With the Democrats taking over the White House and Senate, many eyes will be on climate change and the role the federal government can play in combating it. Various suggestions have been made on how Congress can best legislate to help combat climate change. However, certain actions can be taken immediately. One such move is to provide $ 40 billion in lending capacity previously allocated to the Department of Energy under the 2009 stimulus package. This money is already available to the Department of Energy’s Loan Program Office (LPO) to be spent at any time as a loan or loan guarantee for qualified projects.
All new loans would follow $ 30 billion in loans and loan guarantees previously provided by the LPO under the same programs (specifically under the Obama administration and a large loan related to a nuclear reactor project under the Trump administration) . There is strong optimism under the Biden administration that the unallocated funds may be more readily available for qualified projects. The LPO has recognized some of the challenges in government loan support programs and has taken steps to better engage interested parties, including non-binding preliminary consultations to guide potential applicants through the process and to ensure that the LPO and project are each prepared as the LPO- Application process begins in earnest. In light of the innovative projects in 2021, the LPO is also reviewing the opportunities for offshore wind and the offshore wind value chain, as well as vehicle solutions that may qualify for the LPO programs.
The $ 40 billion loan capacity, including $ 4.5 billion for renewable energy alone, is available to applicants seeking funding for innovative fossil fuel, nuclear, or renewable and energy efficiency projects. for fuel efficient vehicle manufacturers with advanced technology; or for tribal energy development projects.
To qualify for the renewable energy or energy efficiency loans or loan guarantees under Title XVII of the Energy Policy Act 2005, a project must meet all of the following requirements:
Use new or significantly improved technology compared to commercial technology in use in the United States at the time the warranty was granted.
Avoid, reduce or bind anthropogenic emissions of greenhouse gases.
Located in the United States (projects may be foreign owned or sponsored as long as the projects are in any of the 50 states, the District of Columbia, or any US territory).
Offer a reasonable prospect of repayment.
Interested applicants should be aware that the deadline for obtaining LPO loans is typically longer than in the commercial finance market. A typical project funding deadline should be approximately 90 days for the LPO to qualify for the due diligence program and obtain internal approvals. However, for innovative projects that meet the other LPO eligibility requirements, the loans or loan guarantees available through the LPO may be a viable option. For example, for offshore wind projects, long-term energy storage, green hydrogen extraction, or carbon capture projects where it is difficult to find long-term funding from commercial lenders, LPO loans could be a particularly important source of funding in the years to come.
© 2021 McDermott Will & EmeryNational Law Review, Volume XI, Number 28