The head of the Department of Energy’s loan program signaled yesterday that his office is in no rush to approve its "innovative" projects, as the Biden administration plans how to distribute funds from the infrastructure package.
The Loan Programs Office’s $40 billion in loan authority is viewed by many innovation advocates as an important climate policy tool. Under the Obama administration, LPO helped finance the first massive wind projects, giving legs to an industry that is now a linchpin of decarbonization efforts.
The office’s work was mostly put on ice under the Trump administration, however. And in the 11 months since President Biden began his tenure, the LPO hasn’t yet made a single award.
Yesterday, LPO’s director, Jigar Shah, defended the office’s pace and suggested that the Energy Department would likely take a similarly methodical approach with new energy funds from the $550 billion infrastructure package.
"When you think about how this stuff works, sometimes we confuse motion with progress, and I think we’ve been very careful at the Loan Programs Office not to confuse the two," said Shah during a webinar hosted by the Bipartisan Policy Center.
So far, the loan office has received $53.6 billion worth of completed applications from energy companies, or 66 projects in total, he said. Those range across technologies, including sustainable aviation fuel, direct air capture, carbon capture and storage, hydrogen, battery manufacturing and critical minerals, among others.
But those applications have often raised philosophical questions about what the office should be prepared to finance, Shah said. "Do we want to do [battery] processing? Do we want to physically dig up dirt [for battery minerals]?" he said.
"What are the answers to the big questions? And those things are not things that you answer in a week," Shah said.
LPO has also been advising other agencies on how to capitalize on the infrastructure package’s billions in public funds for emerging clean technology, and how to turn that into an outpouring of private financing for those technologies, he suggested.
"In general, there’s been a lot of reliance on grants going out the door, as progress. … [But] those grants are meant to catalyze something bigger: gigaton-scale carbon reduction," he said.
The loan office has seen its fortunes turn dramatically, depending on who’s in the White House.
Under the Trump administration, just one new project, the Vogtle nuclear project in Georgia, was awarded a loan guarantee from the loan office. And at the height of the Covid-19 pandemic in 2020, advocates had pushed the Trump administration to get money flowing from DOE loans as a source of economic stimulus.
But in the infrastructure law, Congress gave the Energy Department a much longer timeline to spend the money than in the 2009 American Recovery and Reinvestment Act (ARRA), which was focused on "shovel-ready" projects, Shah noted.
"We’re in a different situation than we were in the ARRA stimulus. … The Congress had said, ‘Put the money out the door as fast as possible.’ In this case, they haven’t said that. Most of the timelines for the bipartisan infrastructure legislation money is really five years, in some cases seven to 10 years. So we have time to think about this and do it properly," he said.
Prior to Shah’s remarks, Biden administration officials have sometimes sent mixed messages about how fast the infrastructure funds would flow out. At one November briefing, for example, Transportation Secretary Pete Buttigieg told reporters that infrastructure funds would flow out “as fast as many of these agencies and workforces can absorb those dollars when the formula increases or when a new grant is available.”
In terms of new direct funding, the loan office itself didn’t gain much from the bipartisan package.
But the law did create dozens of new offices and programs within the Energy Department, all of which will need to be staffed and plugged into cross-agency coordination on climate policies.
One of the new offices, known as the Office of Clean Energy Demonstrations, will have a purview that brushes up closely against that of the loan office: overseeing large-scale demonstrations of emerging technologies like hydrogen, carbon capture and long-duration storage.
Both the loan office and the new clean energy demonstrations office frame much of their work around scaling up ideas for clean energy that aren’t sufficiently tried and true for most financiers.
Shah drew a line between the two offices based on technological readiness.
"The Office of Clean Energy Demonstrations is really saying, ‘There are a lot of places where the underlying technology — we think it’s going to work, but we’re not sure it’s going to work.’ In those places, the Loan Programs Office really can’t provide money," he said.
Across DOE, he added, the infrastructure law will lead to a huge influx in funding, as well as a massive round of new hires.
"The latest soundbite I heard was, we probably need to hire 1,000 more people. And that process is hard, in government," he said.
Reporter Edward Klump contributed.