The DOE loan guarantee process to receive a speed up in action

Alexander Richter 7 Aug 2009

According to a recent article on SolveClimate.com, the U.S. Energy Secretary Steven Chu “pledged to speed up action on the loan guarantees earlier this year when Congress expanded the program from $38.5 billion to $100 billion in the recent stimulus package, and he seems to be making good on that promise.

Three loans have been granted in the last seven months and several more are moving forward.”

According to Issa Arnita, investor relations director at geothermal developer Raser Technologies, the company has made good experience with the DOE and the program. “The company applied for a loan in late February and was approved in June to move to the due diligence phase, considerably faster than previous applicants experienced. The loan guarantee will back US$152 million financing, 80% of the cost of a geothermal plant to be built in Utah that will produce 42 megawatts of power.

Arnita says the company is expecting a final answer by the end of this month. The cost was far less than others experienced in the past, too.”

“We’re actually going to be below $1 million, more like several hundred thousand dollars,” says Arnita. “The money that we’re applying for with this loan guarantee is under the former administration program, the Bush administration, but the process has been sped up considerably as the Obama administration took over.”

“While there have been improvements, some believe the DOE can still do better, including Energy Secretary Chu. In May, groups representing solar, wind, biomass, geothermal, hydro and nuclear power companies sent a letter to White House officials calling for the DOE and the budget office to make the process easier. In particular, they want to do away with the preliminary credit assessment which can cost hundreds of thousands of dollars.

The letter argues that the credit assessment is not needed for established technologies and that start-ups don’t have enough credit information to get a favorable rating. The signatories ask for consolidation of the environmental review process and urge the DOE to accept the review of state and federal permitting agencies.

They also blame disagreements between the DOE and the Office of Management and Budget for some of the current delays.

As it stands currently, the loan guarantees are conditional and require companies to show private investment before federal money is released, something industry would like to see changed. Still, companies are anxious to get the loans, particularly at a time when private investment markets have dried up.

The DOE has a two-year extension of the program, giving the department until September 2011 to distribute the funds. With companies still waiting to hear about their loans, they will need to work quickly to fix the program and disperse the loan guarantees to businesses that are at the forefront of the green energy economy.

While industry may not get everything that they are asking of the DOE, if Raser Technologies is any indicator, they are off to a good start.”

Source: SolveClimate