Implementation Of Epact 2005 Loan Guarantee Programs By The Department Of Energy

Implementation of EPAct 2005 loan guarantee programs by the Department of Energy: hearing before the Subcommittee on Energy and Air Quality of the Committee on Energy and Commerce, House of Representatives, One Hundred Tenth Congress, first session April 24, 2007.

Title XVII of the Energy Policy Act of 2005 established DoE¿s loan guarantee program (LGP) for innovative energy projects that should decrease air pollutants or greenhouse gases and that have a reasonable prospect of repayment. For FY 2008 and 2009, Congress authorized the use of borrower fees to pay the costs of loan guarantees; DoE will limit loan guarantees to $38.5 billion. Congress mandated this review of DoE¿s progress in assessing progress in: (1) issuing final regulations; and (2) taking actions to help ensure that the program is managed effectively and to maintain accountability. Also assessed how inherent risks due to the nature of the LGP may affect DoE¿s ability to achieve intended program outcomes. Includes recommendations. Illus.

Since the Department of Energys (DOE) loan guarantee program (LGP) for innovative energy projects was established in Title XVII of the Energy Policy Act of 2005, its scope has expanded both in the types of projects it can support and in the amount of loan guarantee authority available. DOE currently has loan guarantee authority estimated at about $77 billion and is seeking additional authority. As of April 2010, it had issued one loan guarantee for $535 million and made nine conditional commitments. In response to Congress mandate to review DOEs execution of the LGP, GAO assessed (1) the extent to which DOE has identified what it intends to achieve through the LGP and is positioned to evaluate progress and (2) how DOE has implemented the program for applicants. GAO analyzed relevant legislation, prior GAO work, and DOE guidance and regulations. GAO also interviewed DOE officials, LGP applicants, and trade association representatives.

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Established by the Energy Policy Act of 2005, the Department of Energy's loan guarantee program was designed to give federal support to risky, innovative, clean energy technology. Under a federal loan guarantee, instead of the private sector taking on risk to fund the scaleup of new technology, the government steps in, risking federal dollars on the hopes for success of these energy projects. Through the section 1703 and 1705 programs, the Department guaranteed loans to 30 energy companies, putting about $28 billion of taxpayer money on the line. Easy money combined with political pressure to issue loans before the temporary subsidy program expired led the DOE to rush loan applications. Both the DOE Inspector General and the Government Accountability Office found that DOE did not have the necessary expertise or the metrics to effectively evaluate these loans. A number of companies that received section 1705 loans went into default. In total, over $800 million in taxpayer money has been wasted by this DOE loan program. The GAO estimates that the cost for the current loan guarantees is $2.2 billion. Supporters argue the cost is justified if we can help innovative technologies make the leap to the commercial market. But what if federal meddling in the market actually hurts innovation?

This report examines the role of rare earth metals and other materials in the clean energy economy. It was prepared by the U.S. Department of Energy (DoE) based on data collected and research performed during 2010. In the report, DoE describes plans to: (1) develop its first integrated research agenda addressing critical materials, building on three technical workshops convened by the DoE during November and December 2010; (2) strengthen its capacity for information-gathering on this topic; and (3) work closely with international partners, including Japan and Europe, to reduce vulnerability to supply disruptions and address critical material needs. Charts and tables. This is a print on demand report.