Hill Heat

Ben Geman reports for E&E News:

DOE: Loan guarantee program advancing, official tells Senate panel (04/03/2008) Ben Geman, E&E Daily senior reporter

A high-level Energy Department official assured lawmakers yesterday that the department is making progress on a “clean energy” loan guarantee program and expects to begin receiving the first full applications this month.

David Frantz, who heads the loan guarantee office, also told a Senate Appropriations panel that DOE plans to issue the solicitation for the next round of projects within months.

Congress last year required DOE to provide House and Senate appropriators a loan guarantee implementation plan to define award levels and eligible technologies at least 45 days before a new solicitation. Lawmakers should receive this plan later this month, Franz told the Senate Energy and Water Subcommittee.

The Energy Policy Act of 2005 authorized federal loan guarantees for low-emissions energy facilities such as new nuclear plants, renewable energy projects, carbon sequestration and other technologies. But lawmakers - notably Sen. Pete Domenici (R-N.M.) - say the program has been slow getting off the ground.

Frantz said DOE is on the cusp of receiving full applications from some of the first 16 projects the department is considering and expects them to come in over the next several months. These projects include integrated gasification combined cycle power plants, solar energy projects, cellulosic ethanol plants, a hydrogen fuel cell project and others. DOE hopes to begin issuing the first guarantees this year.

Nuclear power plant developers are eager to receive the federal loan backing and see the program as a crucial way to get a much-anticipated wave of plants off the ground after a decades-long lull in new nuclear construction.

But loan guarantees for nuclear plants are on a longer time frame. Frantz told reporters it is not clear whether nuclear will be one of the technologies included in the next solicitation. “It is still very much in the planning stage, and we have not made a final determination,” he said after the hearing.

The omnibus fiscal 2008 appropriations bill provides DOE with authority to issue $38.5 billion worth of loan guarantees through the end of fiscal 2009, including $18.5 billion for nuclear power projects. The department already had an additional $4 billion in loan guarantee authority through prior legislation.

But DOE, as part of the current budget proposal, is asking lawmakers to extend this time frame through fiscal 2011 for nuclear power projects and fiscal 2010 for other projects. Franz called the extension “absolutely essential.”

“It takes us months and years on these larger projects to do our credit underwriting and due diligence process,” he told reporters.

Frantz said he envisioned the $18.5 billion in loan guarantee authority for nuclear plants would cover guarantees for three to four projects. The program allows the federal government to issue guarantees for loans that cover up to 80 percent of a project’s cost—a federal backstop that is designed to help energy project developers secure Wall Street financing.

Sen. Larry Craig (R-Idaho) urged Frantz to move quickly in implementing the loan program. “I hope that you have running shoes on,” he said.