Jump to Navigation


Federal Stimulus Funding Fuels Further DOE Loan Guarantee Program Opportunities

April 16, 2009

The American Reinvestment and Recovery Act (ARRA) appropriated $6 billion to the U.S. Department of Energy's (DOE) Title XVII Loan Guarantee Program to support loan guarantees of up to $60 billion for renewable energy and electric power transmission projects.  Potential applicants for these loan guarantees include companies involved in alternative energy production (such as solar, wind and hydropower projects), leading-edge biofuel projects, and projects designed to upgrade electric power transmission.  Interested companies would do well to revisit the opportunities available through the Program and the latest appropriation, as well as the many requirements established under the Program's final administrative rule.


The DOE Loan Guarantee Program was established under the Energy Policy Act of 2005 and was designed to support eligible projects that avoid, reduce or sequester air pollutants, including anthropogenic emissions of greenhouse gas using new and innovative technology.

Initial Loan Program Requirements and Status

DOE initially issued a solicitation for pre-applications prior to the issuance of a final rule governing the program.  Out of hundreds of applicants, DOE invited sixteen projects to submit full applications.  Of that group, eleven submitted full applications prior to the deadline set by DOE and are under review.  Most recently, DOE announced it has signed a conditional commitment for one of these early applicants- Solyndra, Inc. for a $535 million loan guarantee to build a manufacturing plant for solar panels.    

DOE issued a final rule governing the Loan Guarantee Program on October 23, 2007.  Under the rule, DOE must advertise available loan guarantee authority through the use of public solicitations.  For example, since the initial solicitation for pre-applications, DOE has issued individual solicitations for front-end nuclear fuel cycle projects, nuclear power projects, renewable energy projects, and carbon capture and sequestration projects. 

The rule includes a number of important requirements, including:

  • Applicants must pay administrative costs and the credit subsidy cost of their proposed projects prior to receiving the loan guarantee.
  • The loan guarantee must not cover more than eighty percent of the total project cost.
  • The loan guarantee does not finance tax-exempt debt obligations.
  • Project sponsors must make a significant equity contribution to the proposed project.
  • DOE holds the first lien on all project assets pledged as collateral for the loan.

New Loan Guarantee Section Created by the ARRA

Instead of simply adding $6 billion to the existing Loan Guarantee Program, the ARRA created a new section under Title XVII for near-term commercial projects that fall into three categories:

  • Renewable energy systems, including incremental hydropower, that generate electricity or thermal energy, and facilities that manufacture related components.
  • Electric power transmission systems, including upgrading and reconductoring projects.
  • Leading edge biofuel projects that will use technologies performing at the pilot or demonstration scale that DOE determines are likely to become commercial technologies and will produce transportation fuels that substantially reduce life-cycle greenhouse emissions compared to other transportation fuels.

Importantly, the $6 billion appropriated for this new section of the Loan Guarantee Program will cover the credit subsidy costs for eligible projects.  While it is impossible to estimate the actual credit subsidy cost for each project, an average of 10% of the total guarantee for each project would lead to $60 billion in loan guarantee funding. 


The Obama Administration and Secretary of Energy Stephen Chu have stated publicly their desire to see funds moved quickly into the marketplace to support alternative energy projects.  In line with that desire, Secretary Chu has initiated a process to amend the existing Title XVII regulations and DOE has announced the signing of its first commitment to make a loan guarantee—an important stage in the process. 

Pending further actions by Congress to create a so-called "clean energy bank" to provide financing for alternative energy projects, DOE's Loan Guarantee Program remains the most important conduit for getting public funds into the marketplace to create new alternative energy projects and so-called "green jobs."  The program has been beset by delays since its inception but there are increasing signs that the new administration is intent on getting funding to flow faster.  With the tremendous amount of money from the ARRA, it is important to note that a new source of capital may finally be available from DOE for a variety of projects.  Should you have any questions about the government funding opportunities available through this Program or the complex maze of rules that surround it, please do not hesitate to contact us.