes longer because they require extensive environmental review and might face significant local opposition.
“We’re in a heap of trouble in siting the various thousands and thousands of acres of solar we want,” Mr. Reicher said. “It’s six to 10 million acres of land we’ve got to search out to site the projected construct out of utility scale solar in america. That’s huge.”
Other developers are hoping the federal government will help finance technologies and business plans which are still of their infancy.
Timothy Latimer is the chief executive and co-founder of Fervo Energy, a Houston company that uses the identical horizontal drilling techniques as oil and gas producers to develop geothermal energy. He said that his firm can produce clean energy 24 hours a day or produce roughly energy over the course of a day to balance out the intermittent nature of wind and solar energy and spikes in demand.
Mr. Latimer claims that the techniques his firm has developed will lower the price for geothermal power, which in lots of cases is costlier than electricity generated from natural gas or solar panels. He has projects under development in Nevada, Utah, Idaho and California and said that the brand new loan authority could help the geothermal business expand way more quickly.
“It’s been the talk of the geothermal industry,” Mr. Latimer said. “I don’t think we were expecting excellent news a month ago, but we’re getting more ready for prime time. We’ve barely scratched the surface with the quantity of geothermal that we are able to develop in america.”
For all of the potential of the brand new law, critics say that a big expansion of presidency loans and loan guarantees could invite more waste and fraud. Along with Solyndra, the Energy Department has acknowledged that several solar projects that received its loans or loan guarantees have failed or never got off the bottom.
A big nuclear plant under construction in Georgia, Vogtle, has also received $11.5 billion in federal loan guarantees. The plant has been widely criticized for years of delays and billions of dollars in cost overruns.
“A lot of these projects are funded based on political whim fairly than project quality,” said Gary Ackerman, founder and former executive director of the Western Power Trading Forum, a coalition of greater than 100 utilities and other businesses that trade in energy markets. “That results in many stranded assets that never live as much as their guarantees and turn out to be examples of presidency waste.”
But Jamie Carlson, who was a senior adviser to the energy secretary through the Obama administration, said the department learned from its mistakes and developed a greater approach to reviewing and approving loan applications. It also worked more closely with businesses in search of money to be certain that they were successful.
“It was this black box,” said Ms. Carlson, who’s now an executive at SoftBank Energy. “You only sat in purgatory for like 18 months and sometimes as much as two years.”
Ms. Carlson said the department’s loans serve an important function because they might help technologies and corporations which have demonstrated some business success but need more cash to turn out to be financially viable. “It’s there to finance technologies which are proven but perhaps to banks which are perceived as more dangerous,” she said.
Energy executives said they were excited because more federal loans and loan guarantees could turbocharge their plans.
“The projects that will be done will go faster,” said William W. Funderburk Jr., a former commissioner on the Los Angeles Department of Water and Power who now runs a water and energy company. “It is a tectonic plate shift for the industry — in a superb way.”