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How Clean Energy Thrives Under the Budget That Was Supposed to Kill It

The Energy Department's loan guarantee program didn't just escape the ax in the government shutdown-dodging deal that passed earlier this month -- it actually came out ahead. It's hard to believe, considering how adamant the GOP was about taking out funding for clean energy. But it's true, thanks to Washington's nutty budgeting system, DOE loan chief Jonathan Silver explained Thursday during GigaOM's Green:NET conference. (I caught a replay of the confab's live stream.)

To be clear, there are two loan guarantee programs -- 1705 and 1703.

  • 1705 is a stimulus package program that provides loan guarantees for certain renewable energy projects that begin construction by September 30, 2011. The budget kept the money for 1705 intact.
  • 1703 is a, um, renewable program contained in the Energy Policy Act of 2005 that allows the DOE to support innovative clean energy technologies that would typically be unable to secure conventional private financing. Solar, wind, biomass, hydrogen, nuclear, alternative vehicles and clean coal projects are qualify.
Here's how the money juggling worked out to benefit the DOE's 1703 program. First, imagine two buckets (these are stand-ins for the way Congress lays out its spending priorities and then actually ladles out the cash):
  • The "authorization" bucket is how much you can spend.
  • The "appropriations" bucket is the money you actually have to spend.
Budget cutters did trim back the authorization cap for the Energy Department's clean energy loan guarantee program. But that got replaced by actual credit subsidies in the appropriations bucket, Silver explained in the GigaOm conference:
It means we actually have new funds in the 1703 program to provide credit subsidies for applicants, which we've never had before, he said.
It gets better. Clean energy projects that have received awards under 1705 (the stimulus fund program) must begin construction by Sept. 30. But many project developers are stuck in a pre-construction limbo while they await final approval. Conditional funding commitments have been made, but they can't start construction until every "I" is dotted, every "T" crossed. The budget now allows applicants that have conditional commitments, but haven't closed by that date, to move over to the 1703 program.

That's important because 1703 doesn't have an expiration date. The money will always be there. As a result, the DOE is now racing to close these deals so they can move over to 1703, Silver said during the GigaOm conference.

How is the DOE loan program doing? It's still slow, but it's improving. Before Silver was hired, the program had 14 employees. Today, it has about 180. Silver, who is former managing general partner at D.C-based venture capitalist firm Core Capital Partners, has applied best practices you'd find in the private sector to help streamline the often slow and tedious federal government process. This may not sound like much, but prior to 2009 the program didn't even have a way for project developers to file their applications electronically, Silver said.

To date, the DOE loan guarantee program has:

  • Completed 27 transactions equivalent to just over $30 billion in loans and loan guarantees;
  • Total project costs ( the additional equity capital that sits on top) valued at $45 billion;
  • These projects have created more than 60,000 direct jobs
Check out the entire GigaOm interview with Silver, where he explains some of the other improvements as well as talks about controversial loan guarantee recipient Solyndra.

Photo from Flickr user Johnny alive, CC 2.0
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