United States (Federal)

US-14:Loan Guarantee Program

Policy Description

The U.S. Department of Energy’s Loan Guarantee Program provides loan guarantees for clean energy projects to encourage their commericial deployment on a broader scale. 

Description

The U.S. Department of Energy’s Loan Guarantee Program provides loan guarantees for clean energy projects to encourage their commercial deployment on a broader scale. [1] The Loan Guarantee Program consists of three separate programs, Section 1703, Section 1705, and Advanced Technology Vehicles Manufacturing (ATVM). All three programs are administered through DOE’s Loan Programs Office (LPO), which conducts a competitive review of the applications [2]. LPO originates, guarantees, and monitors loans to support clean energy projects through these programs.

The Section 1703 Loan Program guarantees loans for innovative clean energy technologies that are typically unable to obtain conventional private financing due to high technology risks. In addition, the technologies must avoid, reduce, or sequester air pollutants or anthropogenic emissions of greenhouse gases. Eligible technologies include: biomass, hydrogen, solar, wind/hydropower, nuclear, advanced fossil energy coal, carbon sequestration practices/technologies, electricity delivery and energy reliability, alternative fuel vehicles, industrial energy efficiency projects, and pollution control equipment [3].

The Section 1705 Loan Program authorized loan guarantees for projects that commenced construction no later than September 30, 2011 and involved certain renewable energy systems, electric power transmission systems, and biofuels. The American Recovery and Reinvestment Act of 2009 appropriated $6 billion to the Section 1705 Program to support more than $60 billion in loans for these projects. $10 million from this $6 billion will support the administrative expenses for the Advanced Technology Vehicles Manufacturing Loan Program. LPO will continue to actively monitor projects that previously received loan guarantees under the program, but no new loan guarantees will be issued under the 1705 program [4].

The ATVM Loan Program supports the development of advanced technology vehicles (ATV) and associated components in the United States.

Lender-applicants apply to the Loan Program Office via the Financial Institution Partnership Program (FIPP). Under FIPP, project developers seek project loans from qualified private sector lenders and financial institutions who then directly apply to the DOE. By leveraging the resources of private sector lenders with experience in these types of credit markets, the FIPP enables DOE to review and process applications faster. In a FIPP financing, DOE guarantees up to 80 percent of a loan while lender-applicants are required to hold at least 20 percent of the credit exposure to the project. This ensures the interests of the lenders, DOE, and project sponsors are aligned. In this way, FIPP offers partial guarantees to finance commercial transactions [5].

In the 2013 Climate Action Plan, the Obama Administration pledged $8 billion in loan guarantees for advanced fossil energy and efficiency projects [6].

Policy Information Expand this section for information on the key features of the policy, such as its date of introduction, categorization, main objective(s) and linkages with other policies.

Policy Categorisation

Policy Instrument Type: Economic, Incentives & Subsidies

Position in the Pyramid

About Us

Participation: Voluntary

Period

Start Date: 2005

Policy Linkages

Supported By Save Energy Now LEADER (replaced by US-4b Better Buildings, Better Plants Program) Effort Defining
Supported By Energy Star for Industry Program Effort Defining

Agencies Responsible

Department of Energy
Department of Treasury
Environmental Protection Agency

Primary Objective: Energy

Objective

Accelerate commercial deployment of innovative and advanced clean energy technologies at a scale sufficient to contribute meaningfully to national clean energy objectives

Target Group

Industrial, Commercial, Nonprofit, Schools, Local Government, State Government, Agricultural, Institutional, Any non-federal entity, Manufacturing Facilities

Driver of energy consumption or emissions affected by policy: Energy consumption

Implementation Information Expand this section for information on targets, monitoring, verification and enforcement regimes, and implementation requirements and tools.

Coverage

Industry and other sectors

Quantitative Target? no

Progress Monitored? no

Verification Required? yes

Enforced? no

Requirements on the Target Group

 

In order to apply for a loan guarantee, an applicant must:

  • Match the requirements for one or both Section 1703 (technology focused) and Section 1705 (projects and systems focused) of Title XVII of the Energy Policy Act of 2005
  • Submit an application in response to a solicitation from DOE [6]

The government provides the loan guarantee, but the loans (for clean energy developers and manufacturing companies working on eligible projects) are provided by private lenders. These private lenders are required to hold at least 20 percent of the credit exposure to the project, in order to keep their interests and the DOE and project sponsors in alignment [7].

Support by Government

 

The Department of Energy considers project applications that have been submitted in compliance with an open solicitation (*1) [8] Federal Funding Amount: $6 billion [9]

Implementation Toolbox

 

The Department of Energy compiled a library of resources, including reference materials, answers to frequently asked questions and advice. See https://lpo.energy.gov/?page_id=51

Complexity of Implementation

Government

Government must evaluate competing loan guarantee solicitations and make awards based on multiple criteria

Target Group

Fixed rules, relatively easy to check eligibility and via standard forms request financial incentive.

Impacts, Costs & Benefits Expand this section to find information on policy effectiveness and efficiency.

Impact Quantitative Estimate Qualitative Estimate
Estimated effect on energy consumption or emissions Not available Not available
Estimated costs/benefits for industry Not available Not available
Estimated cost for government Not available Not available
Other Benefits
General Benefits

References & Footnotes

References

[1] East Bay Community Foundation: http://www.ebcf.org/stimulusguide/index.php?option=com_content&view=article&id=98:innovative-technology-loan-guarantee-program&catid=41:enviroment-a-energy&Itemid=59

[2] U.S. Department of Energy, Loan Programs Office: https://lpo.energy.gov/

[3] U.S. Department of Energy, Loan Programs Office: https://lpo.energy.gov/

[4] U.S. Department of Energy, Loan Programs Office: https://lpo.energy.gov/

[5] U.S. Department of Energy, Loan Programs Office, “What if I’m a lender?” website: https://lpo.energy.gov/?page_id=314

[6] U.S. Department of Energy, Loan Programs Office: https://lpo.energy.gov/

[7] U.S. Department of Energy, Loan Programs Office: https://lpo.energy.gov/

[8] U.S. Department of Energy, Loan Programs Office: https://lpo.energy.gov/

[9] East Bay Community Foundation: http://www.ebcf.org/stimulusguide/index.php?option=com_content&view=article&id=98:innovative-technology-loan-guarantee-program&catid=41:enviroment-a-energy&Itemid=59

[10] White House (2013). FACT SHEET: President Obama’s Climate Action Plan. Available at http://www.whitehouse.gov/the-press-office/2013/06/25/fact-sheet-president-obama-s-climate-action-plan

Footnotes

(*1) The “Renewables Solicitation” invites the submission of applications for projects in the United States that employ energy efficiency, renewable energy, and advanced transmission and distribution technologies that constitute new or significantly improved technologies.

(*2) No verification on the resulting EE improvements or GHG reductions but obviously verifications on the spending.