Loan Guarantee Program
The Department of Energy (DOE) Loan Guarantee Program helps to bring down the financing costs for large energy projects. Since its inception, the program has supported 28 energy projects creating thousands of construction and manufacturing jobs nationwide. SEIA supports the Loan Guarantee Program as a useful tool to bring down the cost of solar energy and spur private investment in solar projects.
- The DOE Loan Guarantee Program was created in 2005 to overcome the great challenges that large energy projects face in obtaining affordable long-term financing.
- More than $25 billion in private investment has been spurred by the Loan Guarantee Program.
- Ten utility-scale solar projects that received loan guarantees are currently under construction, and one solar power plant is already operational. These solar power plants will provide enough energy to power to more than half a million homes.
The DOE Loan Guarantee Program was created in the Energy Policy Act of 2005 to overcome the great challenges that large nuclear, renewable, and other energy projects face in obtaining affordable long-term financing in the commercial marketplace. Since its creation, the DOE Loan Guarantee Program has closed loan guarantees for 28 energy projects and made commitments to two others, sparking private investment of more than $25 billion.
How Loan Guarantees Work
The financing challenge faced by many large energy projects is commonly referred to as the “valley of death” as new technologies transition from the research and development stage to full commercial deployment. Through the Loan Guarantee Program, DOE guarantees the debt of privately‐held energy generation and manufacturing projects, guaranteeing to a private lender that if the company defaults on a loan related to the project, the government will step in to repay the outstanding balance.
The Loan Guarantee Program is designed to encourage private investment while minimizing risk to the taxpayer. Each dollar appropriated for the program leverages up to thirteen dollars in private sector investment. In addition, applicants undergo a rigorous review process to decrease the risk of each project. Funds are set aside to cover any future defaults.
Solar Success Stories from the Loan Guarantee Program
The DOE Loan Guarantee Program has achieved a number of notable successes for the solar industry. Chief among these is the finalizing of loan guarantees for eleven utility‐scale solar power plants in the Southwest, totaling more than 2,700 MW – enough to power approximately 500,000 homes.
These solar power plants, which typically have contracts in place selling the electricity to utilities, are currently under construction, employing thousands of workers and taking advantage of a nationwide supply chain that includes states like Michigan, Kentucky and Alabama. A loan guarantee has also been issued for a distributed generation project which will install 750 MW of solar equipment on commercial rooftops in 28 states across the country.