Friday, February 13, 2009

Senate Hearing On EPAct05 Loan Guarantee Program

Subscribers Note: WIMS will not be publishing on Monday, February, 16, 2009, in observance of President's Day/Washington’s Birthday.

Feb 12: The Senate Energy & Natural Resources Committee, Chaired by Senator Jeff Bingaman (D-NM) held a hearing is to receive testimony on the current state of the Department of Energy Loan Guarantee Program, authorized under Title 17 of the Energy Policy Act of 2005 (EPAct05), and how the delivery of services to support the deployment of clean energy technologies might be improved. EPAct05 authorizes the U.S. Department of Energy to issue loan guarantees to eligible projects that "avoid, reduce, or sequester air pollutants or anthropogenic emissions of greenhouse gases" and "employ new or significantly improved technologies as compared to technologies in service in the United States at the time the guarantee is issued."

Witnesses testifying at the hearing included David Frantz, Director of Loan Guarantee Program, Department of Energy and representatives of the Council on Competitiveness; Friedman Billings Ramsey & Company, Inc.; and Barclays Capital. Chairman Bingaman and Ranking Member Senator Lisa Murkowski (R-AK) both delivered opening statements.
Chairman Bingaman said, “As I’ve noted before on this topic, the challenges we face in reorienting our energy systems from our current path are significant. Even as many of us realize the dangers to our health, security, and welfare that continuation of the status quo presents, the size of the challenge can be daunting. Putting a price on CO2 will help, and I believe policies such as a Renewable Electricity Standard will also be a part of the solution, but to achieve the speed and scale required, we can’t limit ourselves to one or even a few policy tools. We should explore every possible option and be ready to adapt when policies don’t seem to get the job done. . .

"The loan guarantee program in the 2005 energy bill was aimed squarely at that problem [developing and implementing new technologies], but somewhere along the line it seems the guiding principles of speed and scale were lost. I believe the President and Secretary Chu are bringing the necessary will and sense of urgency to this problem, but we should still ask ourselves if the structure of the program is sufficient to allow them to succeed. Can the Department take the necessary risks -- risks the private sector is unwilling to take or unable to effectively price – to enable these technologies to get over the initial hurdles to commercialization? Will they be able to act at a sufficient scale to reduce the deployment costs that keep these technologies from effectively competing with entrenched current technologies?"

Ranking Member Murkowski said, "Some opponents of this vital program dismiss it as merely a Loan Guarantee Program for the nuclear industry. That is simply not the case. The Title XVII program provides support for a broad portfolio of clean energy technologies - everything from energy efficiency and renewable energy systems; to pollution control and vehicle technology; to advanced nuclear and carbon capture projects.

"The Loan Guarantee Program we established four years ago can now assist us as we seek to rebuild our battered economy. The program supports projects that promise stable, high paying energy sector jobs and will help rebuild a core infrastructure upon which the future prosperity of our country depends.

"We are not risking taxpayer dollars with this program. Instead, fees paid by loan guarantee recipients are designed to cover the costs of potential project defaults.The energy sector obviously needs the Title XVII Loan Guarantee Program as evidenced by the voluminous number of requests submitted to the Department of Energy. Despite the current limit of $42 billion for the program, DOE has received more than $120 billion dollars in applications. . .

". . .there is an urgent need for these services -- particularly in this credit crisis -- and we should ensure that the current program proceeds as expeditiously as possible. Where there are roadblocks, they should be removed. Where rules are ambiguous, clarification should be provided. If there is a desire to broaden the current program to provide additional services or achieve different policy objectives, then it should be done in such a way as to not cause delays in the disposition of current applications. Second, we must ensure equitable treatment of the entire portfolio of clean energy technologies. Now is not the time to be picking technology “winners and losers.”

DOE testified, "This program is an urgent priority for Secretary Chu as we face an unprecedented economic crisis that demands action. Secretary Chu is personally reviewing the program, and has committed to giving this program the attention, departmental resources and oversight it needs to succeed while ensuring that taxpayer interests are protected. . . One immediate priority for Secretary Chu is automating, simplifying and streamlining the existing application and evaluation systems."

DOE summarized the current proposal status including: The 2006 mixed technologies solicitation closed in November 2008 -- 11 projects for $4.0 billion in loan authority; The front-end nuclear power facilities solicitation closed in December 2008 -- two proposals for $2 billion in loan authority; The first nuclear power facilities solicitation also closed in December 2008 -- 15 proposals for $18.5 billion in loan guarantee authority; The fossil energy advanced technologies solicitation Part I applications were due on December 22, 2008 -- eight projects for $8 billion in loan guarantee authority; The advanced renewables solicitation currently has $10B in loan guarantee authority and is scheduled to close in February 2009, with the exception of the large scale renewable projects which will close in April 2009.

Access the hearing website and link to testimony and a webcast (
click here). Access a statement from Senator Bingaman (click here). Access a statement from Senator Murkowski (click here). Access the DOE Loan Guarantee Program website for complete background information (click here). [*Energy]