Financing innovation to drive the clean energy transition requires power partnerships

Published on September 29, 2022 by Kim Riley


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Historic federal funding from recently enacted legislation stands to substantially help drive innovation that could further help the nation’s energy sector reach its net-zero goals faster, speakers said during the National Clean Energy Week 2022 Policy Makers Symposium, held Sept. 27-29. 

The Loan Programs Office (LPO) in the U.S. Department of Energy (DOE) is doing its part by working to ensure it can more swiftly and efficiently get the funds out there to finance relevant projects that can help the industry meet its goals, according to LPO Director Jigar Shah, who spoke during a Wednesday fireside chat.

At the same time, America’s investor-owned electric companies are staying focused on successfully executing their clean energy transition plans, said conference speaker Ameren Corp. Executive Chairman Warner Baxter, who serves as the current chairman of the Edison Electric Institute (EEI), the trade association representing all of the nation’s investor-owned utilities. 

In fact, Baxter said that Ameren and many other EEI member companies have established net-zero carbon emission targets by 2050 or sooner and have ambitious interim targets.

“We are relentlessly investing in critical energy infrastructure to drive innovation while advocating for policies that support those investments to accelerate the clean energy transition across the country, while also enabling us to continue to prioritize energy security, and customer reliability and affordability,” Baxter said. “That is what our customers expect and that is what our country needs.”

Since last year’s symposium, President Joe Biden and Congress have taken unprecedented actions to address climate change and at the same time help address energy grid reliability and customer affordability, Baxter added.

For instance, he said the Infrastructure Investment and Jobs Act, the CHIPS and Science Act, and the Inflation Reduction Act (IRA) all have provided significant federal funding for new clean energy technologies, transportation electrification, innovative grid technologies, and robust clean energy tax incentives. 

“Taken together, our industry and our country have an extraordinary package of new tools that will help us to effectively execute our clean energy transition,” said Baxter.

And the DOE is at “the center of gravity” of the public-private partnerships that are needed to deploy the innovative clean energy technologies necessary to reach for a net-zero economy, he said.

Specifically, Shah has been meeting with key stakeholders across the country about the role his office plays in the clean energy transition.

For example, the IRA substantially increased the existing lending authorities of the LPO by more than $100 billion and also created a new loan program, the Energy Infrastructure Reinvestment (EIR) Program (Title 17 section 1706) that is meant to revitalize the nation’s current infrastructure at the pace needed to address the climate crisis.

Under the new law, the EIR Program gets $5 billion through fiscal year 2026 to support loan guarantees up to $250 billion for energy infrastructure-related projects that will reinvest in energy infrastructure; support retooling existing energy infrastructure; or make the existing operating energy infrastructure more efficient by adding things like carbon management and emission control technologies, according to the DOE.

The EIR Program also could finance transmission upgrades or reconductoring, or modernize existing nuclear or hydropower facilities, said the department, noting that EIR applicants must demonstrate how they will engage with and how their project will benefit communities where the investment is taking place. 

Shah particularly likes this “broader benefit” of the IRA: it starts to break up the oligopoly that’s been created around tax equity. “Previously, unless you were in the top 20 percent of that oligopoly… then it was really difficult to get access to the limited tax equity that was available,” he said.

The IRA allows tribes and nonprofits to get that access and avoid the oligopoly, added Shah, which will allow for a lot more applicants to come through the LPO.

“The new law provides more empowerment to those groups that may have been lukewarm about clean energy because they weren’t really able to control their own destiny,” Shah said. “Today they’re a lot more bold about wanting to shape their own future and this makes them more interested in clean energy. 

“We should be very careful not to discount that sort of empowerment the IRA provides to the wider marketplace,” he said. “We want to make sure everyone participates in this revolution.”

And while significant capital is available for decarbonization technologies, these projects still may lack access to adequate debt capital. The LPO fills this gap in commercial deployment by serving as what Shah called “a bridge to bankability” for innovative and high-impact energy technologies, providing them with access to needed loans and loan guarantees when private lenders cannot or will not until a given technology has reached full market acceptance.

The LPO provides a bridge to bankability for those technologies to cross the final milestones to commercialization, said Shah.

Discussion moderator Tom King, managing partner at CrossRiver Capital and founding director of Borincana Foundation Inc., said during the discussion that Shah has brought the idea of a more programmatic, more systemic support system to the loans that the LPO does for companies as they’re commercializing.

“DOE is an extraordinary place to do innovation and it will remain so,” Shah said. “What we haven’t been given is a mandate by Congress in the past to get into the commercial space.” 

Now, though, that’s changing as the DOE and LPO restructure, streamline processes, ensure contractor comfort, and lean in to the learning curve around innovation and finance, among other changes that Shah said will lead to full market acceptance for clean energy projects that need to get to scale. 

Shah also said that the LPO works very closely with private capital markets and wants to shorten the time it takes to get to full market acceptance by engaging frequently with them to try to get the commercial banks more comfortable with possibly funding projects. 

At the same time, the tax credits offered in the IRA will give the equity investors a higher rate of return such that they can take on additional or higher risks, according to Shah. “We think a lot more projects will be enabled because of the tax credits and programs,” he said. 

Brian Wolff, chief strategy officer and executive vice president of public policy and external affairs for EEI, pointed out during his address that driving innovation is really the key to the clean energy transition, and all of EEI’s members will continue to lead on this front and to work together with the federal government to drive that innovation. “The LPO has been reorganized to meet that goal,” he said.