Program Background

The Energy Policy Act of 2005 (EPAct05) authorizes the U.S. Department of Energy to issue loan guarantees to eligible projects that "avoid, reduce, or sequester air pollutants or anthropogenic emissions of greenhouse gases" and "employ new or significantly improved technologies as compared to technologies in service in the United States at the time the guarantee is issued".

Title XVII of EPAct05 provides the basis of DOE's program. This title provides broad authority for DOE to guarantee loans that support early commercial use of advanced technologies, if "there is reasonable prospect of repayment of the principal and interest on the obligation by the borrower." Loan guarantees will be another tool that DOE will use to promote commercial use of innovative technologies. This tool is targeted at early commercial use only, not energy research, development, and demonstration programs.

DOE published Guidelines for the Loan Guarantee Program in the Federal Register. DOE also issued a Solicitation Announcement inviting interested parties to submit project proposals that meet the Title XVII statutory requirements and also contribute to the goals of the President's Advanced Energy Initiative. To lessen the risk of defaults on these loans, DOE is carefully reviewing project proposals submitted by the December 31,2006 deadline to ensure that they are commercially and financially viable before issuing an invitation to apply for a loan guarantee.

Important Features of DOE's Loan Guarantee Program

A principal purpose of the Title XVII loan guarantee program is to encourage early commercial use in the United States of new or significantly improved technologies in energy projects. DOE's loan guarantee program is not intended for technologies in research and development. DOE believes that accelerated commercial use of new or improved technologies will help to sustain economic growth, yield environmental benefits, and produce a more stable and secure energy supply.

Title XVII specifies that DOE must receive either an appropriation for the Subsidy Cost or payment of that cost by the borrower. The Subsidy Cost is the expected long-term liability to the Federal government in issuing the loan guarantee. No funds have been appropriated for the Subsidy Cost of loan guarantees. Therefore, DOE anticipates that the borrower (the sponsors) of a project approved to receive loan guarantee pursuant to the first solicitation will pay this cost.

In the first round, the Department evaluated loan guarantee pre-applications for projects that employed technologies in the following areas:

1. Biomass
2. Hydrogen
3. Solar
4. Wind and Hydropower
5. Advanced Fossil Energy Coal
6. Carbon Sequestration practices and technologies
7. Electricity Delivery and Energy Reliability
8. Alternative Fuel Vehicles
9. Industry Energy Efficiency Projects
10. Pollution Control Equipment