By Justin Martino, Power Engineering
Although the U.S. Department of Energy’s Loan Program Office’s power generation focus has mostly been on renewable energy projects, the office will soon be branching out into fossil fuel projects with $8 billion in loans.
Peter Davidson, executive director of the office, spoke about soliciting proposals for loans for the development of innovative fossil fuel-fired projects at the keynote luncheon for the POWER-GEN International Financial Forum.
“This is the beginning of our process,” he said. “We will be finalizing this and issuing the finals rules and instructions within the next few weeks.”
The goal of the Loan Program Office is the provide loans for promising new technology that has progressed beyond the research and development stage, but has not been tested on a commercial scale and may not be financed by private investors. The office looks to finance the several facilities that can prove the technology and provide lessons for developers building future plants using the same technology.
The office currently has 31 loans outstanding for a total of $32.4 billion, with $18.5 billion already disbursed. The office also has more than $40 billion in remaining loan authority. Despite the office’s focus on providing loans to projects that might be considered too risky for private lenders, the department has an estimated loss of only $799 million. Losses could also drop more pending additional recoveries.
Davidson used solar power facilities of an example of how the office can help establish an emerging technology. In 2010, there were no photovoltaic power plants in the U.S. with a capacity of more than 20 MW. Although projects were permitted and the technology was proven, Davidson said senior lenders would not take the risk on scaling up the technology from a 20-MW facility to a 200-MW facility.
The Loan Program Office financed three projects, and worked with private partners to finance two additional projects. In those projects, the office guaranteed 80 percent of the debt and worked with a network of private lenders.
“Since that time, 10 new projects of 100 MW and above have been built or are being built or really have been banked in the United States,” he said.
The office has also worked with concentrated solar projects, including the 250-MW Solana Generating Station in Arizona, which recently went online, and the 110-MW Tonopah solar project in Nevada. Both plants use molten salt storage, which can provide six hours of full power at night when there is no sunlight. Davidson said the office considers the facilities transformative projects.
The office is hoping to achieve the same sort of transformation with its fossil fuel project loans. To be considered for a loan, the projects must use fossil fuel, be innovative, reduce greenhouse gas e missions, be located in the U.S. and provide a reasonable expectation of repayment. The solicitation covers four areas: carbon capture, including CO2 capture from traditional coal or natural gas electricity generation; advanced resource development, including coal-bed methane recovery, underground coal gasification and use of waste gases; low carbon power systems, including coal or natural gas oxycombustion, chemical looping or fuel cells using synthesis gas, natural gas or hydrogen; and efficiency improvements, including combined heat and power and waste recovery, high-efficiency distributed fossil power systems and high temperature materials including superalloys and ceramic refractories.
“Carbon capture is obviously a very important part of what we’re trying to do in the country and in the Department of Energy,” Davidson said.
The department is not allowed to contact developers that are working on projects that might fit the criteria and must rely on receiving applications from companies, Davidson said. Because of that, the department is focused on letting people the $8 billion in loans is available and providing information to interested companies.
“I really just want to get the word out that the government really is open for business with this $8 billion solicitation,” he said.
The POWER-GEN International Financial Forum is in its third year and is co-located with POWER-GEN International.