A Plug Power electrolyzer system. Plug Power is trying to finalize a $1.66 billion loan to build a series of clean hydrogen production plants. (Power plug)
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President Joe Biden’s $400 billion Green Bank has just weeks to close billions of dollars in deals to finance green technology before handing over the keys to the Trump administration.
The Department of Energy’s Office of Loan Programs has provided crucial support to companies deploying new technology and large projects that banks typically avoid. Among other loans under Biden, LPO made a record $9.2 billion offer to Ford Motor Co. to finance the construction of three battery factories and provided $1.5 billion to Holtec International Corp. to restart a closed nuclear power plant.
Yet more than $40 billion in conditional liabilities could be at risk once President-elect Donald Trump takes office. Since the election, the LPO has announced a $4.9 billion loan guarantee to renewable energy developer Invenergy for a high-voltage transmission line project; A $6.6 billion conditional loan to Rivian Automotive Inc.; and a $7.5 billion loan for a joint venture between Samsung SDI Co. and Stellantis NV to create battery manufacturing plants in Indiana.
It’s still possible the Department of Energy will have time to meet those commitments, but it won’t be easy, said Kennedy Nickerson, who previously worked as a policy adviser in the Office of Loan Programs.
“It would be very quick and would require a very bureaucratic process that works perfectly, but it’s possible,” said Nickerson, who is now vice president of Capstone, a Washington-based research group. “The Biden administration recognizes the risk and is working hard to make loan guarantees and loan agreements as watertight as possible” before Trump takes over.
Asked if the Energy Ministry had enough time to close pending loans, Jigar Shah, the office’s director, said it was up to the borrowers to complete the rigorous verification process. of the Ministry of Energy.
“Right now, borrowers are sufficiently motivated to act more quickly than they were, probably a year ago,” he said. “It’s up to the borrowers to decide. Our process has not changed.
During his first administration, Trump tried to kill the program. This time, some members of his entourage want to eliminate or retool the LPO to finance fossil fuels and other energy sources favored by Republicans.
One of the two executives chosen by Trump to lead the so-called Department of Government Efficiency, Vivek Ramaswamy, has already promised that the new administration would review and cancel billions of dollars in “last minute” loans to the Department of Government. ‘Energy. (The other is Elon Musk, whose company Tesla Inc. benefited from an LPO loan during the Obama administration.) Chris Wright, Trump’s nominee for energy secretary, criticized subsidies for wind and solar power. and called greenhouse gas reduction targets “perverse.” However, he spoke of the advantages of nuclear energy.
Construction of Ford’s BlueOval Battery Park in Michigan is progressing. (Ford Motor Co.)
Jonathan Silver, who oversaw the Office of Loan Programs during President Barack Obama’s first term, said Republicans could choose to dismantle it at their peril.
“The greatest irony,” he wrote in an email, “is that by attempting to slow this inevitable and necessary transformation, the ‘drill baby, drill’ crowd is actually increasing the chances that the next administration be forced to introduce government mandates. to get us back on track.
The LPO received an injection of money from the climate law signed Biden. It has nearly $400 billion in loan authorizations remaining, the Energy Department said in November.
The administration has yet to close 18 loans, including a $2 billion commitment made in February 2023 to Redwood Materials Inc., a battery recycler run by a Tesla alum.
The time it takes to finalize the loans makes it unlikely they will all be completed before Biden leaves office. The average LPO decision takes more than 200 days, although the Biden administration closed its first deal — a roughly $500 million loan guarantee for a hydrogen project in Utah — in about 40 days .
Pat Gruber, CEO of biofuel maker Gevo Inc., said there is no chance the Biden administration will close on the $1.46 billion loan given to his company in October. The company still needs to raise capital and finalize other details, although he is optimistic the new administration will get across the finish line.
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Recovering the funds would not be easy for the Trump administration, especially if the money was sent, said Peter Davidson, founder and CEO of Aligned Climate Capital who served as executive director of the office from 2013 to 2015.
“Once a loan has been committed, it is a binding contract with the government, so it must be paid,” Davidson said. “Once the money is committed, if it is not sent to the borrower, you are in a legal dispute, and it must be resolved in court.”
The bureau has had a reputation for caution since its first loan went bad. In 2009, the bureau provided a $535 million loan guarantee to Solyndra to manufacture tube-shaped solar panels at a new factory in the San Francisco Bay Area. The company went bankrupt two years later, sparking a political storm. Joe Mastrangelo, CEO of advanced battery company Eos Energy Enterprises Inc., said LPO remains committed to avoiding another extinction, even if it slows the application process.
His company first contacted the Department of Energy about four years ago, received a conditional commitment in 2023, and recently closed on a $303.5 million loan to cover production line costs from its factory outside of Pittsburgh and add a second line as well as possibly install two. lines at another nearby facility.
Mastrangelo said any funding mechanism for startups developing new technologies will end up funding some failures: “If we do our job well, as a country, there will be failures in the program – there must be. You need to have a process that moves with the pace of the market.
The LPO also draws on the expertise of other agencies when deciding whether to finance projects. That adds another hurdle to distributing the money as other parts of the administration try to insulate Biden’s legacy from Trump.
Plug Power Inc. had to work not only with the DOE but also with the Environmental Protection Agency and the Army Corps of Engineers as it tries to finalize a $1.66 billion loan to build a series of clean hydrogen production plants, CEO Andy Marsh said.
While critics often complain that the government is a poor venture capitalist, Marsh said the loan office understands clean tech startups and big business projects better than many private sector companies. “The government is actually smarter about the perceived risks, simply because they have been involved in these projects,” he said. “If it’s something that’s never been done before, it’s hard for the private sector to take the risk.”