Hill Heat

Ben Geman reports for E&E News:

DOE: Loan guarantee program advancing, official tells Senate panel (04/03/2008) Ben Geman, E&E Daily senior reporter

A high-level Energy Department official assured lawmakers yesterday that the department is making progress on a “clean energy” loan guarantee program and expects to begin receiving the first full applications this month.

David Frantz, who heads the loan guarantee office, also told a Senate Appropriations panel that DOE plans to issue the solicitation for the next round of projects within months.

Congress last year required DOE to provide House and Senate appropriators a loan guarantee implementation plan to define award levels and eligible technologies at least 45 days before a new solicitation. Lawmakers should receive this plan later this month, Franz told the Senate Energy and Water Subcommittee.

The Energy Policy Act of 2005 authorized federal loan guarantees for low-emissions energy facilities such as new nuclear plants, renewable energy projects, carbon sequestration and other technologies. But lawmakers - notably Sen. Pete Domenici (R-N.M.) - say the program has been slow getting off the ground.

Frantz said DOE is on the cusp of receiving full applications from some of the first 16 projects the department is considering and expects them to come in over the next several months. These projects include integrated gasification combined cycle power plants, solar energy projects, cellulosic ethanol plants, a hydrogen fuel cell project and others. DOE hopes to begin issuing the first guarantees this year.

Nuclear power plant developers are eager to receive the federal loan backing and see the program as a crucial way to get a much-anticipated wave of plants off the ground after a decades-long lull in new nuclear construction.

But loan guarantees for nuclear plants are on a longer time frame. Frantz told reporters it is not clear whether nuclear will be one of the technologies included in the next solicitation. “It is still very much in the planning stage, and we have not made a final determination,” he said after the hearing.

The omnibus fiscal 2008 appropriations bill provides DOE with authority to issue $38.5 billion worth of loan guarantees through the end of fiscal 2009, including $18.5 billion for nuclear power projects. The department already had an additional $4 billion in loan guarantee authority through prior legislation.

But DOE, as part of the current budget proposal, is asking lawmakers to extend this time frame through fiscal 2011 for nuclear power projects and fiscal 2010 for other projects. Franz called the extension “absolutely essential.”

“It takes us months and years on these larger projects to do our credit underwriting and due diligence process,” he told reporters.

Frantz said he envisioned the $18.5 billion in loan guarantee authority for nuclear plants would cover guarantees for three to four projects. The program allows the federal government to issue guarantees for loans that cover up to 80 percent of a project’s cost—a federal backstop that is designed to help energy project developers secure Wall Street financing.

Sen. Larry Craig (R-Idaho) urged Frantz to move quickly in implementing the loan program. “I hope that you have running shoes on,” he said.

The decision by Senate leaders not to pursue a filibuster-proof budget reconciliation plan removes one option for moving billions of dollars of renewable energy and efficiency tax breaks funded by repealing incentives for oil and gas companies.

While a Senate budget resolution is going to set aside $13.4 billion over five years for these renewable and efficiency credits – some of which expire this year – it merely signals that the issue is one of the priorities for Senate Democrats and does not forward debate over how to pay for those credits.

A reconciliation bill would have sent detailed instructions to committees on how to pay for that spending and would have been immune to a filibuster.

The budget resolution also includes $3.5 billion in discretionary funding for energy above President Bush’s FY09 request, which Senate Budget Chairman Conrad touted as “a very big increase; I think the biggest increase in more than 30 years.”

Senate Democrats are trying to overcome Republican opposition to scaling back billions in incentives for oil and gas companies to pay for the popular renewable and efficiency credits. Democrats in December fell one vote short of the 60 needed to overcome a filibuster of a $21.8 billion proposal that reduced oil and gas incentives by about $13 billion.

A politically problematic $18 billion House-passed renewable energy tax proposal is pending, but few are optimistic that it could become law given a White House veto threat. This is leading to some brainstorming on other means of getting these credits extended quickly.

Majority Leader Reid has tasked Sen. Maria Cantwell, D-Wash., with helping find another Republican vote or two. Cantwell, who pushed for a one-year $5.5 billion renewable and efficiency tax package as part of a failed Finance Committee economic stimulus plan, said a similar smaller package should be considered. “There’s nothing preventing us from looking at the bigger package – see what the president does – but still work toward a smaller package too,” she said.

Cantwell said “the challenge is to still try to save investment in ‘08,” and extend the tax incentives within the next month or so.

This is the basic message of a broad coalition of businesses, renewable energy groups, environmentalists, labor unions and others who are taking advantage of an international renewable energy conference in Washington this week to do some cohesive lobbying to extend these credits by the end of the month.

But a spokesman for Reid said he will not resurrect an energy tax debate until after lawmakers come back from the upcoming two-week Easter recess.

Several industry officials say they are not requesting that Congress follow a particular strategy for quickly extending the renewable and efficiency incentives.

“We basically said Congress should figure this out,” said Dan Reicher, former assistant Energy secretary for energy efficiency and renewable energy under President Clinton and now director of climate change and energy initiatives at Google.org.

“We have tried to stick to a pretty simple approach – extend the credits quickly and extend them for a long period of time.”

But the political problems associated with repealing the billions in oil and gas incentives means the solution to getting an extension through fast is potentially undefined.

“The answer is, you need some new and original thinking here,” said Marchant Wentworth, legislative representative for the Clean Energy Program at the Union of Concerned Scientists.

While Cantwell has talked about doing a smaller package to gain support and possibly avoid a veto threat, Wentworth cautioned that there does not appear to be a magic number to achieve that.

“The question we all face is, are there new votes that you would get? These are leadership-driven; it’s unclear to me that lowering the incentives gets you anything,” he said.

In the meantime, a wide variety of groups and companies – including retail giant Wal-Mart, the Real Estate Roundtable, Dow Chemical and DuPont – are targeting congressional leaders and several Senate Republicans to vote for extending the credits regardless of whether it affects oil and gas company incentives.

Among Republicans being targeted are Sens. John Ensign of Nevada, John Sununu of New Hampshire, Ted Stevens and Lisa Murkowski of Alaska, Arlen Specter of Pennsylvania and Richard Lugar of Indiana.

Lugar and Murkowski voted against the filibuster in December. Renewable energy groups might also get a rare chance to lobby Bush personally when he speaks today at the 2008 Washington International Renewable Energy Conference.