The Inflation Reduction Act, which President Biden signed into law last week, includes federal government incentives to help fight climate change by directing more money to clean energy and converting fossil-fueled plants to nuclear or renewable energy. It includes a significant expansion of the lending program.
The act authorizes up to $350 billion in additional federal loans and loan guarantees for energy and automotive projects and businesses. The funding, paid by the Department of Energy, is in addition to well-known provisions in the law that provide incentives for electric vehicles, solar panels, batteries, heat pumps and more.
This support could bring to life future technologies that banks have deemed too risky to lend, or projects that lack the necessary funding.
“This is a sleeping giant under the law and a real goldmine in deploying these resources,” said Dan Reicher, who served as assistant secretary of energy in the Clinton administration. “Having this huge amount available is a big deal.”
But like all government efforts to support industries and advance new technologies, expanding lending authority is risky for Biden and the Democrats who passed the bill without a Republican vote. About a decade ago, conservatives realized that Solyndra, a solar power company that borrowed about $500 million from the Department of Energy, had failed to criticize the Obama administration’s climate and energy policies.
Program backers say the program is overall sustainable despite defaults like Sorindra. Interest payments for the fiscal year ended September 30 totaled $533 million.
The Department of Energy’s loan program began in 2005 under the George W. Bush administration, but expanded significantly during the Obama era. The division provided important financing to help expand Tesla’s business, which sold only expensive two-door electric sports cars. The company is now the world’s most valuable automaker.
Under the Trump administration, which has downplayed the risks of climate change, the department’s lending department has been less active. Biden’s team has been working to change that. The department last month revealed plans to lend his $2.5 billion to General Motors and his LG Energy Solutions to build electric vehicle battery plants in Michigan, Ohio and Tennessee.
The department’s Loan Program Office is currently reviewing 77 applications for $80 billion in loans that were sought before the new climate law was approved. The Inflation Reduction Act adds his $100 billion to existing lending programs, for example for the production of electric vehicles and financing projects on tribal lands. He will also add up to $250 billion in new loan guarantees and $5 billion in grants.
“We have confirmed that the private sector wants to repurpose our resources,” said Zigger Shah, a former solar energy entrepreneur and director of the Department of Energy’s Loan Programs Office. I’m here. “We still have a lot of work to do. We need to identify all the areas that are eligible.”
Read more about electric vehicles
- Inflation control law: The law expands tax incentives to entice more US consumers to electric vehicles. However, the new rules will complicate the qualification process.
- Plug-in hybrid: After lagging behind all-electric vehicles, plug-in hybrid vehicle sales are booming in the United States. Electric cars and the high cost of gasoline gave them a chance.
- car crash: Tesla and other automakers take data from vehicles to operate their products. Experts say the information collected could also improve road safety.
- Frustrating hassle: The electric vehicle revolution is just around the corner, but its arrival has been delayed by a fundamental problem. The chargers that people use to refuel their electric cars are often broken.
One of the beneficiaries of the new loan could be the Palisades Power Station, a nuclear facility on Lake Michigan near Kalamazoo, Michigan, which closed in May. The plant struggled to compete in the PJM energy market, which serves homes and businesses in 13 states, including Michigan, New Jersey, Pennsylvania and Washington, DC.
The Biden administration has put nuclear power at the center of efforts to make the power sector carbon neutral by 2035. The administration has provided billions of dollars to support existing facilities like the Diablo Canyon Power Plant. is scheduled to close by the end of 2025. It also supports new technologies such as small modular reactors, which the industry has long claimed are cheaper, safer and easier to build than conventional large reactors.
Holtec International, owner of the Palisades facility, said it is exploring financing programs and other opportunities for its small reactors, as well as bringing the closed plant back online.
In a statement, the company said there are “many hurdles that need to be bridged to reopen the facility,” but it is “working with the state, federal government, and a third-party operator that has yet to be identified to resolve the situation. Confirm” if this is a viable option. ”
In addition to nuclear projects, the financing could spur the development of other clean energy sources, such as converting non-electricity-producing dams into new power generation facilities. rye developmentis a company based in West Palm Beach, Florida with several projects in the Pacific Northwest.
Some researchers and developers are considering converting old fossil fuel plants into clean energy facilities.It is an old oil and gas well geothermal power; old coal-fired power plants as sites for large batteries; An old coal mine for a solar farm. Such diversions may reduce the need to build projects on undeveloped land. This requires an extensive environmental review and is often time consuming as it may face significant local opposition.
“We are struggling to secure the millions of acres of solar farms we need,” Reicher said. “To build a utility-scale solar plant in the United States, from six million he has to find ten million acres of land. It’s huge.
Other developers want the government to fund nascent technologies and business plans.
Timothy Latimer is CEO and co-founder of Fervo Energy, a Houston company that develops geothermal energy using the same horizontal drilling technology used by oil and gas producers. His company said it can either produce clean energy 24 hours a day or produce more or less energy throughout the day to balance the intermittent nature of wind and solar power with surges in demand. rice field.
Latimer claims the technology his company has developed can reduce the cost of geothermal power, which is often more expensive than electricity generated from natural gas or solar panels. He said he has projects in development in Nevada, Utah, Idaho and California, and the new financing facility could help the geothermal business expand more quickly.
“It’s about the geothermal industry,” Latimer said. “I don’t think you expected good news a month ago, but we are gearing up for prime time.
Despite the potential of the new law, critics say a massive expansion of government loans and loan guarantees could lead to more waste and fraud. The Department of Energy has admitted that several solar projects that were financed or guaranteed have failed or never got off the ground.
Bogle, a large nuclear power plant under construction in Georgia, also received $11.5 billion in federal loan guarantees. The plant has been widely criticized for years of delays and billions of dollars in cost overruns.
“Many of these projects are funded based on political whims rather than project quality,” said Western Power, a coalition of more than 100 utilities and other companies trading in the energy market. – Trading Forum founder and former executive director Gary Ackerman said. “It fails to deliver on promises and leads to many stranded assets that are examples of government waste.”
But Jamie Carlson, who served as a senior adviser to the Energy Secretary in the Obama administration, said the department had learned from its mistakes and developed a better approach for reviewing and approving loan applications. worked closely with us to ensure its success.
“It used to be a black box,” said Carlson, now an executive at SoftBank Energy. “You sat in purgatory for 18 months, sometimes as long as two years.”
Carlson said the ministry’s loans serve an important function. This is because it can support technologies and companies that have achieved some degree of commercial success but need more funding to become financially viable. , but probably to fund banks that are seen as riskier,” she said.
Energy executives said they were excited because more federal loans and loan guarantees could accelerate the program.
“Feasible projects will move faster,” said William W. Funderburke Jr., a former Commissioner of the Los Angeles Department of Hydropower who now runs a water and energy company. “This is a seismic shift for the industry, in a positive way.”