Biden-boosted $200B energy loan program set to be doomed by another Trump Presidency
PORT ST. LUCIE, Fla. (Callaway Climate Insights) — Back in early 2010,
Tesla was desperate for cash as it was attempting to
navigate a costly transition from building sports cars to building
sedans. Salvation came in the form of a $465 million loan from the
U.S. Department of Energy that the fledgling automaker used to
construct a plant in California and launch its Model S.
READ MORE COMMENTARY BY BILL STERNBERG
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So it’s more than a little rich that, in this year’s presidential
campaign, Tesla CEO Elon Musk has gone all-in for Donald Trump, who
has mocked electric vehicles and who would likely slash the very
government program that helped Tesla survive.
The Energy Department’s Loan Programs Office was created during the
George W. Bush administration to provide a “bridge to bankability” for
major energy projects that have trouble getting financing. It offers
interest rates that are typically slightly above the federal funds
rate and well below those offered by commercial lenders.
In its role as a cleantech lender operating inside the federal
government, the office has had some spectacular successes (See: Tesla,
which fully repaid its government loan in 2013) and some spectacular
flops (See: Solyndra, the solar panel company that went belly up in
2011 and defaulted on $535 million in taxpayer-backed loan
guarantees).
Big commitments
More recently, the office has played an instrumental role in helping
revive nuclear power as a carbon-free way to meet the anticipated
surge in electricity demand from AI data centers and other users. Its
$65 billion portfolio of active and conditional loans includes $11.5
billion for Georgia Power’s new Vogtle nuclear reactors
and $1.5 billion for restarting the Holtec Palisades reactor in
Michigan.
Other major commitments include $9.2 billion for Ford’s BlueOval SK battery manufacturing plants in Kentucky and Tennessee; $3
billion for Sunnova Energy’s Project Hestia virtual power
plants in Texas and Puerto Rico; $2.5 billion for Ultium Cells battery
plants in Michigan, Ohio and Tennessee; and $2.3 billion for the
Lithium America’s Thacker Pass processing plant in
northern Nevada.
One clue as to what would happen to the office during a second Trump
administration is to look at what happened during the first Trump
administration, when the program went largely dormant, aside from
additional support for the Georgia nuclear reactors.
After the 2020 election, President Joe Biden resuscitated the office.
His signature climate law and other legislation authorized more than
$200 billion in lending for clean-tech projects. His administration
brought in a well-regarded entrepreneur, Jigar Shah, to direct the
office, preferably without producing Solyndra-like defaults that
Republicans in Congress and their allies in the fossil fuel industry
would seize upon.
(The office estimates that its losses represent about 3% of its
portfolio, in line with comparable private sector lenders.)
It’s now wait-and-see
With the U.S. elections looming, borrowers are adding political
calculations to their financial ones. Many are taking a wait-and-see
attitude toward doing business with the government loan programs.
A Kamala Harris victory would keep the loan pipeline flowing and
attract new applications, unless Republicans capture control of both
chambers of Congress and the office becomes a bargaining chip in
budget negotiations. The clean-energy industry is hoping that, in a
Harris administration, the review process would become more efficient,
and the pace of loans would pick up despite the lingering political
trauma from Solyndra and other bankruptcies.
Some people take the attitude that “the way to avoid a bad deal is to
do no deals at all,” says Jeff Navin, co-founder of Boundary Stone
Partners and a former DOE chief of staff. “There are certainly hand
wringers within the department that are always looking for the next
monster under the bed.”
An Energy Department spokesperson tells Callaway Climate Insights that
the loan programs office would “not compromise diligence for
expediency.”
As of last month, the office had 211 active applications seeking about
$305 billion in financing. Shah has said it’s “not possible” to rush
loans through before the next inauguration. Even so, political
overtones are detectable in some of the office’s recent activities.
Its news releases credit the “Biden-Harris administration” for
financing various projects, including the Sept. 30 announcement about
the loan guarantee for the Palisades nuclear plant in Michigan, which
happens to be one of the key battleground states in November’s
election.
If Trump wins, the clean-energy loan programs could well go back into
a deep freeze. Because loans are discretionary and the office is under
no obligation to issue them, the lending programs are particularly
vulnerable to a change in the White House. Under a second Trump
administration, the office “would just die on the vine,” Sen. Martin
Heinrich (D-N.M.) told Politico.
Project 2025, the Heritage Foundation’s conservative policy manifesto,
calls on the next president to “sunset DOE’s loan authority through
Congress and eventually eliminate the Loan Programs Office.” Trump has
tried to distance himself from Project 2025, but the author of the
relevant chapter is a former Trump administration energy regulator.
Trump’s tactics
It would be legally difficult, if not impossible, to revoke existing
loans, unless borrowers are out of compliance. But a Trump
administration might be able to claw back support from projects that
have received conditional financing. Some conservatives are floating
the option of trying to refocus the office’s work toward
Republican-favored industries such as fossil fuels, mining and nuclear
power.
Overall, Navin says, the Loan Programs Office has been “hugely
important” and “has been very successful in making good bets.” Many of
the clean-tech projects have created jobs in red states and have
attracted bipartisan political support.
If the office is effectively shuttered during a second Trump term,
future Teslas would have more trouble succeeding. Which probably
wouldn’t bother Musk in the least.
(Bill Sternberg is a veteran Washington journalist and former
editorial page editor of USA Today.)
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