By Michael J. Gergen, Joshua T. Bledsoe, David E. Pettit and Tara L. Rice

President Obama recently announced that the Department of Energy (DOE) Loan Program Office (LPO) is expanding support for innovative “distributed energy projects” by adding $1 billion in available loan guarantees to support the deployment of these projects through the existing solicitations for Renewable Energy and Efficient Energy Projects and Advanced Fossil Energy Projects.  Eligible projects could include energy storage, smart grid technologies, cogeneration and methane capture for oil and natural gas wells, as well as roof-top solar and energy efficiency technologies that meet certain “innovation” requirements. For example, roof-top solar projects that are combined with storage may be eligible.

The LPO also is targeting distributed energy developers with special supplements to these two pending solicitations that make clear that existing program authority under Title XVII of the Energy Policy Act of 2005 and resources may be used to accelerate the deployment of distributed energy projects. The credit enhancement available through DOE’s LPO traditionally has been used to support utility-scale energy projects. In recognition of the important role of distributed energy in the future of US energy markets, the LPO is making a concerted effort to marshal program resources to support innovation in this growing segment.

In connection with the announcement, DOE’s LPO also released new guidance clarifying that state and state-affiliated entities, such as state green banks, may apply for loan guarantees for eligible projects under Title XVII, which encompasses both the Renewable Energy and Efficient Energy Projects and the Advanced Fossil Energy Projects solicitations. In the special supplements to these solicitations, the LPO explained that distributed energy projects “require different financial structures” than the utility-scale projects that have been supported by Title XVII guarantees. State green banks may serve an important role facilitating and structuring multi-party distributed energy projects. The LPO announcement also notes that projects with state backing may be particularly competitive for a Title XVII loan guarantee if such state support reduces the riskiness of the proposed project.

Through the supplements to the existing solicitations for Renewable Energy and Efficient Energy Projects and Advanced Fossil Energy Projects, DOE’s LPO has made clear that distributed energy projects and state (or state-affiliated) green bank entities are encouraged to apply for loan guarantees through these solicitations. Further, DOE has provided potential applicants with more information about financial structures, project arrangements and distributed energy technologies that are eligible to apply for and potentially obtain guarantees through these solicitations. The LPO accepts applications under these solicitations on a rolling basis.