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In the first quarter of 2023, the Loan Programs Office has shown why it has returned to a growth portfolio. In the first three months of the year we have offered conditional commitments to Rhyolite Ridge, Redwood Materials, and Li-Cycle that, if finalized, would reshore and onshore electric vehicle and critical materials supply chains. These build on loans to bolster our supply chain that LPO closed last year with Ultium Cells and Syrah Vidalia. And last week we announced LPO’s first virtual power plant loan ever to Sunnova’s Project Hestia. If we want to reach our decarbonization goals, projects like these will help us get there.
Portfolio Status Report Released
The FY 2022 Annual Portfolio Status Report was released this week, giving a fuller picture of the growth of the LPO portfolio. In FY 2022 LPO achieved four new conditional commitments for over $4B in loans, closing its first loans in both its Title 17 and ATVM programs since 2015. Every active LPO borrower in the portfolio repaid principal in FY 2022, paying $1.7 billion in principal and $523 million in interest. The portfolio remains concentrated in creditworthy assets, with 70% of exposure held by investment-grade borrowers, and it maintains a low aggregate loss rate of 3% of funds disbursed. Establishing a proactive risk management culture at LPO has been necessary given its mission to provide a bridge to bankability for innovative technologies and other projects essential to our energy future that are unable to access commercial debt markets.
Pathways to Commercial Liftoff Initiative
In March, we were pleased to help launch a new Department-wide initiative, Pathways to Commercial Liftoff, to help drive public and private-sector engagement that will be critical to an effective clean energy industrial strategy. The Liftoff reports are “living documents” developed through extensive stakeholder engagement and a combination of system-level modeling and project-level financial modeling. They provide the private sector and other industry partners a valuable, engagement-driven resource on how and when certain technologies—beginning with Clean Hydrogen, Advanced Nuclear, Long Duration Energy Storage, and Carbon Management—can reach full-scale deployment.
Momentum on Virtual Power Plants
We continue to see momentum grow in support of virtual power plant (VPP) projects that can add demand flexibility, increase affordable clean energy access, and transform grid operations to cost effectively accommodate electrification at scale. VPPs rely on the deployment of distributed energy resources (DERs) at scale; and it is imperative to help make affordable, resilient, and clean energy accessible to all Americans. In February, LPO joined the Smart Electric Power Alliance and National Association of Regulatory Utility Commissioners (NARUC) to host a workshop following the NARUC Winter Policy Summit discussing the fundamentals of VPPs, engaging leaders from across regulatory, utility, and private-sector organizations.
In March, LPO was also pleased to support Secretary of Energy Jennifer Granholm’s participation in the first in a series of VPP Listening Roundtables in Austin, TX, to discuss with the Energy Reliability Council of Texas’ Aggregate Distributed Energy Resource (ADER) Taskforce the reliability benefits of its statewide 80 MW VPP pilot. And we capped off a quick start to the year with the announcement of a $3 billion conditional commitment to Project Hestia, which, if finalized, would provide loans for solar and storage systems for approximately 75,000 to 115,000 homeowners throughout the United States, including targeting at least 20% of customers with credit scores of 680 FICO or less and providing up to 20% of loans to homeowners in Puerto Rico.
Notable Developments for Advanced Nuclear
The advanced nuclear sector also continues to see notable developments. In March, we saw Unit 3 of Plant Vogtle near Waynesboro, Georgia, safely reach initial criticality and generate power for the first time. Once all four units are operating, Plant Vogtle will be the largest clean energy generator in the United States. Advanced Nuclear is poised to become an increasingly important source of safe, reliable, clean, firm power as the nation decarbonizes its energy systems. March also saw an important announcement between the United States, Poland, and Canada to complete the design of the GE-Hitachi BWRX-300. LPO has new tools available to launch small modular reactor (SMR) projects and the supply chains needed to build them.
The Department launched the Liftoff series with Advanced Nuclear on March 20, and it provided the backdrop for industry and finance leaders at the Guggenheim Nuclear Conference a week later, where the day’s speakers honed in on the requirements for achieving liftoff, including the need to sign firm contracts for a critical mass of 5-10 reactors by design to support the buildout of supply chains. The Department of Defense, in addition to supporting developing microreactors through Project Pele and the Eielson Air Force Base Request for Proposals, discussed their potential role as a significant customer for new nuclear.
Tribal Energy Finance News
The LPO Tribal Energy Finance program team continues its active outreach efforts to Indian tribes and tribal energy development organizations to provide access to loans and partial loan guarantees for energy development projects. LPO attended Reservation Economic Summit 2023 earlier this month, and will be attending the NAFOA 41st Annual Conference on April 24-25, 2023, participating in conference panels and hosting one-on-one meetings. Through the first three months of FY 2023, over 250 outreach meetings were held, and four applications were officially submitted, totaling nearly $500 million dollars in requested financing. We look forward to issuing our first Tribal Energy Finance conditional commitment soon.
Now is the time to keep the momentum going. LPO’s FY 2024 Budget Request, released in March, will allow the office to support its growing portfolio effectively while also effectively stewarding the taxpayer’s dollar. This is important as active applications remain high, with 130 active applications requesting nearly $118 billion in loans as of the end of March.
Sincerely,
 LPO Director Jigar Shah
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