US Energy Department Boasts US$400 Billion War Chest to Finance Projects
By Simon West
The U.S. Energy Department’s Loan Programs Office boasts a war chest of more than US$400 billion to finance clean energy projects. Curious about where this massive funding is headed? Experts from the LPO, EXIM Bank and Edlow International Company uncover the sectors that stand to benefit.
From Issue 6, 2024 of Breakbulk Magazine.
(4-minute read)
Nuclear energy, green hydrogen, semiconductors, carbon capture and lithium batteries are just some of the sectors that are benefiting from the U.S. Department of Energy’s recharged Loan Programs Office (LPO).
Speaking at an event at Breakbulk Americas on future energy investments, Suresh Vasan, senior investment advisor at the LPO, said the program had appropriated funds totaling more than US$400 billion to expand its scope and finance clean energy projects.
“We’re looking at it from a very broad perspective – we support all energy that promotes low-carbon solutions,” Vasan told listeners during a discussion moderated by Captain Bill Schubert, president of International Trade & Transportation (IT&T).
Since its launch under the George Bush administration in 2005, the LPO’s direct loans and guarantees have resulted in more than US$50 billion in total project spend, according to the DoE. The LPO’s financial muscle has been significantly bolstered by the Biden administration’s Inflation Reduction Act and Bipartisan Infrastructure Law, enabling it to play a leading role in the nation’s energy transition.
Recent awards include a US$445 million loan to metals recycling firm Li-Cycle to help finance the construction of a lithium-ion battery processing facility in Rochester, New York, a project that will support the production of up to 180,000 electric vehicles (EVs) annually, and a US$1.44 billion loan guarantee for Montana Renewables that, if finalized, will help support the expansion of a green fuels facility in Great Falls, Montana.
To date, some 211 active applications have been formally submitted to the office totaling US$305.3 billion in requested financing, according to the LPO’s monthly application activity report for September.
“We’re doing a lot on the electrification side where you can combine batteries, you can combine solar, so that we can utilize some of this intermittency that’s being caused by wind and solar. It’s a better way to get all the megawatts used. And then we’re focused on third-generation geothermal, which is super exciting,” Vasan said.
The LPO has also been a “very important piece” of the relicensing and overhaul of nuclear power projects, Vasan said. The DoE’s Advanced Reactor Demonstration Program (ARDP), for example, launched in 2020 with an initial US$230 million in R&D awards, seeks to derisk advanced reactors through cost-shared partnerships with the private sector.
Nuclear Energy Poised for Expansion
Fellow panelist Jack Edlow, president of radioactive materials transport specialist Edlow International Company, said soaring demand for nuclear power – driven by electrification and the global push to diversify energy sources – is fueling the construction of both small modular reactors (SMRs) with a generating capacity of 50 to 300 megawatts electric (MWe) and smaller micro reactors with an output of up to 10 MWe.
With demand for these units potentially reaching into the thousands in the next two to three decades, the U.S. must be ready to invest in nuclear technology to maintain its leadership in the sector, Edlow said. The competition with other nations is already tough.
“It’s not just the United States anymore, as it was in the beginning. Others are getting ahead of us at this point,” Edlow said. “Russia is building reactors all around the world – Egypt, Turkey, Bangladesh. The Chinese have an immense internal program. In just a few years they’ll have more reactors than we do in the United States. They just have a few designs that they’re focused on replicating. And they’re also looking to expand internationally.
“But we have a bit of an advantage in that we have these advanced reactors and many different types that are already proven and are now being re-proven for the U.S., and we need to get out there as a country. We need to plant the flag in various places to show U.S. technology is out there. But that’s going to take a lot of government and industry support.”
But, Schubert asked, at what point should the government step back and allow the private sector to take the lead in driving clean energy projects?
Edlow said large-scale projects including SMR plants often require “a little seed” to help kickstart development. “The ARDP has invested money in several different projects, and that will help get these things started. But once they’re proven, it’s time for organizations to start investing in these projects as well,” he said.
Fueling America’s Export Capacity
Nuclear power projects are also getting backing from the U.S. Export- Import Bank, the country’s official export credit agency. EXIM supports U.S. businesses by equipping them with the financial tools – mainly in the form of loans, guarantees and insurance – to export globally, often when private sector lenders are unable or unwilling to step in.
In October, EXIM approved a final commitment for a US$98 million loan to finance the development of a 462-MWe SMR project at the Doicești coal plant site in Romania that will deploy technology from U.S. nuclear developer NuScale.
“We have three or four people at the Bank who are really focused on nuclear,” said panelist Paula Swain, executive director of EXIM’s structured and project finance division. “There is a lot of excitement with SMRs and the future. It’s something the Bank is really focused on for international transactions.”
Swain also shared insight into Make More in America – an initiative designed to reboot America’s manufacturing and export capacity. Launched in 2022, the MMIA typically supports projects in areas such as semiconductors, biotech, green energy and energy storage.
“It’s become very successful. Right now we have 14 transactions in-house. The average transaction size is about US$50 million. The largest so far is US$800 million and the smallest is US$10 million, which is quite a range,” Swain said.
“These transactions are for significant capital expenses – either a brand-new facility or a new production line. Capital expenses that need more long-term financing. But we’re not here to compete with the private sector. If the regional bank the company deals with is willing to take the transaction, we won’t interfere.
“But these transactions have little nuance that maybe the commercial banks are not comfortable with. Maybe the real estate is encumbered by a long-term lease from a municipal entity and the commercial bank won’t take that on because they want to have a deal of trust, or a pledge of that real estate and the lease prohibits that.
“But as the U.S. government we’re comfortable with that political risk.”
Read more: US Nuclear Energy Poised for Massive Expansion
TOP PHOTO: (L-R) Jack Edlow, Suresh Vasan, Paula Swain, Capt. Bill Schubert. CREDIT: Hyve
SECOND: Capt. Bill Schubert. CREDIT: Hyve
THIRD: NuScale boasts the first certified SMR for use in the U.S. CREDIT: NuScale
