Bodman to Release Telling data on DOE Loan Guarantee Program

The Energy Department today will release figures during a congressional hearing showing a yawning gap between funding and the need for federal energy project loan guarantees.

The industry is seeking more than $27 billion in protection from DOE's loan guarantee program, but the department says it can provide $4 billion in guarantees this year and $9 billion in 2008. Energy Secretary Samuel Bodman is expected to unveil this data today before a House Energy and Water Development Appropriations Subcommittee hearing on the fiscal 2008 budget, according to documents obtained by E&E Daily.

Bodman will testify that the 143 loan guarantee pre-applications sent to DOE represent total project costs of more than $51 billion for advanced fossil energy, biomass, solar, energy efficiency and other programs.

The numbers reflect the pre-applications submitted to DOE as of the Dec. 31 deadline. These do not include anticipated requests for new nuclear power projects, for which companies are expected to file combined construction and operating license applications with the Nuclear Regulatory Commission starting later this year.

Nuclear power plants will be eligible for loan guarantees in 2008. On their own, the nuclear power plant loan guarantee requests are expected to be substantial. They also are considered key for any company submitting a new reactor license application to NRC.

"This demonstrates a great need and a great desire from industry to get federal loan guarantees in place to spur innovative and novel technologies that lead to clean energy," Bodman said in a statement. "As we move through the process, experts will be taking a hard look at the proposals, the design, and the financing risks associated with each pre-application with the hopes of inviting some sponsors to submit loan guarantee applications to DOE as soon as possible."

Congress authorized DOE's loan guarantee program as part of the Energy Policy Act of 2005 with the intention to help advanced nuclear, coal and alternative fuel facilities that promise to produce energy while minimizing air emissions. But lawmakers have been frustrated by the now 18-month delay in starting up the program.

The delays have been due to lack of funding because Congress did not approve the fiscal 2007 federal budget until last month. Just as problematic is the wrangling between DOE and the Office of Management and Budget over how the program is structured and managed.

Industry officials and financial analysts also have been frustrated with what they say is a "command and control" manner in which DOE has proposed to set up the program, not to mention the federal government's interpretation of the law's broad guarantee of coverage for up to 80 percent to projects that cover renewable energy systems, advanced nuclear power plants, integrated coal gasification combined-cycle plants and carbon sequestration projects. OMB has defined that to mean support for 80 percent of the debt, which would amount to little more than 60 percent of the cost of a project.

The fiscal 2007 spending resolution Congress approved last month caps the amount of loan guarantees available at $4 billion, with $7 million in startup funding for the department to get the program going. The Bush administration has proposed a $9 billion loan guarantee cap for fiscal 2008, with an operating budget of $8 million.

Of the pre-applications received by Dec. 31, 49 percent of the technologies represented are biomass projects, with 16 percent representing advanced fossil energy technology, DOE said. Another 12 percent of the applications represent solar energy technologies, while 6 percent are for industrial energy efficiency projects. The remaining 17 percent of the applications are for "other" technologies that DOE did not define.

By loan guarantee amount, 61 percent of the requests are for advanced fossil energy technology, which represents the size and scope of the power generation plants in that category. Another 10 percent of the requests by loan guarantee amount are for industrial energy efficiency projects, 14 percent are for biomass projects, 7 percent are for solar projects and 8 percent are for "other."

By total project costs, advanced fossil energy technologies represent the largest grouping, at 69 percent. Biomass comes in at 11 percent while industrial energy efficiency projects represent 7 percent. Another 6 percent are for solar projects and the remaining 7 percent are for "other."

Copyright 2007 E&E Daily. All Rights Reserved. Visit E&E Daily for a free trial.

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