Restriction eases for DOE Loan Guarantees

I don’t really analyze deeply some of the policies surrounding the renewable chemicals and biofuels/bioenergy markets although I do recognize that the renewable chemicals industry seems to be always trying to catch up with its bigger sibling when it comes to policies enabling tax credits, government incentives and loans for renewable chemicals projects and products.

The Alternative Fuels & Chemicals Coalition (“AFCC”) seems to be working on that gap and one of the founders noted that big events will be coming our way this year targeting the renewable chemicals market. Founded by AFCC General Counsel Mark J. Riedy (Kilpatrick Townsend Stockton), AFCC Executive Director CJ Evans (American Diversified Energy) and AFCC Executive Vice President Rina Singh, the organisation advocates for public policies in the biobased economy to promote the development & production of Alternative Fuels, Renewable Chemicals, Biobased Products, and Sustainable Aviation Fuels.

Anyway, the AFCC recently announced that it has been working closely last year with policymakers and appropriators to provide changes to the U.S. Department of Energy (“DOE”)’s Title XVII Innovative Technology Loan Guarantee Program (the “Title XVII Program”), which were realized through the recent enactment of the Consolidated Appropriations Act of 2021.

The Title XVII Program has the authority to disperse up to approximately $25.5 billion in remaining low-interest loans for clean energy projects such as biofuels, renewable chemicals, biobased products, advanced fossil energy and chemicals, carbon capture and storage technologies, renewable power and nuclear energy.

The Title XVII Program focuses on providing hard-to-find financing to commercialize innovative, first-of-a-kind technologies. By stimulating construction and the deployment of new technologies, it has the ability to add thousands of new high-paying jobs, get people back to work, and aid economic recovery.

The Program was authorized in the Energy Policy Act of 2005 to support the deployment of large projects that avoid, reduce or sequester planet-warming emissions. In the American Recovery and Reinvestment Act of 2009, in response to the last financial crisis, Congress temporarily expanded the program.

The significant-high costs for applying into the Title XVII Program for Phase 1 and Phase 2, along with the excessive time frame to financial closing, have been enormous deterrents for technology innovators and project developers, especially those in early-stage and first-of-a-kind technologies. AFCC and many of the Title XVII Program advocates felt there was a need to reform the Title XVII Program to make it accessible for a greater number of project developers by removing and/or reducing several of the applicant borrower fees to the government, moving any such fees to financial closing and compressing the time to reach financial closing.

As AFCC stated in its fiscal year 2021 appropriation request to the House and Senate Appropriations Subcommittee members and staff, removing and/or reducing several of the applicant borrower fees for the DOE’s Title XVII Program would “enable more companies with innovative technologies to participate in the Title XVII Program’s loan guarantees.” To broaden participation, AFFC proposed that Congress “remove the cost and time barriers that prevent many small businesses from participating in the Program,” by directing DOE to remove and/or reduce several of the applicant borrower’s fees payable to DOE and compress the time to reach financial closing.

The full text of the Energy Act of 2020 can be found here. The section-by-section analysis can be found here. Section 9010 (page 1227 in the section-by-section analysis) represents the Title XVII Program changes, which amend and reform its Renewable Energy, Advanced Fossil Energy and Nuclear Energy subprograms, established through the Energy Policy Act of 2005, to defer the collection of fees and other expenses from applicant borrowers until financial closing, and to potentially reduce such fees, compress the time to financial closing and expand project eligibility. It also adds provisions regarding analysis by the Secretary of the Treasury, application status, outreach, coordination, and reports to Congress.

Section 9010 authorizes funding from fiscal year (“FY”) 2021-2025 for administrative and other expenses in the amount of $32 million for each fiscal year, and additional funding for FY 2021 in the amount of $25 million for administrative expenses not otherwise covered by fees collected from project applicant borrowers in order to reduce their fees payable to DOE. All fees, including the underwriting fees and the credit subsidy cost, are moved to at least financial closing and can be reduced at the discretion of the Secretary of Energy.

The last new project approved under the Title XVII Program occurred in late 2016, a loan to a carbon capture and storage plant in Louisiana, which still awaits financial closing. The Trump administration has had one financial closing for a nuclear reactor project in Georgia in 2019 (its second such closing), but the process for its application began under the Obama administration where its initial loan was financially closed.

The Energy Act of 2020, which is part of the Consolidated Appropriations Act of 2021 features consensus provisions from the Senate’s American Energy Innovation Act (S. 2657) and the House’s Clean Economy Innovation and Jobs Act (H.R. 4447). It stands to become the first comprehensive modernization of our nation’s energy policies in 13 years.