US solicits bids for nuclear loan guarantees

10 July 2008

The US Department of Energy (DoE) has invited applications for a total of up to $30.5 billion in federal loan guarantees for renewable energy, nuclear and front-end nuclear power facility projects.

Loan guarantees from the DoE are to encourage the commercial use of new or significantly improved energy technologies. The three solicitations are in the areas of energy efficiency, renewable energy and advanced transmission and distribution technologies (up to $10 billion); nuclear power facilities (up to $18.5 billion); and advanced nuclear facilities for the front-end of the nuclear fuel cycle (up to $2 billion).

The authority to issue loan guarantees amounting to these sums was provided to the DoE in the Consolidated Appropriations Act 2008 and is consistent with the Department's FY2009 congressional budget request. The goals of the program are reducing reliance on imported sources of energy by increasing energy efficiency and diversifying the US energy mix, while improving the environment.

In the 2005 Energy Policy Act federal loan guarantees for clean energy sources were one of five initiatives supported. In October 2007, the DoE announced that it would guarantee the full amount of loans covering up to 80% of the cost of new clean energy projects including advanced nuclear power plants.

This marks the second round of solicitations for the DoE's loan guarantee program. The first round of loan guarantees will go to which supported energy efficiency, renewable energy and fossil energy projects. The DoE is currently reviewing the applications received to date as a result of the first solicitation. A third round of solicitations will be issued soon for loan guarantee applications for up to $8 billion for advanced fossil fuel projects.

The loan guarantee process is organized into four phases: application, project evaluation, conditional commitment, and final approval and closing of a loan guarantee agreement. Selection criteria for the clean energy projects under these solicitations will focus on a project's ability to avoid, reduce or sequester air pollutants or greenhouse gas emissions; the speed with which the technologies can be commercialized; the prospect of repayment of the guaranteed debt; and the potential for long-lasting success of these technologies in the marketplace.

The application is divided into two parts. The Part I submission, to be received by 28 September, will provide the DoE with a top level description of the project, project eligibility, financing strategy and progression to date in critical path schedules. These schedules include items such as licensing, site preparation and long lead procurements.

"Loan guarantees from the department will enable project developers to bridge the financing gap between pilot and demonstration projects to full commercially viable projects that employ new or significantly improved energy technologies," Jeffrey Kupfer, the acting deputy secretary of energy, said. "Projects supported by loan guarantees will help meet President Bush's goal of diversifying our nation's energy mix with energy projects that will improve the environment while increasing energy efficiency."

The loan guarantees are expected to act as a catalyst and reduce financing cost by demonstrating government support, without cost to the taxpayer, though they "are backed by the full faith and credit of the United States". Any preliminary approvals issued next year will be conditional upon the applicant receiving a combined construction and operating licence from the Nuclear Regulatory Commission and these are not expected before 2010.