Why Federal Loan Guarantee Programs Matter
Why are loan guarantee programs regarded by alternative energy proponents—and many others—as so vital to reducing this country’s reliance on fossil fuels?
The most basic reason is that innovative energy ideas and startup projects generally have a great deal of difficulty getting banks to grant traditional loans. Historically, there has been a fairly high fail rate among first-of-a-kind alternative energy projects. Federal loan guarantee programs—from the U.S. Department of Energy (DOE) and the U.S. Department of Agriculture (USDA)—have for many years taken the risk out of making loans for such projects. Because of that, the loan guarantees have permitted the launch of hundreds of renewable energy projects. And, as it turns out, projects funded by these programs have far more successes than failures.
The many projects that have come into being because of loan guarantees have resulted in significant job creation and other benefits to the environment and the economy. The Section 9003 and 9007 loan guarantee programs of the USDA, for example, have leveraged each federal dollar invested fivefold to tenfold as a result of the stimulus these projects have created for multiple follow-on projects financed entirely by private investments and commercial loans; led to economic growth in the nation’s rural communities; and supported projects that otherwise would not have been built, thereby generating local tax revenues and returning millions of dollars each year to the U.S. Treasury through annual interest payments.
Meanwhile, programs funded by the DOE Title 17 loan guarantee program have created more than 56,000 jobs in 20 states, and for each program launched by a program loan, up to five additional projects subsequently have been built through private sector funding.
The DOE Title 17 loan guarantee program and the USDA Section 9003 program seem likely to be eliminated. Those who believe that killing these programs is a good idea are going to some lengths to justify this turn of events. But the reality is the loan guarantee programs ensure that there is a path to commercialization for thousands of alternative energy projects, 823 applications for guaranteed USDA loans will be left without recourse, and projects that have invested many years and many millions of dollars to move forward will have to halt.
American Diversified Energy Consulting Services (ADE) will continue to speak in favor of federal loan guarantees through our lobbying arm – America First Energy Consulting Services – with lawmakers and our other contacts in Washington. We encourage you to do the same. If we are not successful this year, we will do what we can to get elected officials to reinstitute these programs or programs like them in the future.
If you want to weigh in on this matter with your elected officials—and timing is urgent because Congress is moving toward passage of the bills that will eliminate these programs (House bills H.R. 3266 and H.R.3268 and Senate bills S. 1609 and S. 1603)—you can find the phone number of your senators or representatives at:
Although it might seem an outdated approach in these times of electronic communication, experts say it’s more impactful if you call rather than email or text, even if you’re routed to voicemail.
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