Late last week, the United States Dept. of Energy (“DOE”) Loan Program Office issued a final solicitation for projects seeking loan guarantees titled “Federal Loan Guarantees for Renewable Energy Projects and Efficient Energy Projects.” Issued under the DOE’s Section 1703 Loan Program (named for Section 1703 of Title XVII of the Energy Policy Act of 2005), the Renewable and Efficient Energy Projects solicitation will make up to $2.5 billion in direct loan guarantees* available to “catalytic projects”- i.e., those that will push the commercial deployment of innovative technologies in future projects. Download a copy of the solicitation (PDF).
We provide a checklist of project eligibility, program requirements and the loan guarantee application process below.
What Projects Are Eligible?
All eligible projects must:
be located in the United States;
use (1) renewable energy systems; (2) efficient electrical generation, transmission and distribution technologies; or (3) efficient end-use energy technologies; and
both (1) avoid, reduce, or sequester anthropogenic emission of greenhouse gases and (2) employ a “new or significantly improved technology” as compared to a “commercial technology” that has been used in three or more commercial projects for at least five years at the time the term sheet is issued.
With respect to whether a particular project will “avoid, reduce, or sequester” greenhouse gases (“GHGs”), the DOE will conduct a life cycle assessment of each project’s GHG impact using a “cradle-to-grave” approach.
The DOE anticipates that eligible projects will fall into one of five broad categories:
Advanced Grid Integration and Storage (e.g., smart grid systems using demand response, sensing, or storage; microgrid projects; and storage projects that enable greater adoption of renewable generation);
Drop-in Biofuels (e.g., new biorefineries, bio-crude refining processes, and modifications to existing facilities);
Waste-to-Energy (e.g., landfill or biodigester methane for heat and power; municipal solid waste to electricity; and crop and forestry waste to fuel and/or energy);
Enhancement of Existing Facilities (e.g., addition of generation to non-powered dams, addition of variable speed pump turbines to existing hydro facilities, and retrofitting existing wind turbines), and
Efficiency Improvements (e.g., reducing residential, institutional, and commercial energy use; recover, store, or dispatch curtailed energy from underutilized renewable energy sources; recover, store, or dispatch waste energy from thermal, mechanical, electrical, chemical or hydro processes; and dispatch, control, or stabilize intermittent power to large transmission lines, smart grids, and microgrids).
What are the Program Requirements?
The Energy Policy Act of 2005 sets the limits of the DOE’s authority to issue loan guarantees. DOE loan guarantees under the Section 1703 Loan Program may be for a term of up to 30 years and may cover no more than 80% of eligible project costs. However, the DOE has noted with respect to this solicitation that “the amount of senior debt that a particular project can support . . . will be the key determinant of overall senior debt leverage.” The DOE wants to maximize the amount of co-lending by private sector senior lenders and will therefore look more favorably on project proposals for which only partial guarantees are requested.
Another important factor to consider is that, according to the DOE’s FAQ website for the solicitation, the Loan Program Office has not received any appropriated funds to pay the credit subsidy cost (a reserve established to cover the government’s risk of estimated shortfalls in repayment) for loan guarantees issued under this solicitation.** While it is possible that such amounts will be appropriated, the borrower should expect to pay credit subsidy costs at closing – especially for applications submitted in the later rounds.
How Does the Application Process Work?
Applicants will undergo a two-part review: Part I will determine initial eligibility and, for those that clear initial eligibility, Part II will be the full application process. The First Part I submission due date is October 1, 2014. There are no provisions for a small business set-aside in this solicitation.
Part I applications must be accompanied by a $50,000 application fee. If an applicant is invited to submit an application under Part II, an additional fee of $350,000 (for loan guarantees greater than $150 million) or $100,000 (for loan guarantees less than $150 million) must accompany its submission.
While the solicitation anticipates five rounds of applications, with Part I deadlines ranging from as early as October 1, 2014, for Round 1, to as late as December 2, 2015, for Round 5, awards will be made on a rolling basis so applicants should expect that the earlier rounds will be heavily subscribed and later rounds could be cancelled.
Can I Submit Multiple Applications?
Yes, for different technologies. However, applicants cannot submit applications for multiple projects using the same technology. In other words, if you have an innovative technology, pick your best project.
* The solicitation states that additional amounts will be available “that can be imputed based on the availability of an appropriation for the credit subsidy cost of such imputed loan guarantee authority.” The DOE estimates that the total dollars available for loan guarantees through this new program will be $4 billion.
** The solicitation notes that the 2011 Appropriations Act made approximately $169,660,000 available for the credit subsidy cost of the DOE’s loan guarantee authority under Section 1703, generally. However, only renewable energy projects and efficient end-use projects under Sections 1703(b)(1) and (7) of Title XVII, qualify for funds under that legislation (efficient electrical projects under Section 1703(b)(6) do not). Thus, to the extent that appropriated funds for credit subsidy costs under the 2011 Appropriations Act are still available, they are not available for all project types eligible under this solicitation.