Secretary Steven Chu has made hasty work of shaking up the Department of Energy. Today the agency announced a series of reforms designed to expedite the dispersal of loans and loan guarantees — changes that the DOE says will position it to start offering loan guarantees from a much-delayed loan guarantee program by late April or early May. The agency also said in today’s release that new loan guarantees will be offered under the stimulus legislation by early summer, and at least 70 percent of its share of the stimulus will be dispersed by the end of 2010.
This means new allotments for the smart grid, advanced batteries, alternative-fuel vehicles and the array of clean energy initiatives supported by the stimulus will likely avoid languishing in the kind of multiyear application and evaluation process used for the $25 billion low-interest loan program for fuel-efficient vehicles and the Loan Guarantee Program for clean energy technologies. Planned reforms include:
- Rolling appraisals of applications – instead of delaying the consideration of an application until a far off deadline, the Department will review them when they are submitted so that decisions can be made more quickly.
- Streamlining and simplifying loan application forms and other paperwork.
- Accelerated loan underwriting by using outside partners.
- In cases where up-front fees may deter companies from applying, the Department will offer applicants the opportunity to pay the fees as part of the loan at closing.
- Further reduction of up-front costs by restructuring credit subsidies so they are paid over the life of the loan.
- Additional staff and resources to process applications.
- Working with the industry to attract good projects into the loan guarantee program and helping them navigate the process.
- A web site that will provide increased transparency in both process and results, as well as information to help applicants through the process.
Earlier this month, DOE Loan Guarantee Program Director David Frantz revealed at a Senate hearing that even the most progressed applications under the older program (created under the Energy Policy Act of 2005) would take a few months to process — as opposed to the four weeks that Secretary Chu had mentioned as a goal earlier this month. Today’s announcement confirms Frantz’s timeline.
It also sheds light on Tesla Motors CEO Elon Musk’s recent statement about that company’s loan guarantee application. “Regarding funding,” he wrote in an email to customers last Wednesday, “I am excited to report that the Department of Energy informed Tesla last week that they expect to disburse funds from our $350M Model S loan application within four to five months.” The company later clarified that its application had not been approved, but in fact remained in the financial and technical merit stage of evaluation. If all goes according to Chu’s plan at the DOE, approved projects in Tesla’s cohort could have guarantees disbursed in the 4-5 month time frame that Musk described.
The green light on a loan guarantee, however, does not mean money in the bank. As the DOE explains, “These offers may still require recipients to secure their own share of the financing –- similar to earnest money in a home mortgage – or meet other conditions prior to closing.”
Photo credit Lawrence Berkeley National Laboratory