Subcommittees Examine the DOE Loan Programs’ Record of Success
(Washington, DC) – Today, the Committee on Science, Space, and Technology’s Subcommittees on Energy and Oversight held a hearing to review the Department of Energy’s Loan Programs Office (LPO) and in particular the loan guarantee program.
The mission of LPO is to “accelerate the domestic commercial deployment of innovative and advanced clean energy technologies at a scale sufficient to contribute meaningfully to the achievement of our national clean energy objectives.” The program was originally authorized by the Energy Policy Act of 2005 and has been subsequently reauthorized and expanded several times by Congress. The program was developed to overcome the gap that often occurs between the demonstration and commercialization phases of new technologies, due to lack of sufficient private sector investment.
Ranking Member of the Oversight Subcommittee, Don Beyer (D-VA) said in his opening statement, “The DOE Loan Programs Office helps to advance the commercialization of new and emerging clean energy technologies. It encourages private investment in these key areas that would have been absent without federal support.
“Some of my friends in the Majority may not like to acknowledge this fact, but the investments the federal government made in key technologies helped spawn new industries, including the information revolution, and solidified America’s place as the global hub of scientific innovation, revolutionary discoveries and advanced technological development. I believe our government should strive to be a leader in developing clean energy technologies as well. The DOE Loan Programs Office helps us do that.”
Ranking Member of the Energy Subcommittee, Alan Grayson (D-FL) said, “Congress identified an area where the lending market wasn’t meeting our national needs, and we directed the Department of Energy to take on this task. By statute, this meant the Department had to take on some risk. As with any financial portfolio, gains may come with some losses. The basis of our modern lending market is the acceptance of some level of risk to provide our economy with greater access to capital to grow. Despite this risk, the Loan Programs Office has an overall success rate of over 90%. Losses to date represent only 2.27% of the Department’s $34 billion loan and loan guarantee portfolio and less than 10% of the $10 billion loan loss reserve that Congress set aside to cover expected losses in these programs. In fact, interest payments the federal government has received to date for these loans now total over $500 million more than the estimated losses to the portfolio.”
Mr. Gregory Kats, President of Capital E, a clean energy advisory and venture capital firm, said in his testimony, “Given the clear success of the loan guarantee program to date based on measures of financial performance and impact on security, employment and US competitiveness, the DOE should not slow or limit the loan program. In the real world where US companies are investing to build jobs and strengthen America’s competitive position in global markets, the DOE loan program is a big success. The DOE loan program enables innovation and enables expanded venture capital and private equity investment in these industries.”
He also emphasized the due diligence performed by DOE’s LPO throughout the application process saying, “I have served on the boards of two US energy firms that applied for DOE loan guarantees, and I can attest that the DOE application process is detailed and rigorous.”
In addition, in contrast to assertions by another witness invited by the Majority that the private sector would fill this program’s role, Mr. Kats’s written testimony states, “If energy projects were very low risk (investment grade) they would have access to commercial funding, and a DOE loan guarantee would be an unattractive option. The rigorous nature, difficulty and cost of these applications means that a DOE loan guarantee is pursued by U.S. firms only when they cannot get competitive private sector financing. … The DOE loan program has enabled the US to regain some global leadership in the critical areas of advanced transportation and power generation at a time when it was falling behind its international competition in these fundamentally critical industries.”
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