E&ENews PM, September 22, 2008

DOE ANNOUNCES $8B IN LOAN GUARANTEES FOR 'CLEAN COAL'

By Katherine Ling, E&ENews PM reporter

The Energy Department announced $8 billion in loan guarantees today for projects that capture carbon or deploy other "clean coal" technologies.

There is $6 billion in loan backing for projects that use carbon capture and storage (CCS) or other technology to cut greenhouse gas emissions by at least 50 percent in industrial gasification and coal- fired power plants. The other $2 billion will go to advanced coal gasification projects. Three of the original 16 projects DOE solicited for the first round of guarantees were also coal-based technologies.

This is the third round of DOE solicitations for the clean energy loan guarantee program established in the 2005 energy bill, but no loans have been finalized, much to the displeasure of key congressional Republicans.

DOE still does not know when the first loan guarantee will be granted, said David Frantz, director of the loan program office. "The applications have not been completed for a variety of reasons," he told reporters. "And we don't have control of the responsiveness of the applicants."

The financial sector's current crisis could also set the program back if applicants are borrowing through commercial banks, Frantz said.

Additional delays could be problematic for DOE, as the program must distribute $38.5 billion in guarantees authorized in the omnibus fiscal 2008 appropriations bill by the end of fiscal 2009. DOE asked Congress to extend the timeline through 2011 for nuclear projects and 2010 for other projects.

The number of projects the loans could support is also dwindling as costs escalate. Frantz said the $18.5 billion for nuclear energy could probably accommodate only about two power plants.

DOE's first round of solicitations for $4 billion in guarantees produced a final group of 16 prospective projects, including integrated gasification combined cycle power plants, solar energy projects, cellulosic ethanol plants, a hydrogen fuel-cell project and others. DOE has set Nov. 19 as the final submission deadline for the first round of projects.

The second round of solicitations DOE announced in June included $18.5 billion in loan guarantees for nuclear power plants, $2 billion for uranium enrichment and other "front-end" nuclear facilities, and $10 billion for renewable energy, energy efficiency and advanced transmission and distribution technologies. The first part of those applications is due next Monday and the second part by Dec. 22.

Similarly to the previous round of solicitations, DOE will judge the third round of applications based on a project's ability to avoid, reduce or sequester air pollutants or greenhouse gas emissions, the length of time to commercialization, chances of repayment of the debt and "long-lasting success" in the marketplace, the department said.

Click here to read the solicitation announcement.