One of President Joe Biden’s leading climate change initiatives is now in a race against time.
The U.S. Department of Energy is under pressure to finalize $25 billion in pending loans for businesses involved in significant clean energy projects nationwide. This move is seen as one of Biden’s final opportunities to secure his climate change legacy before President-elect Donald Trump assumes office next year, promising to dismantle Democratic spending plans.
The Department’s Loan Programs Office has become a key instrument for Biden in his efforts to promote a greener economy. It has made billion-dollar agreements to revive a nuclear power plant in Michigan, support lithium mining in Nevada, and establish factories for electric vehicle components in Ohio and Tennessee.
However, the future of this office under Trump is uncertain. During his presidency, Trump supported only one project under the program and suggested significant budget cuts for the office. Furthermore, Trump’s recent choice for leading the DOE, Chris Wright, a fracking executive, has publicly criticized “large government subsidies and mandates.”
This situation presents a tricky balancing act in the final weeks of Biden’s presidency, both for the DOE and for energy companies looking for financial support from Washington.
Out of the 29 loans and loan guarantees announced by the administration, 16 remain incomplete. These include a $9.2 billion loan for an EV battery project in Kentucky and Tennessee, a $1.5 billion guarantee for sustainable aviation fuel production in South Dakota, and a $1 billion loan for nationwide electric vehicle charging infrastructure.
Andy Marsh, president and CEO of hydrogen company Plug Power, noted the urgency of the situation. His company hopes to secure a $1.7 billion loan from DOE to build up to six “green hydrogen” plants. Marsh is aiming to finalize the loan guarantee before Trump’s inauguration on January 20th.
These pending loans, some of which were announced nearly two years ago, hint at a potential struggle under Trump’s administration. There might be a clash between efforts to reduce U.S. dependence on Chinese imports and Republicans’ desire to cut spending. Biden’s broader aim is to stimulate a green construction boom to weaken China’s dominance in clean energy and reduce global warming pollution.
According to a review by POLITICO, twelve pending loans and loan guarantees worth a combined $21 billion are in Republican congressional districts. The department also has an impressive 210 active applications, totaling $303.5 billion, as of October. The office recently updated its estimated remaining loan authority to nearly $400 billion across several programs, leaving hundreds of billions of dollars available for the incoming Trump administration, should it decide to utilize the office.
Mark Menezes, who served as deputy Energy Secretary during Trump’s first term, anticipates the Biden team will try to finalize the loans in the coming weeks. He pointed out that it’s easier to explain a finalized loan and its purpose than to explain a conditional loan.
Other former staffers of the lending office expect the administration to accelerate the completion of loans in the final weeks of Biden’s presidency. Brendan Bell, COO at Aligned Climate Capital and former director of strategic initiatives at the loans office, predicted the Biden administration will work to the last minute to finalize its conditional commitments.
However, the Loan Programs Office, established in 2005 to fund emerging energy technologies that struggle to attract private capital, has had its share of successes and failures. Notably, it awarded Tesla Motors $465 million in 2010, helping to turn Elon Musk’s electric vehicle company into an industry leader. But it’s perhaps most famous for a failed loan guarantee – a $535 million loan guarantee to Solyndra, a solar manufacturer that later went bankrupt, resulting in severe criticism from Republicans.
Despite these challenges, the loan office has been active under Biden. He appointed Jigar Shah, a prominent clean energy entrepreneur, to lead the office. Shah quickly became a leading voice for the administration on energy issues, emphasizing the department’s ability to confront the so-called valley of death that prevented innovative companies from securing private financing.
The office has announced roughly $37 billion in loans or loan guarantees for 29 projects during Biden’s tenure. It has finalized financing for 12 of them, worth approximately $12 billion. Two of them were completed after the election. Another 16 projects have received conditional commitments for loans or guarantees worth just over $25 billion — an amount the administration is racing to finish before Biden leaves office.
There are concerns that the incoming Trump administration could cancel unfinished loans or halt further action, causing unease among proponents of the office. Nalin Gupta, founder and CEO of Wabash Valley Resources, admitted, “We are scared about it.” His company received a conditional commitment for a nearly $1.6 billion loan guarantee in September to install a carbon capture and sequestration system on an ammonia facility at the site of a former coal plant in Indiana.
In conclusion, as Biden’s presidency nears its end, the Department of Energy is under pressure to finalize billions of dollars in loans for clean energy projects. With the incoming Trump administration threatening to dismantle Democratic spending plans, the future of these loans remains uncertain.
