The DOE loan program has a lot of climate capital to offer

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The hotel’s ballroom was packed before breakfast as Jigar Shah took the stage at the annual oil and gas industry conference in Houston this spring. The host joked that he was sure a big crowd would turn out for Mr. Shah, even at 7:30 in the morning

It is rare for a mid-level federal official to attract so much attention. But the mysterious little office that Mr. Shah oversees is the Ministry of Energy Loan Program Office, has become a driver of the Biden administration’s efforts to push clean energy aggressively. And Mr. Shah is no ordinary bureaucrat.

As part of last year’s Inflation Reduction Act, Congress replaced the office Loan arranging authority For companies trying to bring emerging energy technologies to market, increasing them tenfold from $40 billion to more than $400 billion. This makes it one of the largest economic development loan programs in US history.

Mr. Shah, 48, is the gatekeeper to the tax money. the clock is ticking; He has about a year and a half to get money out the door before the 2024 election could mean changes in the White House that will scale back the program.

He brings entrepreneurial swagger and a tolerance for career risk. Before coming to government in 2021, Mr. Shah was a celebrity of sorts in energy circles. A pioneer in the solar industry making millions, co-hosted A popular energy podcast For nearly a decade he has been outspoken on everything from self-driving cars to Canadian energy policies. (“Countries should not have a stupid policy,” he told listeners in 2017, calling it the “Jigar Shah Rule”). will reach “The greatest opportunity to create wealth in our lifetime.” He is a regular presence on social media, where he criticizes the public.

Mr. Shah’s business acumen carries his weight with energy companies. “Jigar brings street credibility,” said Atul Arya, chief energy strategist for S&P Global, a research firm.

The job comes with huge expectations – and high stakes. Created in 2005 to help finance clean energy projects that commercial banks found too bewildering, the loan program has financed some of the country’s first large wind and solar farms and branded electric car maker Tesla. But it also lent $535 million in 2009 to Solyndra, a solar company that went bankrupt two years later, requiring taxpayers to absorb the loss. In Republican circles, Solyndra has become shorthand for insider and the Trump administration Basically freeze the loan program.

Mr. Shah focused on avoiding another Solyndra while reviving the office, hiring staff and convincing energy companies that the federal government was willing to lend them again.

He’s always aware that Republicans are ready to take on any taxpayer-backed loans that default. power circle The inspector general warned Her office does not have enough resources to properly monitor the new agency, raising concerns among some in Congress.

“Americans deserve to know that this money is being spent responsibly,” said Rep. Cathy McMorris Rodgers, R-Washington, who chairs the House Energy Committee and who called the loan bureau’s funding increase “solyndra on steroids.” She said she would hold the Department of Energy “accountable for every cent spent.”

Mr. Shah says the role of the loan program is not to take a leap of faith in projects with opportunity but to support promising clean-energy deals that can’t get traditional financing because commercial lenders lack the ability to vet the science expertise found in the department of energy.

In a recent interview, Mr. Shah said today’s office bears little resemblance to the office that made a bad bet on Solyndra a decade ago. The staff has grown from 12 to 250, and they have safeguards to weed out high-risk projects. Last month the office mentioned Its overall loan portfolio has turned a profit, while it incurred losses equivalent to just 3 per cent of its loans – a performance in line with commercial banks.

“Obviously, the failed projects of the past will not make it to the office this time,” said Mr. Shah. “Now we can look at our $38 billion portfolio of loans and say, actually, we’ve been good stewards of the capital, really making money for the federal government.”

Sitting in his office at the Department of Energy in front of a map covered in color-coded posters representing projects across the country, Mr. Shahex relaxed with confidence. Wearing a casual cardigan more befitting of a tech executive than a federal worker, Mr. Shah spoke in full paragraphs, moving seamlessly from the practices of Wall Street lending to the challenges of geothermal energy.

He estimated that cutting America’s greenhouse emissions in about half this decade, as President Biden has pledged, would require about $10 trillion in investment. Inflation Reduction Act It could save 1 trillion dollarsbut the rest must come from the private sector.

“We’re not the smartest people in the room,” he explained. At a recent podcast event in Napa, California. “The people who are the smartest are the American innovators and entrepreneurs who put their sweat and tears behind something and come to us for the last help they need to get to the finish line.”

Mr. Shah also insists that clean energy can be bipartisan. His office is currently reviewing applications from 141 energy projects seeking $121 billion in loans — many of them in red states. Fossil fuel companies are also investing in renewable energy.

“Everyone is doing this job,” Mr. Shah said at the Napa event. “I understand that some of them were worried that their country club membership might be revoked if they outwardly support what we do. But increasingly everyone is involved in the country club.”

One of the biggest hurdles clean energy companies face is traversing the “Valley of Death”. Investors might fund small demonstrations of new battery chemical systems or geothermal drilling technologies. But financing a commercial version is a challenge.

Take Monolith, a Nebraska-based chemical company, for example. For years, Monolith has been working on “pyrolysis of methane” refining, which involves taking natural gas, heating it to high temperatures, and producing two valuable products—ammonia, which is used in fertilizers, and carbon black, which is used in tires. Both products are usually made through highly polluting methods, but Monolith believes it can do so without heating the planet.

Monolith had already built a small production facility, and was ready to expand significantly. And here comes the role of the loan office. Leveraging a network of scientists and experts within the Department of Energy, the Bureau evaluated Monolith’s proposal and He has since conditionally agreed to a $1.04 billion loan.

“The audit you go through can be very intense — it takes years, and they bring in teams to go over every little detail of our technology, our business plans,” said Rob Hanson, CEO of Monolith. “But in the end, not only do you get a loan, you get an endorsement from one of the most cutting-edge art institutions in the world, which is incredibly valuable.”

Other projects currently supported by the Loan Bureau include: new plant in Rochester, New York, that harvests lithium from old electric car batteries and Giant salt cave In Utah that will be converted to a hydrogen battery as a backup for wind and solar energy.

Even if government experts vet a new technology, success is not guaranteed. Markets change, commodity prices fluctuate, and overseas competitors can step in. Solyndra failed not because its solar technology didn’t work, but because the alternatives became cheaper when silicon prices fell.

For Mr. Shah, the office is a natural fit. It is almost encyclopedic about both energy and finance.

“In some ways he knew more about the pyrolysis of methane than I did,” said Mr. Hanson of Monolith. “He knew what Exxon and Chevron were doing in this space in the ’70s, and whoever experienced what I did. He immediately understood the importance of what we were trying to do.”

In 2003, Mr. Shah founded SunEdison, a solar company that pioneered a new way to pay for solar projects. SunEdison will assume the risk of financing and building the solar arrays, and the customer agrees to purchase electricity from those panels at a fixed rate over a longer period. His first customer was Whole Foods in New Jersey. Today, many solar and wind energy projects are funded through similar agreements.

“There is no better way to learn than in the world of hard hitting,” said Claire Broido Johnson, co-founder of SunEdison. “We had a lot of ups and downs in those early days as we tried to convince potential clients and investors that our idea wasn’t crazy.”

The loan office wants to make cutting-edge technologies, such as clean hydrogen fuel, as common and easy to finance as wind and solar power have become.

And it’s trying to expand clean energy in a way that touches all Americans. Last month the office He said he would conditionally guarantee Up to $3 billion to help Sunnova, a solar energy company, fund rooftop solar panel networks and battery systems to help lower energy costs in underserved communities.

As part of its new windfall, Shah’s office has $250 billion to retrofit aging fossil fuel infrastructure — by far the most money. While the office still needs to clarify how it intends to use the money, experts say it could help, for example Warding off economic devastation In communities facing coal plant closures.

One question is how quickly the loan office can move money around without rushing into decisions. Since Mr. Shah took office, the program has finished with only a few loans.

“It’s very difficult to get through the application process, especially with all the safeguards that have been put in place after Solyndra,” said Tate McDonald, partner at the law firm Holland & Knight, which represents dozens of loan office applicants and award recipients. “The Jigar team has worked hard to help the projects get moving again, but it’s no easy feat.”

Mr. Shah realizes he must move quickly. He pointed to Project Monolith as evidence that the Office was no longer crippled by past failures. Everyone was like, ‘Wow, this is a really risky project. And we’re like, “Well, we’re back.”

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