DOE OFFICIAL: FOSSIL SOLICITATION RESULT OF ‘GREAT’ COLLABORATION

Tamar Hallerman
GHG Monitor
8/30/13

The current public comment period on a draft Department of Energy solicitation for advanced fossil energy projects is an attempt to gauge industry interest and learn from previous mistakes, according to the head of the DOE Loan Programs Office. In a recent interview with GHG Monitor, LPO Executive Director Peter Davidson said the $8 billion draft solicitation, unveiled earlier this summer as part of the White House’s climate plan, was the product of “a great deal” of internal work with the Office of Fossil Energy and the national labs. “We wanted to respond to what we were hearing from industry about other ways we could be helpful on accelerating new technology development and deployment,” Davidson said. “We wanted to make sure that we could learn from things we’ve done before, and that’s why we thought it would be better to go out for a public comment period.”

The solicitation, if it moves forward, would be the LPO’s second for fossil energy technologies. The Department issued a narrower solicitation for coal gasification projects under the Section 1703 Loan Guarantee Program in 2008. But most of those projects withdrew from consideration as development plans were shelved and cancelled. As of this spring, only one project was still in active review by the Department and in the due diligence stage for a $2.8 billion loan guarantee, according to the Government Accountability Office. Davidson would not comment on the first solicitation but said, “Some of those [projects] are still very alive. … We’re working on them.” He said, “Some of these are very big and complicated projects with multiple offtake agreements that would have to be signed before we can move ahead on them. So there is still movement on those.”

Technologies on the ‘Cusp’

Davidson said this time around, DOE designed the new draft solicitation to be intentionally broad. “We wanted to make [the solicitation] as attractive to developers and participants out there as possible,” he said. A notice published in the Federal Register earlier this summer calls for “innovative and advanced” fossil energy technologies that are on the “cusp” of commercialization, including carbon capture and storage, chemical looping and other technologies that could increase the efficiency of fossil fuel-fired electricity generation like hydrogen fuel cells, combined heat and power and waste heat recovery technologies. The draft solicitation also included calls for “advanced resource development and extraction technologies” to cut down on upstream greenhouse gas emissions like dry fracking, coal-bed methane recovery, underground coal gasification and methane emissions capture from energy production.

Davidson said DOE does not have a minimum size requirement for projects, but given that the application process is “fairly expensive,” the projects awarded with loan guarantees under previous LPO solicitations have tended to be on the larger side. He said the loan guarantees under previous programs have averaged about $500 million, but that amounts have ranged from about $50 million to $1.5 billion in the past. “It’s the full range,” Davidson said, adding that the award amounts will likely be dependent on the level of industry interest. “We’re in a small space that is very important but very specific. … We don’t do R&D projects, we don’t do demonstration projects.  LPO does not do grants and we don’t do equity investments. All we do is provide loans. We act in the role of a senior banker, providing loans to new technologies or new processes,” Davidson said.

Three public meetings on the draft solicitation held at DOE headquarters over the last month and subsequent stakeholder comments submitted online have mainly drawn requests for more clarity and detailed information related to the solicitation. Some have requested that the Department further widen its solicitation so their technologies could be deemed eligible, while others have said that the applications fees are too high, particularly for smaller companies and projects. Following the comment period, which wraps up early next month, Davidson said the LPO plans on incorporating stakeholder comments and issuing a final solicitation “probably” in October.

Moniz Steps Up Support

Energy Secretary Ernest Moniz has in recent weeks notably stepped up his public support of the program. During a speech earlier this week at Columbia University, Moniz acknowledged how criticism of the loan guarantee program tends to center on the bankruptcy of the solar panel manufacturer Solyndra. “Not every investment is going to succeed,” Moniz said. “Obviously, no one likes a project to fail and to come on the taxpayers’ tab,” he said. “But since becoming Secretary three months ago, I’ve had the opportunity to do an extensive review of the loan program and I have found that this program is supporting a large and diverse $34.4 billion portfolio of more than 30 projects … [and has a] track record that is quite remarkable.” He said the current and projected losses to the taxpayer are 2 percent of the overall portfolio and less than 10 percent of the loan loss reserve fund. “I think most of Wall Street would be pretty pleased with that performance,” Moniz added.

In previous interviews with GHG Monitor, CCS stakeholders have appeared split about how much new loan guarantee authority could truly incentivize new RD&D. Some said federal investment in large, individual projects was not the most effective approach in moving the field forward and instead called for larger annual budget allocations for federal R&D efforts. Meanwhile, others said that any public help is welcome, and could help spur some new RD&D as part of a suite of incentives large-scale CCS projects could use to reach deployment.