White House races to lend billions in climate funds before election

The Energy Department’s Loan Programs Office was turbocharged by the 2022 Inflation Reduction Act, which gave it hundreds of billions of dollars to lend to clean-energy businesses. So far, it has only used a tiny fraction of that capacity.

Biden administration officials fear that if Donald Trump is elected, the office would stop making loans. The program was largely dormant while Trump was president.

“The election is everything," said Adam Forgie, the Democratic mayor of Turtle Creek, Pa., where a startup making zinc batteries for energy storage has opened a factory at the site of an old Westinghouse plant that shut down in the 1980s. The closure was part of a manufacturing-industry collapse that destroyed thousands of jobs in Pittsburgh and surrounding areas like Turtle Creek.

The startup, Eos Energy, has a nearly $400 million commitment from the loan office that was announced a year ago to expand the factory and create several hundred jobs. “Hopefully whoever wins understands the need for business in this town," Forgie said.

Eos Chief Executive Joe Mastrangelo said the company is working as fast as possible to get the deal done soon.

Under the Biden administration, the program has agreed to lend about $6.5 billion to five companies. It made $24.9 billion in commitments for loans to new companies such as Eos that haven’t gotten final approval. It had more than 200 active applications for $281 billion in loans at the end of July.

The pace of loan commitments has accelerated recently. The office announced a $1.45 billion pledge to a big solar-panel maker, a $1.2 billion deal with a maker of battery parts and an $861 million agreement for solar farms and battery storage in Puerto Rico.

Those companies are part of the group of 19 including Eos and a Ford Motor joint venture that have announced agreements with the office but haven’t received cash. About half of those are in the supply chain for batteries and electric cars. They are part of an effort to cut reliance on China, which dominates the battery industry.

Companies fear that loan commitments could end up in limbo if Trump wins. Loans have to be approved by political appointees, including the head of the Energy Department, so the program is subject to the policy whims of the executive branch. The Trump campaign didn’t respond to a request for comment.

Other parts of the climate law such as clean-energy tax credits will be harder to roll back without an act of Congress and could be protected because they have driven a flood of investment to Republican districts. The Treasury Department and other agencies are also racing to complete tax-credit rules and spending programs before January, when a new administration takes over.

The loan office has quadrupled its staff under Biden. It has compiled a list of projects it plans to give priority to this year, according to people familiar with the matter. It has pushed for faster permitting and environmental reviews on projects it is backing from agencies like the Bureau of Land Management and the Environmental Protection Agency.

One hang-up has been a requirement that companies get funding from private investors before the loans can go out. The program’s rigorous due-diligence process, higher interest rates and slowing growth in electric-car sales have made it harder to get deals done.

Now run by former clean-energy entrepreneur Jigar Shah, the loan program is seen as a way to boost technologies that are too risky to get large amounts of private-sector funding without government support.

Companies have found the process cumbersome and lengthy, often taking years. Hovering over every loan decision is the specter of Solyndra, the solar-panel company that failed in 2011, causing a $535 million loan to go sour. Shah has said Solyndra never would have made it through the office’s current due-diligence process.

The loan office has had many successes. Tesla in 2010 won a $465 million loan, which it repaid in 2013. The program’s default rate of 3% is comparable to the performance of loan portfolios of commercial banks. It has made money for the government since its launch in 2005 under President George W. Bush.

Lithium Americas, a mining company that received a $2.3 billion commitment in March for a project in Nevada, had to work with the loan office for more than two years before getting the commitment, said Tim Crowley, vice president of government and external affairs at the company. The process is “brutal," he said. Crowley said the company expects to close the loan later this year.

If Trump wins, he could also shift lending toward technologies more favored by Republicans, such as nuclear power, hydrogen and carbon capture, said Sasha Mackler, executive director of the energy program at the Bipartisan Policy Center. The office has support from a number of Republican lawmakers who have seen the benefits of projects it backs in their states, he said.

“There are senior members of the Republican party that are supportive of its mission and would not be happy to see it deprioritized or neglected in a second Trump administration," he said. “I think there’s a pretty strong case that the LPO will continue to function."