The International Energy Agency expects the world to invest about a billion dollars a day into solar in 2023, marking the first time renewables has surpassed global investment in oil production. It’s astonishing growth for an industry that was in its infancy just a decade ago. And Jigar Shah, the director of the Loan Programs Office at the US Department of Energy, thinks his office should get partial credit for kick-starting the solar revolution.
The technology for solar has been well established for years, but the business case for installing it on a mass scale hasn’t developed as quickly. Around 20 years ago, there wasn’t a single large utility solar project in the US, and it was risky business to be the first. But that’s what the Loan Programs Office was created to accomplish in 2005, before being given an expanded mandate in 2009. It filled a gap where the private sector wouldn’t, by providing loans for innovative clean technologies that were not yet implemented on a mass scale.
“When you think about all the dominoes that fell to get to a billion dollars a day, we started that process,” Shah said in an interview last month with Vox. “We’re the ones who hit the first domino.”
Shah pointed out that the first five large-scale — 100-megawatt or more — solar plants in the US were all funded by the Loan Programs Office early in the Obama administration. A similar story was true for the rise of electric cars: The DOE office gave a $465 million loan to Tesla in 2010 to produce the successful Model S.
The Loan Programs Office has been dormant for over a decade. The Inflation Reduction Act along with the bipartisan infrastructure law rescued the office from obscurity but gave it a new challenge to tackle. Now, the Loan Programs Office has an expanded mandate from Congress to distribute up to $250 billion in loans to “retool, repower, repurpose, or replace energy infrastructure” for the Energy Infrastructure Reinvestment program (EIR).
It’s a brand-new domino to topple: how to tap the potential of existing fossil fuel infrastructure so it can be put to use in a clean energy transition.
Giving pipelines and gas stations new life
The goals of the EIR are different than most of the Inflation Reduction Act’s spending. Congress passed the Inflation Reduction Act a year ago to usher in a new era of clean technology and manufacturing aimed at slashing US climate pollution. Billions of dollars of the climate law focuses on what it will build through tax credits, grants, and direct investments, technologies like heat pumps, electric cars, solar fields, offshore wind, power lines, and modern nuclear power.
What happens on the other side of the equation — the fossil fuel infrastructure left behind — is less clear. With 370 coal-fired power plant retirements announced in the past decade and more to come, this transition is already underway.
The DOE’s EIR has far-reaching potential to transform what we think of as traditional energy infrastructure, including utilities, power lines, and pipelines, as well as things like gas stations and hospitals. Executed in its full vision, the loans could help to lower climate pollution in the near term, but even more importantly, prove there’s a market for retooling the infrastructure we already have.
“This is a way that we can upgrade our existing system in a meaningful way, at a much lower cost than would otherwise be possible and move quickly,” RMI’s senior principal of Carbon-Free Electricity Uday Varadarajan said.
So how would it work? The Loan Programs Office reviews applications for proposals, which are typically in the hundreds of millions of dollars. Unlike other types of loans approved by the office, the technology here does not have to be innovative. All the projects must do is show they are slashing, avoiding, or sequestering carbon dioxide or other kinds of pollution.
This leaves the potential for a vast number of projects. One of the most direct ways architects of the EIR envisioned the program working would be to fund clean electricity generation that would take the place of retiring coal power plants. That could involve physically converting toxic coal mines into a large array of solar panels with battery storage, or adding transmission lines that boost interconnection and reliability of the grid.
Other potential projects that could receive EIR funding may include converting old gas pipelines into ones fit to carry hydrogen, a potentially clean fuel whose main waste product is water. Or the funding might be used to retrofit pipelines to be able to transport carbon so it can be stored deep underground and not escape into the atmosphere. Carbon capture and storage received a major boost from the EPA in its draft power plant rules, as an option for gas plants to lower their emissions, but this technology is a nonstarter without the infrastructure.
There are still other, more creative approaches left on the table. RMI’s Varadarajan suggested that even abandoned gas stations could be put to new use through the EIR. Old gas stations are notoriously hard to reclaim and put to better use, but with more financing and an interested developer, they could be converted to EV charging stations and part of a distributed virtual power plant network.
Taite McDonald, a partner at the law firm Holland and Knight who helps clients navigate DOE loan program applications, said she sees the most potential for large industrial complexes, like hospitals and college campuses, that have already made public commitments to reaching net zero.
This list of potential projects shows quite a range in ambition and also raises some critical questions. Will the EIR loans mostly be put to financing large institutions on their journey to net zero or, more ambitiously, to creating an entirely new market for abandoned gas stations and coal mines? The answer will depend on the kinds of applications that start to come in.
“People are going to start to look at this when the other options start to be expended,” McDonald said. “And because it’s such a new program, we just haven’t really seen a lot of folks start to do that. What the program essentially becomes will remain to be seen.”
Jigar Shah explained his job involves a lot of “cajoling folks,” and explaining to industries how the DOE could help with low-cost financing for goals they have already committed to publicly.
“I see this as an economic development program,” Shah explained. “It’s our primary goal to help ensure that we can see investments and opportunity in the clean economy line up with communities that are currently producing energy. Whether that’s a coal plant that’s scheduled to retire but could become the site of an advanced nuclear power plant, or an interconnection point for a large battery and wind farm to access the grid, there’s a lot of useful infrastructure, local talent, and know-how in the workforce that could be put to good use.”
Balancing ambition, exhaustiveness, and speed will make all the difference
The Loan Programs Office can be truly transformative if the full $250 billion is loaned out for slashing carbon footprints. But the history of the office is also a reminder of all the potential pitfalls for this kind of government funding.
Solyndra was a solar panel manufacturer that received a loan under a different program to fund innovative technologies in 2009, but went bankrupt a few years later. It made for a field day for the Tea Party takeover of the House in 2010, which launched investigations calling the program an example of the government’s wasteful spending and its capacity to pick winners and losers. The House ultimately passed the “No More Solyndras Act” in 2012 to block any more loan approvals (the bill didn’t pass the Senate).
The Loan Programs Office itself has had some successes, however. The Obama administration approved 40 projects at a total of $36 billion that included companies such as Tesla and Nissan, which were looking to expand EV manufacturing, and Beacon Power, a company that would help store power to ensure grid reliability.
But the political fallout from the Solyndra bankruptcy did permanent damage. For about a decade, the Loan Programs Office went dormant until its first signs of life late in the Trump administration.
Both the Inflation Reduction Act and bipartisan infrastructure law have given the office its expanded mandate, and one of the most powerful positions in financing a clean energy revolution. Shah, a former clean energy entrepreneur, was tapped to lead the rapidly expanding team.
However, Shah and his office of 250 can’t afford more scandal — or being too timid, either. The clock is ticking down on the timeline Congress gave the EIR program, which has just until 2026 to approve up to $250 billion in loans, a deadline that will be tough to make.
Getting the word out and convincing applicants is another challenge. Shah acknowledged that DOE loans might not be “a natural thing for a lot of these applicants to use.”
While there isn’t a huge market today for retrofitting and repurposing existing fossil fuel sites, the hope is the EIR starts to make it much more commonsense. Shah argues that’s exactly the role the government should play, helping sectors make a leap to becoming no-brainer investments. “If we don’t start that process, there’s no one else,” he said.