What Is The DOE’s Loan Guarantee Program?
Obama’s Stimulus Package provided billions of dollars in tax incentives to U.S. companies that use green energy, which includes wind turbines and solar panels. ARRA also recently introduced a new DOE Loan Guarantee Program for clean power projects.
This program provides loan guarantees up to 80 percent of a proposed project’s total costs. The program expires on September 30, 2020, and includes the existing Department of Energy loan guaranty program for innovatively designed technologies.
As it applies to clean energy, the DOE Loan Guarantee Program seeks to provide financial assistance to wind and solar power development and deployment projects. In many cases, the project will not meet all the applicable federal and state environmental requirements and may not be cost-effective under current economic conditions. The goal is to provide a valuable resource for communities across the country that are working to reduce their carbon emissions and reduce their dependence on imported oil. Through this program, federal agencies and private entities can partner with community groups and local businesses to create jobs and increase the local economy.
The two primary objectives of the loan guarantees are to: (1) reduce the Federal Government’s reliance on fossil fuels and (2) improve the Nation’s economy by reducing the cost of energy. The program can also be used to fund research and development, and help provide tax credits to qualified projects that meet specific criteria.
The requirements for the program vary depending on the type of renewable energy used for the project. It is important to review the terms and conditions carefully so that you can determine if the project qualifies.
The first requirement is that the project must meet the criteria for a Directed Energy Project, which means the project must be economically feasible without debt service charge or equity financing. Additionally, it must meet the criteria for an Energy-Efficient Property Program (EPP), which requires that the proposed project will reduce energy consumption through the implementation of efficient design, material use, construction, and operations and maintenance.
The second requirement is that the project must receive federal funding for the cost of the project from a federal agency other than the Department of Energy.
The third requirement is that the project must receive tax benefits, such as a tax credit, or a reduction in property taxes. The project may also qualify for grants from state and local governments and/or a combination of the above.
The fourth requirement is that the project must receive a loan guarantee. The Department of Energy offers guarantees based on the project’s viability. These guarantees are offered to project developers, and may be issued in the form of a Directed Energy Project Loan Guarantee, an Energy-Efficient Property Loan Guarantee, or a Combined Grant/Guarantee. The Department of Energy provides a number of loan programs to finance projects including:
The five programs require that the project will have an established capacity to produce, store, deliver, and distribute renewable energy resources to meet the projected needs of communities. To ensure the viability of a renewable energy resource project, the program focuses on developing and demonstrating the project cost effectiveness.
The Department of Energy’s Renewable Fuels Standard provides a grant program to eligible borrowers to develop renewable energy resources and improve fuel efficiency. As part of the program, borrowers must demonstrate an existing fuel efficiency measure and demonstrate that their measure is capable of achieving an expected improvement in the cost per gallon of fuel consumed for each gallon of gasoline required to generate that fuel. An Energy Star certificate will be required to demonstrate that the project meets fuel-efficiency requirements and meet the targeted target of a reduction in fuel consumption for every gallon of fuel generated.
A loan modification program helps borrowers who are experiencing financial hardship due to increased cost of living meet the project’s ability to meet its loan repayments while meeting the Federal Government’s goals. To qualify, borrowers must demonstrate a demonstrated financial need and demonstrate that the project will help meet these needs, while also improving the project’s ability to fulfill the requirements for approval.
The Department of Energy’s Loan Guaranty Program also has several eligibility requirements that include: (I) demonstrate that the borrower qualifies for an Energy Savings Certificate (ESA); (ii) demonstrate that the borrower has an established capacity to meet the borrower’s project requirements, which includes the demonstration of an established cost effective process for implementing the project’s plan of action; (iii) demonstrate that the borrower is a low-income applicant; and (iv) demonstrate that the borrower has a history of building and/or managing an EIR for previous projects that have not been successfully completed. The program is available to individuals, organizations, and businesses.