A game changer for financing clean energy projects
Key changes have been made to the Loan Guarantee Program for Innovative Technologies, Title XVII of the US DOE.
The Coalition for Alternative Fuels and Chemicals, along with its General Counsel, Kilpatrick Townsend & Stockton LLP, worked closely with policymakers and appropriators this year to make key changes to the innovative technology loan guarantee program of the United States DOE Title XVII, which was included in Section 9010 of the Consolidated Appropriations Act of 2021, enacted December 27 by former President Trump.
Title XVII has the power to disperse up to approximately $ 25.5 billion in low interest loans for clean energy projects such as biofuels, renewable chemicals, bio-based products, energy advanced fossils and chemicals, carbon capture and storage technologies, renewable energy and nuclear power. . It focuses on providing the hard-to-find funding to bring innovative and unique technologies to market.
The program was authorized by the Energy Policy Act 2005 to support the deployment of large projects that avoid, reduce or sequester emissions from global warming. In the Recovery Act of 2009, Congress temporarily expanded the program. Although they are well funded, the significant high costs of multiple borrower fees from the submission of applications to the financial close of Title XVII program for phases 1 and 2, as well as the excessive delay until financial close, have been a huge deterrent to technology innovators and project developers, especially those in the early stages of developing new technologies. The AFCC and many Title XVII supporters felt that it was necessary to reform the Title XVII program to make it accessible to a greater number of project developers by eliminating or reducing the fees of several applicant borrowers payable to government, by transferring fees to financial close. and compress the time to reach it. As AFCC stated in its 2021 FY2021 appropriation request to the House and Senate Appropriations Subcommittee, this would allow more companies with innovative technologies to participate in the program’s loan guarantees. Title XVII. To broaden participation, the AFCC proposed that Congress “remove the cost and time barriers that prevent many small businesses from participating in the program,” asking the DOE to take action regarding the aforementioned borrower fees and obstacles to financial close.
Section 9010 of the Energy Law of 2020 represents the changes to the Title XVII program, which modify and reform its Renewable Energy, Advanced Fossil Energy and Nuclear Energy sub-programs. These changes include the deferral of the collection, or perhaps the reduction, of multiple borrower fees, including credit grant payments and other underwriting fees from government-initiated third-party vendors, from applicant borrowers to. ” at least financial close, reduction of time to financial close and expansion of the project. eligibility. It also offers the possibility for borrowers to recover their borrowing costs from the loan proceeds, or possibly to include them in the equity of the project, and adds provisions concerning the analysis by the Secretary of the Treasury, the statement of requests, outreach, coordination and reporting to Congress.
Section 9010 authorizes funding for fiscal year 2021- ’25 for administrative and other expenses in the amount of $ 32 million for each fiscal year, and additional funding for fiscal year 2021 in the amount of $ 25 million. dollars for administrative fees to reduce borrower fees payable to DOE.
The last new project approved under Title XVII took place at the end of 2016, a loan to a carbon capture and storage plant in Louisiana, which is still awaiting financial close. The Trump administration had a financial close for a nuclear reactor project in Georgia in 2019 (its second such close to offset the additional costs of the project), but the process began under the Obama administration where its initial loan has been closed financially. In fact, the enactment of Section 9010 represents the most significant restructuring of a federal government funding program in US history. It opens the door by releasing otherwise stranded government funds to provide developers of technology projects with the federally guaranteed loans needed to successfully finance their first commercial energy and chemicals projects. These projects are the most difficult to finance. DOE’s Title XVII loan guarantee program represents one of the very few avenues to achieve such success and accepts applications under these new statutory revisions. It is set to become the first comprehensive modernization of our country’s energy policies in 13 years.
As the chair of the US Senate Committee on Energy and Natural Resources, Lisa Murkowski, said, the energy law represents the first modernization of our country’s energy policies in more than a decade and will foster innovation. at all levels on a range of technologies essential to our energy. and national security, our long-term economic competitiveness and the protection of our environment.
Contract: Mark Riedy
Kilpatrick Townsend & Stockton LLP