Biden revives ‘clean energy’ program with $1B loan guarantee
The Biden administration has issued its first clean energy loan guarantee, reviving an Obama-era program that helped launch the country’s first utility-scale wind and solar farms a decade ago but has largely gone dormant in recent years.
The Energy Department said it would guarantee up to $1 billion in loans to help a Nebraska company scale up production of “clean” hydrogen to convert natural gas into commercial products used in manufacturing and agriculture.
The revived loan program is part of President Joe Biden’s efforts to slash planet-warming greenhouse gas emissions in half by 2030, amid legislative gridlock that has stalled a $2 trillion package of social and environmental initiatives. It’s among the tools he can use without new legislation.
Under President Barack Obama, the program boosted Tesla’s efforts to become a behemoth in electric cars, but it stumbled after the California solar company Solyndra failed soon after receiving federal aid a decade ago, costing taxpayers more than $500 million. Republicans and other critics seized on Solyndra as an example of wasteful spending under Obama’s stimulus program.
The aid to Lincoln-based Monolith Inc. is the program’s first non-nuclear loan guarantee since 2016.
Monolith produces “carbon black,” a powdery substance that enhances tires and other rubber products, and hydrogen used in ammonia-based fertilizer.
Monolith says it can create both products while vastly shrinking their greenhouse gas emissions. The company plans to use the Energy Department guarantee to finance a major expansion of its existing Hallam, Nebraska, plant that produces hydrogen and carbon black.
Energy Secretary Jennifer Granholm hailed the announcement as a sign the once-high profile loan program is back in business and ready to support deployment of clean energy, from biofuels to nuclear power and offshore wind.
“Advanced, clean production technology like Monolith’s are the types of impactful projects that support not just sustainability, but economic growth and clean energy jobs for the American people,” Granholm said.
Monolith will use the loan guarantees to “develop the innovation needed to help lead the clean energy transition, while also creating high-paying green jobs and strengthening our nation’s supply chain,” said Rob Hanson, the company’s co-founder and CEO.
Jigar Shah, who took over as director of the loan program office last year, said the program has drawn over 70 applications valued at more than $60 billion. The new bipartisan infrastructure law expanded the program’s authority and broadened the pool of eligible borrowers. The agency has access to roughly $40 billion in loan authority and expects to make an array of loan commitments in 2022, Shah said.
While Tesla and Solyndra are the best known examples, the loan office manages over 30 projects worth more than $30 billion and generates $500 million in interest income for the federal government every year, Shah said.
“We have a track record of choosing winners,” he said in an interview. “And I know that we get a lot of press on the ones who don’t succeed,” but the program has suffered just over $1 billion in losses since 2011, or roughly 3.3% of its investment, a figure Shah said is on par with commercial banks.
“Many people think we’re not taking enough risk,” he said. “But we’re in line with the best of the best.”
Some companies that apply for assistance “want the Loan Program Office to be sort of your fairy godmother in Cinderella, where you show up in rags and I create a carriage for you out of a pumpkin and turn all the mice into horses and all that stuff,” Shah said. “But it’s just not the way it works.
A former clean-energy entrepreneur who founded the SunEdison solar company, Shah said he understands the mindset of loan applicants —”you sell the dream, right?” — but says his job as a government official is to provide a reality check even as he offers assistance.
“Tell me how you’re going to make the mice into horses, and pumpkins into a carriage and the rags into a beautiful dress,” he said, continuing the metaphor. “What processes and procedures have you learned to put in place? How are you going to protect my money?”