There’s $44 Billion in Clean Energy Funds Up For Grabs

(Bloomberg) --

Jigar Shah earned a reputation for blunt talk, first as a clean energy entrepreneur who helped make solar power mainstream and then as an irreverent podcaster—well, as irreverent as it gets among renewables wonks. So it was in keeping with his persona when, days after Joe Biden won the presidency, Shah expressed doubt that the government could immediately unlock the floodgates for investment from a key federal cleantech-financing program.

The Energy Department has a little-known investment operation, the Loan Programs Office, with a focus on backing innovative clean technologies in early commercial development. It has more than $40 billion to lend, and during an episode of the podcast he co-hosted, the Energy Gang, Shah was skeptical whether the LPO could accelerate low-carbon technologies quickly. The office was “fundamentally broken,” Shah said.

About four months later, the Energy Department hired Shah to run LPO.

“I criticize organizations or concepts because I think they can improve. And when they genuinely come to me and say, ‘Jigar, we’d like to improve, we’d like to do things better,’ then I roll up my sleeves and help,” he says.

LPO was enormously influential about a decade ago, helping propel solar and electric vehicles, but the office has been little used since. That may have to change fast to help meet Biden’s goal of decarbonizing U.S. electrical grids by 2035. Given its existing loan authority, LPO could become an even more important tool in the fight against climate change if Congress isn’t able to pass landmark infrastructure bills that could support such things as carbon capture and storage. 

Shah is intimately familiar with the ups and downs of the cleantech industry. He founded SunEdison, a onetime solar giant that declared bankruptcy in 2016 (long after he left), and co-founded Generate, a clean energy-financing company.

He spoke with Bloomberg Green about how he defines innovation. This interview has been edited and condensed for length and clarity.

Let’s start with the basics. What does the Loan Programs Office actually do?

Well, the nuances and the technical part of it changes, but we’re a bridge to bankability. Commercial debt markets are not enthusiastic about putting new technology on their books, so the Loan Programs Office does it first.

We’ve done such a good job that people don’t remember how well we’ve done. When you think about solar and wind utility-scale financing, nobody was clearing those loans in 2010, 2011.

The same thing is true for Tesla.

Today, company after company after company is SPACing on Wall Street. If we hadn’t stepped in in 2010 to help Tesla with the loan, it wouldn’t have happened.

When you think about the trillion-dollar impact we’ve had in solar and wind and in electric vehicles, I think people just take it for granted. They’re like, “Well, of course they did. That was going to happen anyway.” Really? Was it really going to happen anyway?

You were skeptical about LPO's ability to be a near-term catalyst for cleantech investment.

LPO needs a lot of support—not just from the administration, but also from the U.S. Treasury Department, Office of Management and Budget, and others. My understanding at the time was that there wasn't sufficient support for the changes that were needed.

I was wrong. There was support. The secretary [Jennifer Granholm] has been a huge champion since she came in.

The office languished for a while. How are you trying to change that?

The program was largely dormant when you look at the activity levels after 2011. Now we’ve got about 100 applications that have either come in or are actively being prepared, worth about $69 billion or so. We’ve got $44 billion of loan capacity. So this program is back up and running. I think we will continue to average $7 billion a month of applications coming in—and that, I think, will mean that we won’t be dormant for much longer.

You’re also trying to expand the bounds of how people see LPO— it’s not just for entrepreneurs or companies but can also help low-income communities. How does that fit with the mission to fund innovation?

When you look at the history of the Loan Programs Office, there are two major criteria. One is greenhouse gas emission reductions, and the other is innovation. Those criteria were interpreted by previous administrations in a much more narrow way. This program actually does have a fairly broad remit.

There are a couple of things our money can unlock and help to finance: refrigerators, water heaters, HVAC. The traditional financing costs for these grid-connected devices can be prohibitive for low- and moderate-income homeowners. We think LPO-guaranteed loans can help companies offer a more affordable cost of financing.

But water heaters, HVAC, and rooftop solar are hardly innovative at this point. How do those still qualify?

The Loan Programs Office has a very clear mandate around innovation. We’re not looking to support rooftop solar and HVAC in their 1.0 form. The innovation in virtual power plants is that they’re connected devices and that they can be used as a grid resource. That’s new. So we are saying to the solar industry and to the HVAC industry: “If you want to use our programs and be classified as innovative, then you have to do innovative things.” And some folks want to, and some folks are not interested, which is fine.

How do you go about communicating all this to potential applicants?

What we’re doing is, frankly, very confusing. We have 10 new outreach people in the office, and they are literally holding people’s hands through the process. We are having 400 calls a week. I had a call recently with a rural electric co-op who said, “We’ve been trying for four years to figure out how to electrify our school bus fleet.” I was like, “Well, we can fund that. As long as it saves greenhouse gas emissions, we can fund that.”

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