U.S. Energy Secretary Steven Chu announced in Washington that the Department of Energy (DOE) will provide up to $750 million in new funding from the American Recovery and Reinvestment Act to help accelerate the development of renewable energy generation projects. This funding will be targeted to cover the cost of loan guarantees for renewable energy projects and could support as much as $4 to 8 billion in lending to eligible projects, and the Department will invite private sector participation to accelerate the financing of these renewable energy projects.
“A renewable energy economy is a true opportunity to create new jobs, reinvigorate America’s competitiveness and support the president’s goal of doubling renewable energy in the United States,” said Secretary Chu. “American innovation can be the catalyst that jumps starts a new clean energy Industrial Revolution.”
This new funding is targeted towards promoting the rapid deployment of renewable energy projects such as wind, solar, biomass, geothermal, hydropower as well as leading edge biofuels projects and the related manufacturing facilities, electric power transmission projects that commence construction before September 30, 2011. The goal of this newly announced program is to help renewable energy projects using existing mainstream technologies get funded and is not designed to promote the development of frontier technologies. The program is geared towards boosting the flow of capital into the existing renewable energy sector projects from private sector financial institutions.
To facilitate this process the DOE announced the creation of a new Financial Institution Partnership Program (FIPP). This program is comprised of a streamlined set of standards designed to expedite DOE’s loan guarantee underwriting process and leverage private sector expertise and capital for the efficient and prudent funding of eligible renewable energy and related projects. The FIPP will seek to leverage the human and financial capital of private sector financial institutions by accelerating the loan application process while balancing risk between DOE and private sector partners participating in the program.
This first solicitation under the new program will seek loan guarantee applications for conventional renewable energy generation projects, such as wind, solar, biomass, geothermal and hydropower. Past solicitations for renewable energy generation projects have focused on loan guarantee applications using new or innovative technologies not in general use in the marketplace.
Under this first FIPP solicitation, proposed borrowers and project sponsors do not apply directly to DOE but instead work with financial institutions satisfying the qualifications of an eligible lender, which may apply directly to DOE to access a loan guarantee. The solicitation invites applications from eligible lenders for partial, risk-sharing loan guarantees from DOE. The guarantee percentage will be no more than 80% of the maximum aggregate principal and interest during a loan term, and the project debt must obtain a credit rating of at least ‘BB’ or an equivalent with a nationally recognized credit rating agency.
