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D.O.E.’s Loan Program Has a Lot More Climate Capital to Give

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When Jigger Shah took the stage at the oil and gas industry’s annual conference in Houston this spring, hotel ballrooms were packed before breakfast. The host joked that he was sure even at 7:30 a.m. there would be a large crowd gathering for Mr Shah.

It’s rare for a middle-ranking federal official to get so much attention. But the small, unremarkable office Mr. Shah oversees is the Department of Energy. Loan Program Office, has been the driving force behind the Biden administration’s efforts to aggressively promote clean energy. And Shah is no ordinary bureaucrat.

As part of last year’s Control Inflation Act, Congress significantly expanded the size of its secretariat. Authority to arrange loans For companies looking to bring emerging energy technologies to market, that number will increase tenfold, from $40 billion to over $400 billion. As such, the program has the potential to become he one of the largest economic development loan programs in US history.

The 48-year-old Shah is the gatekeeper of that huge tax bill. And the clock is ticking. By the 2024 election, the president has about a year and a half to pull out the money, which could be curtailed by White House changes.

He brings an entrepreneurial spirit and risk tolerance to his work. Before taking office in 2021, Shah was something of a celebrity in the energy world. A multi-million dollar solar industry pioneer, he was a co-organizer. popular energy podcasts For nearly a decade, he has been an outspoken critic of everything from self-driving cars to Canada’s energy policy. (In 2017, he told listeners that “no country should have a stupid policy,” which he dubbed the “Jighar Shah Rule.”) He fears nothing in the transition to clean energy. I have persistently promoted the view that it is not, is equivalent to “The Greatest Wealth Creation Opportunity of Our Lifetime”. He regularly appears on social media where he jokes with the public.

Shah’s business acumen plays an important role for energy companies. “Jigger gives us credibility on the street,” said Atul Ariya, chief energy strategist at research firm S&P Global.

This job comes with big expectations and big stakes. Created in 2005 to help finance clean energy projects that commercial banks found too embarrassing, the loan program financed some of the country’s first large-scale wind and solar farms. provided funding for electric car maker Tesla. But in 2009, it also lent $535 million to solar company Solindra, which filed for bankruptcy two years later, requiring taxpayers to absorb the losses. Among Republicans, Solindra has become an abbreviation for the government’s Bond Guru, and the Trump administration has effectively frozen its lending program.

Mr. Shah has focused on avoiding a new Mr. Sorindra while reviving offices, hiring staff and convincing energy companies that the federal government is ready to lend again.

He is always mindful that Republicans are poised to seize taxpayer-supported loans if they fail.Department of Energy the inspector warned His office does not have enough resources to properly oversee the newly created government agency, raising concerns among some in Congress.

Rep. Cathy McMorris Rogers, a Washington Republican who heads the House Energy Committee and has called the increased funding to the lending office “Solindra on steroids,” said, “Americans believe this money is being used responsibly. You have the right to know that you are being used.” She said she would hold the Department of Energy “responsible for every penny spent.”

Shah said the role of the loan program was not to take the plunge on chance projects, but rather to take conventional loans because commercial financiers lack the ability to screen (scientific expertise the ministry has). said it was unable to support promising clean energy deals. of energy.

In a recent interview, Mr. Shah said his current office bears little resemblance to the one that made a bad bet with Mr. Sorindra a decade ago. The staff has grown from 12 he to 250 he has and safety measures are in place to eliminate projects that are too risky.at the office last month report Although the company’s entire loan portfolio turned profitable, losses amounted to just 3% of the loan value, a performance comparable to that of commercial banks, he said.

“Projects that have failed in the past will obviously not make it through the Secretariat this time,” Shah said. “Now, looking at our $38 billion worth of loan portfolio, I can tell you that we’re really managing our capital very well and we’re actually making money for the federal government.”

Sitting in his Department of Energy office in front of a map covered in color-coded decals representing projects across the country, Mr. Shah exudes relaxed confidence. Dressed casually in a fleece vest, more like a tech executive than a federal employee, Shah delivered a paragraph-by-paragraph speech that seamlessly transitioned from Wall Street lending practices to the challenges of geothermal energy.

He estimated that about $10 trillion in investment would be needed to cut America’s global warming emissions by about half over the next decade, as President Biden pledged. The Inflation Control Act could provide $1 trillion, but the rest would have to come from the private sector.

“We’re not the smartest people out there,” he explained. At a recent podcast event in Napa, California. “The smartest people are the American innovators and entrepreneurs who put their sweat and tears into something and come to us for the last help they need to reach their goals.”

Shah also argues that clean energy is bipartisan. His office is currently reviewing applications from 141 energy projects seeking $121 billion in loans, many in loss-making states. Fossil fuel companies are also investing in renewable energy.

“Everyone is getting into this action,” Shah said at the Napa event. “I think some of them were worried that if they were too vocally supportive of what we were doing, their membership in the country club would be revoked. all of us are now participating in it.”

One of the biggest hurdles facing clean energy companies is crossing the so-called ‘Valley of Death’. Investors could fund new battery chemistries and small-scale demonstrations of geothermal drilling technology. However, funding to develop a commercial-scale version is difficult.

Consider Monolith, a chemical company based in Nebraska. Over the years, Monolith has taken natural gas, heated it to high temperatures, and refined his “methane pyrolysis” to produce two valuable products: hydrogen, which is used to make fertilizers, and carbon black, which is used in tires. I’ve been Both products are typically made using highly polluting methods, but Monolith believes they can be made without heating the earth.

Monolith had already built a small production facility and was ready to expand significantly. That’s where the Loan Office came in. By leveraging its network of scientists and experts within the Department of Energy, the Loan Office will evaluate Monolith’s proposals and It then conditionally approved a $1.04 billion loan.

“The review can be very rigorous. It will take years. They gather a team to scrutinize every detail of our technology and business plan,” said Rob Hanson, Chief Executive Officer of Monolith. ‘ said. “But at the end of the day, not only do we get financing, we get certification from one of the most sophisticated technical organizations in the world, which is very valuable.”

Other projects currently supported by the Loan Office include: novel plant In Rochester, New York, lithium is recovered from old electric car batteries, huge salt cave In Utah, it will be converted to hydrogen batteries as a backup for wind and solar power.

Scrutiny of new technologies by government experts does not guarantee success. Markets change, commodity prices fluctuate, and foreign competitors may enter. Sorindra failed not because its solar technology didn’t work, but because the price of silicon plummeted, making alternatives cheaper.

For Shah, the office is a natural fit. He has an almost encyclopedic knowledge of both energy and finance.

“In some ways, he knows more about methane pyrolysis than I do,” Monolith’s Hanson said. “He knew what Exxon and Chevron were doing in this space in the 1970s and who tried what. They gave me.”

In 2003, Shah founded SunEdison, a solar power company that pioneered new payment methods for solar projects. SunEdison will take the risk of financing and building the solar arrays, and customers will agree to purchase power from those panels at a fixed price over the long term. His first customer was a Whole Foods store in New Jersey. Many solar and wind power projects are currently funded by similar agreements.

“There’s no better way to learn than in the world of Hard Knock,” said Claire Bloyd Johnson, co-founder of SunEdison. “We had a lot of ups and downs in the early days trying to convince potential clients and investors that our idea was not crazy.”

The lending firm wants cutting-edge technologies like clean hydrogen fuel to be as common and affordable as wind and solar.

And it’s trying to expand clean energy in a way that affects all Americans.at the office last month said to conditionally guarantee Contribute up to $3 billion to help solar power company Sunnova fund a network of rooftop solar panels and battery systems that help reduce energy costs for disadvantaged communities.

Shah’s office has set aside $250 billion to upgrade aging fossil-fuel infrastructure as part of fresh windfall income, the largest amount to date. The agency still needs to clarify how the funds will be used, but experts say, for example: avoid economic devastation In communities facing the closure of coal-fired power plants.

One question is how quickly loan offices can disburse funds without rushing to make decisions. Only a handful of loans from the program have been completed since Shah took office.

“Getting through the application process is a big step, especially after Solindra, when all the protections are in place,” said Tait McDonald, a partner at law firm Holland & Knight, who represents dozens of loan office applicants and beneficiaries. It’s very difficult in the process,” he said. “The Zigger team has been working hard to get the project back on track, but it won’t be easy.”

Mr. Shah recognizes that he must act quickly. He cited the Monolith project as proof that offices are no longer paralyzed by past failures. “Everybody was like, ‘Wow, this is a really dangerous project.’ And we’re like, ‘Oh, we’re back.'”

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