Gettin’ yer Benjamins: DOE finalizes $4B loan guarantee program for renewables

By Mark Riedy and Jim Lane

This week in Washington, the Department of Energy’s Loan Program Office announced the Final RenewableEnergy and Energy Efficiency Projects Solicitation for its up to $4 billion loan guarantee program under Section 1703 of Title XVII of the Energy Policy Act of 2005.

The Solicitation may be accessed by clicking here. The Comments may be accessed by clicking here.

$2.5B up for grabs

Under the Solicitation, DOE makes available $2.5 billion in loan guarantee authority, plus an additional $169 million in appropriated credit subsidy authority and an imputed loan guarantee authority, with an amount of up to $4 billion in total loan guarantee support.

DOE may provide a loan guarantee of up to 80% of the total project costs, without a cap, but subject to available program funds.

The tenor of a FFB loan and term of a DOE loan guarantee may be up to 30 years, but typically range between 12 and 20 years.

Some really good news

In response to Comments, DOE clarified that although the Solicitation requires that a project have a reasonable prospect of repayment, it is not required to have long-term, fixed price, or take-or-pay arrangements. Applicants who sell in the spot market are encouraged to propose creative solutions. DOE ultimately is seeking not only to have its guarantees repaid, but to enable projects under this program to be successful.

Do you qualify?

To foster further development of clean energy technology, DOE will “view favorably projects that demonstrate their catalytic effect on the commercial deployment of future renewable energy or energy efficiency projects that replicate or extend the innovating features of such eligible project.”

The Solicitation identifies types of projects that DOE has determined will have a catalytic effect— and several “drop-in biofuels” categories rated a mention, including:

• New bio-refineries that produce gasoline, diesel fuel, or jet fuel;
• Bio-crude refining processes; and
• Modifications to existing ethanol facilities to gasoline, diesel fuel, or jet fuel.
Waste-to-Energy
• Methane from landfills or ranches via biodigesters to heat and power;
• Municipal solid waste to electricity;
• Crop waste to fuel and/or energy and bioproducts.

Project Eligibility

Under this Solicitation, DOE is seeking to support innovative clean energy projects that meet the following eligibility criteria:

• be located in the United States;
• use one of the following technologies: renewable energy systems; efficient electrical generation, transmission, and distribution technologies; or efficient end-use energy technologies.
• avoid, reduce, or sequester anthropogenic emission of GHG; and
• employ New or Significantly Improved Technologies, as compared to Commercial Technology in
service in the United States, at the time the term sheet is issued, as these terms are defined under 10
CFR Part 609.

A technology will be considered Commercial Technology if it is in general use in the commercial marketplace in the U.S. at the time the term sheet is issued by the DOE. A technology will be considered in general use if it has been installed and is used in 3 or more commercial projects in the U.S. in the same general application as in the proposed project, and has been in operation in each such commercial project for at least 5 years by the time the term sheet is issued.

A New or Significantly Improved Technology is a technology that is not a Commercial Technology, and that has been: (i) only recently developed, discovered, or learned; or (ii) involves or constitutes meaningful and important improvements to the Commercial Technology in use in the U.S. at the time the term sheet is issued.

Application Process

The application consists of two submissions, Part I and Part II. Part I submission determines the initial eligibility of a project for funding, while the Part II submission includes completion of the full application and due diligence process. Only applicants for projects that are deemed eligible based on DOE’s Part I review may be invited to submit Part II of the application.

• Part I review will include an evaluation of whether the project is responsive to the requirements of the Solicitation. In addition to project eligibility requirements, a Part I application must demonstrate that
the project provides a reasonable prospect of repayment of the principal and interest, has sufficient

• Part II review will include a determination of the project’s viability based on financial, technical, and programmatic factors. DOE will conduct a more detailed, weighted review of a Part II application, which will include thorough due diligence of the project.

Viable projects that are granted a conditional commitment will then undergo the complete underwriting process and negotiation of terms for the loan guarantee.

Yikes, the Application Fee

The total application fee for the application is targeted at between $150,000 and $400,000, payable in two installments.

More analysis of the Solicitation

Mark Riedy and his team at Kilpatrick Townsend issued a legal alert on April 21 analyzing the Draft Solicitation — you can access that in all its glory, here.

And the complete Alert on this Solicitation from Kilpatrick Townsend and the team is here.