Tens of Billions in Loan Guarantees Targeted at Cleantech Companies

The Department of Energy plans another big year of guaranteeing loans for renewable energy projects.

In the past 14 months, the DOE’s largest loan guarantee program (called Section 1705) awarded almost $26 billion to 23 renewable energy projects being run by companies such as BrightSource Energy and Abound Solar. The program has the financial assets to do a similar volume this year, before a September deadline brings it to a close, Jonathan Silver, executive director of the loan program office, told peHUB in an exclusive interview.

Silver, a former venture capitalist, says he wants to put every penny to work. “I’m trying to bridge the valley of death,” which holds back young innovative technologies from the funds necessary for them to reach commercial scale, he says.

A second program for advanced vehicles (read electric cars) has the capacity for an additional $8 billion to $10 billion in loan guarantees. These funds also will be used, Silver says. VC-backed companies that have benefited from that program include Tesla Motors and Fisker Automotive.

Numerous companies have already stepped forward with applications for the guarantees, including many venture-backed startups. The money has the effect of lowering the cost of capital by making private lenders more comfortable with a project. The guarantees make the government responsible for a portion of the financing if a project fails.

The guarantees play the role of encouraging the development of alternative energy in the country, and Silver, formerly a managing general partner at Core Capital Partners, says he is actively examining applications for projects in seven areas:

  • Energy storage;
  • Advanced wafer manufacturing for solar cells;
  • Biofuels;
  • Concentrated solar energy;
  • Biowaste;
  • Offshore wind generation; and
  • Geothermal energy generation.

Asked why VCs should pay attention once the guarantees are signed off, Silver notes that supply chains have to be developed for each of the technologies. That could equate to new venture investment opportunities.