A Game Changer for Financing Clean Energy Projects

The Alternative Fuels & Chemicals Coalition, along with its general counsel, Kilpatrick Townsend & Stockton LLP, worked closely with policymakers and appropriators this year to provide key changes to the U.S. DOE Title XVII Innovative Technology Loan Guarantee Program, which were included in Section 9010 of the Consolidated Appropriations Act of 2021, enacted on Dec. 27 by former President Trump.

The Title XVII Program has the authority to disperse up to approximately $25.5 billion in low-interest loans for clean energy projects such as biofuels, renewable chemicals, biobased products, advanced fossil energy and chemicals, carbon capture and storage technologies, renewable power and nuclear energy. It focuses on providing the hard-to-find financing to commercialize innovative, first-of-a-kind technologies.

The program was authorized in the Energy Policy Act of 2005 to support the deployment of large projects that avoid, reduce or sequester planet-warming emissions. In the 2009 Recovery Act, Congress temporarily expanded the program. Despite being well funded, the significant high costs of multiple borrower fees from application submission to financial closing in the Title XVII Program for Phase 1 and Phase 2, along with the excessive timeframe to financial closing, have been enormous deterrents for technology innovators and project developers, especially those in the early development stages of new technologies. AFCC and many of the Title XVII Program advocates felt there was a need to reform the Title XVII Program to make it accessible for a greater number of project developers by removing or reducing several applicant borrower fees payable to the government, moving any fees to financial closing and compressing the time to reach it. As AFCC stated in its fiscal year 2021 appropriation request to the House and Senate Appropriations Subcommittee, doing so would “enable more companies with innovative technologies to participate in the Title XVII Program’s loan guarantees.” To broaden participation, AFCC proposed that Congress “remove the cost and time barriers that prevent many small businesses from participating in the program,” by directing DOE to take action regarding the aforementioned borrower fee and financial closing barriers. 

Section 9010 of the Energy Act of 2020 represents the Title XVII Program changes, which amend and reform its Renewable Energy, Advanced Fossil Energy and Nuclear Energy subprograms. These changes include deferring the collection of, or possibly reducing, multiple borrower fees, including credit subsidy payments and other government-initiated, third-party vendor underwriting expenses, from applicant borrowers until at least financial closing, compressing time to financial closing and expanding project eligibility. It also provides the possibility to borrowers to recover their borrower fees from loan proceeds, or potentially include them as project equity, and adds provisions regarding analysis by the secretary of the treasury, application status, outreach, coordination and reports to Congress.

Section 9010 authorizes funding from fiscal year 2021- ‘25 for administrative and other expenses in the amount of $32 million for each fiscal year, and additional funding for FY 2021 in the amount of $25 million for administrative expenses to reduce borrower fees payable to DOE.

The last new project approved under the Title XVII Program occurred in late 2016, a loan to a carbon capture and storage plant in Louisiana, which still awaits financial closing. The Trump administration had one financial closing for a nuclear reactor project in Georgia in 2019 (its second such closing in order to offset additional project costs), but the process began under the Obama administration where its initial loan was financially closed. In fact, the enactment of Section 9010 represents the most significant restructuring of a federal government funding program in U.S. history. It opens the door by freeing up otherwise stranded government funding to provide technology project developers the necessary federally guaranteed loans to successfully finance their first commercial energy and chemical projects. Such projects are the most difficult to finance. The DOE Title XVII Loan Guarantee Program represents one of the very few avenues to achieve such success and is accepting applications under these new statutory revisions. It stands to become the first comprehensive modernization of our nation’s energy policies in 13 years.

As U.S. Senate Committee on Energy and Natural Resources Chairwoman Lisa Murkowski said, the Energy Act represents the first modernization of our nation’s energy policies in well over a decade, and will foster innovation across the board on a range of technologies that are critical to our energy and national security, our long-term economic competitiveness, and the protection of our environment.

Contract: Mark Riedy
Kilpatrick Townsend & Stockton LLP
mriedy@kilpatricktownsend.com
202-508-5823