US Energy Department Celebrates Loan Guarantee Successes as Stimulus-Supported 1705 Program Comes to Close

DOE Loan Guarantee chief Jonathan SIlver

By Jonathan Silver
Executive Director, U.S. Department of Energy’s Loan Programs Office

Special to Biofuels Digest

Since my last update six months ago, the U.S. Department of Energy’s Loan Programs Office (LPO) has been extremely busy, committing or closing 19 additional financings of clean energy projects – including one of the country’s first commercial-scale cellulosic ethanol plants, Project LIBERTY, sponsored by POET, LLC.

LPO announced 12 projects in June alone, totaling more than $9 billion in financing.  Since we made our first investment in mid 2009, the loan programs have committed more than $40 billion in loans and loan guarantees to support 42 clean energy projects with total project costs greater than $63 billion.

These projects will create or save more than 66,000 jobs across the U.S., and include 23 generation projects that will power nearly three million homes, about the same number of homes in Arizona.  The generation projects will also avoid nearly 19 million metric tons of carbon dioxide, equivalent to the carbon dioxide emissions of three and a half million vehicles, or roughly the same number of vehicles as the entire state of Kentucky.

The Section 1705 Loan Guarantee program

The Section 1705 program, a part of the American Recovery and Reinvestment Act (ARRA), has been an important conduit for these investments.  As the 1705 program winds down, it’s worth taking a moment to reflect on the significant accomplishments of the last two years.

When the Obama administration took office, the DOE loan programs had not issued a single loan guarantee since its inception in 2005.  Since that time, the program experienced considerable growth, increasing its staff, for example, from 35 people in 2009 to approximately 175 federal employees and supporting contractors today.  With the appropriate level of resources and infrastructure in place, the loan programs got off the ground and provided considerable support to a wide variety of clean energy sectors, including biofuels, solar, wind, geothermal, nuclear, transmission and storage.

Doubling the rate of loan guarantee issue

Consider that so far in 2011, LPO has committed support for 23 projects, compared with 11 in 2010 and eight in 2009.  Our projects include the world’s largest wind farm, several of the world’s largest concentrating solar and photovoltaic generation plants, three commercial geothermal plants that breathe new life into the industry, and the first nuclear power plant in the United States in the last three decades.

They also include a facility that will mass produce advanced high strength steel, which helps decrease vehicle weight, and an innovative solar manufacturing facility that could dramatically cut the cost of solar power.  And finally, they include a landmark rooftop solar project, which will generate approximately 733 megawatts of clean power by placing solar panels on commercial rooftops in as many as 28 states.  Many of these projects are first-of-a-kind that, when completed, can be replicated across the U.S., creating even more jobs and increasing our nation’s ability to compete on a global level.

The Recovery Act has supported three out of every four projects we have announced to date.  With just $2.5 billion in appropriated ARRA funds, the Loan Programs Office brought more than $20 billion in private capital off the sidelines and into the markets.  Recently, we offered a conditional commitment for a $105 million loan guarantee to support Project LIBERTY, a first-of-its-kind cellulosic ethanol plant that will produce up to 25 million gallons of ethanol per year.  It is expected to create more than 200 construction jobs and 40 permanent jobs.

POET’s Project LIBERTY

Project LIBERTY is eligible under 1705 because it is a leading-edge biofuels project that will commence construction prior to the program’s sunset date of September 30, 2011, and because its innovative qualities meet the Department’s objectives for investing in potentially transformative technologies.  Unlike many conventional corn ethanol plants, Project LIBERTY will produce ethanol using corncobs, leaves and husks – sources provided by local farmers – that do not compete with feed grains.

The facility will use an enzymatic process to convert crop waste into ethanol and will be located adjacent to POET’s existing grain-based ethanol plant.  Project LIBERTY will produce biogas from a waste stream of the cellulosic ethanol process that will power both plants.  Once up and running, the project will displace 13.5 million gallons of gasoline annually, and, if replicated at POET’s 26 other corn ethanol facilities, could have a projected combined annual capacity of one billion gallons per year of cellulosic ethanol.

While many innovative projects like Project LIBERTY were conditionally approved under the 1705 program, many more were unable to reach approval because the program lacked sufficient funds and time to meet the market demand for financing.  If, in the future, the Loan Programs Office has sufficient budget resources, we may be able to continue evaluating these projects.

Moving on to Section 1703 loan guarantees

In the meantime, some of those projects could be eligible for 1703, which, for the first time, has $170 million in appropriated funds to help support a limited number of renewable energy or efficient end-use energy technologies.  For now, our efforts are concentrated on closing the remaining 1705 projects that have received conditional commitments.  We are proud of the tremendous contributions this program has made towards achieving a cleaner energy economy, and look forward to continuing the momentum in the near future.