A US cleantech loan program sprints while path is clear

At the risk of going dormant under incoming US president Donald J. Trump, the Loan Programs Office (LPO) of the US Department of Energy (DOE) is in a final sprint to process hundreds of applications for government-backed loans that would finance large cleantech manufacturing projects, including plants making battery materials and biobased chemicals.

The LPO provides loans to projects that have the potential to reduce greenhouse gas emissions but use new technologies that are considered too risky for private lenders. The office started issuing loans during Barack Obama’s first administration. The program drew attention for a 2010 loan that helped fuel the growth of the electric carmaker Tesla and attracted scrutiny a year later when the solar firm Solyndra went bankrupt and defaulted on an LPO loan.

After Solyndra’s bankruptcy, the number of loans issued by the LPO dropped significantly. The slow pace continued during Trump’s first term, when the office issued only one loan, which was for a nuclear power plant in Georgia. But the office has roared back to life during Joe Biden’s administration, thanks to an influx of funding through the Inflation Reduction Act, which passed in 2022.

Some analysts expect the incoming Trump administration to mostly sideline the LPO. In a speech in September, Trump promised to rescind all unspent funds from the Inflation Reduction Act and called policies supporting clean technologies a scam.

Earlier this month, Trump nominated oil industry executive Chris Wright to lead the DOE. In a January 2024 letter, Wright, then CEO of the oil firm Liberty Energy, called the idea that government policies should support renewable energy projects to fight climate change a “destructive misunderstanding.” The DOE head must sign off on new commitments for LPO loans.

Other industry observers say the LPO may yet survive. Jeff Navin, cofounder of Boundary Stone Partners, a lobbying firm that focuses on clean energy, said during a November webinar about the election’s impact on clean energy that it was easy for Trump to minimize LPO activity during his first term because, after Solyndra’s demise, the office had few high-quality applications. “That’s not the case now. There is a robust pipeline,” he said. “It will be harder to say, ‘We’re out.’”

Given the uncertainty, companies are working to push their loan applications across the finish line quickly.

The LPO has been moving fast as well, and the pace is accelerating. During the first 2 years of the Biden administration, the LPO issued 5 conditional commitments for loans. In 2024, the LPO has issued 17 conditional commitments, including 4 in October alone. The LPO recently reported that it has 210 active applications and is still receiving 1 new application per week.

One week after the election, the LPO changed the methodology it uses to estimate its authority to make loans; the change allowed the office to quadruple the amount of money available for projects that repurpose old energy infrastructure for clean energy projects. The LPO argued that such projects aren’t very risky, meaning it can set aside less money in the case of a default.

After securing a conditional commitment, firms must meet certain terms, such as additional investment or offtake agreements, before closing the loan. When the biobased chemical firm Solugen received a conditional loan commitment in June, Chief Technology Officer Sean Hunt told C&EN that he didn’t think a Trump election would complicate the closing process. “If we weren’t at the conditional commitment stage, then there would be that risk,” he said. “Moving to close, it’s more of a lawyer exercise.”

Yet the short seller Iceberg Research is betting against Gevo—which in October received conditional approval for an LPO loan for a sustainable aviation fuel project—because of the risk that the Trump administration will block conditionally approved LPO loans. Gevo executives argue that they can close the deal even after Trump takes office. “It feels pretty good,” CEO Patrick Gruber said on an investor call days after the US election. “We’re in a red state. It’s creating jobs. It’s rural economic development . . . That’s why we get lots of bipartisan support.”

Other firms with conditional commitments hope to avoid uncertainty by closing their loans this year. On a November conference call, executives from the zinc-based battery firm Eos told investors that they have reached an agreement with the DOE on all major loan documents and are now awaiting final approval. Andy Marsh, CEO of the hydrogen fuel cell manufacturer Plug Power, said on a November conference call that the company has a “clear path” to close its LPO loan before Trump takes office.

“It would be irresponsible for any government to turn its back on private sector partners, states, and communities that are benefiting from lower energy costs and new economic opportunities spurred by LPO’s investments,” a DOE spokesperson says. The agency declines to answer questions about the pace of processing applications through the remainder of 2024.

The LPO must balance speed with rigor in the final weeks of the year. The DOE’s Office of Inspector General, which guards against waste, fraud, and abuse within the department, recently hired a legal firm to identify weak spots in the LPO’s due diligence process and evaluate some LPO loans to ensure they comply with the office’s policies. Several Democratic lawmakers objected to the move, arguing that previous investigations by the watchdog haven’t identified any fraud or abuse in the LPO.

And despite a few high-profile failures like Solyndra, the program is financially successful, Chris Creed, the LPO’s chief investment officer, told C&EN in June, noting that the program’s losses amount to about 3% of the money it has lent. Creed said the office’s strategy is working. In the early days, the LPO issued loans for commercial-scale solar power plants that were considered risky. “Today, that’s readily bankable by the private sector,” he said.

Some Republican lawmakers have criticized the LPO for taking on too much risk. But Richard Wang, founder of the battery industry advisory firm Crevasse Consulting, argues that the low failure rate indicates that the LPO isn’t taking enough risk. “They’re trying to take very little risk because they’re very cognizant of this Solyndra 2.0 sort of example,” he told C&EN in September. “If you’re profitable, private banks can do that too.”

Some of the LPO’s supporters hope the program’s track record will lead the second Trump administration to see it differently. Sydney Bopp, a partner at Boundary Stone and a former chief of staff at the LPO, says many projects from companies applying for the loans align with the Trump campaign’s energy policy platform.

“The program currently has the capacity to support onshoring, reshoring, and the building of important infrastructure,” she says. “That would ultimately have a positive impact on US businesses and consumers.”