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Loan Guarantees Are Back: DOE Targets 'Catalytic' Grid Integration Technology

DOE Loan Guarantee and Grid Integration

Three years after the Department of Energy issued its last loan guarantee to a renewable energy project, the program is officially back in action.

Ending a long hiatus, the DOE indicated in February that it would finally use the remaining $1.5 billion allocated by Congress for loans to clean energy project developers. Today, the department is announcing the first public step in that process: a solicitation for developers of battery storage, microgrids, efficiency and waste-to-energy projects that will “catalyze” the market.

“We are looking at how we get the same type of impact in other technologies like we did in solar,” said Peter Davidson, the executive director of DOE’s loan programs office, in an interview at Greentech Media’s Solar Summit.

The total support could rise to $4 billion as DOE uses $2 billion in other available funds, plus hundreds of thousands of dollars in credit subsidies.

The projects will fall under the 1703 loan guarantee program, the original loan backstop vehicle set up under the 2005 Energy Policy Act and funded by the stimulus package in 2009. That is separate from DOE’s sister loan program, 1705, which offered $16 billion in support to clean energy companies, 80 percent of them solar. Although the 1705 program has a 97 percent success rate, it’s still best known for having backed failed solar companies Abound and Solyndra.

So far, 1703 has been used to support two large-scale nuclear plants. After a multi-year analysis of where remaining funds should be spent, Davidson’s team is now looking to support projects on the opposite end of the spectrum that can help integrate nimble, distributed clean energy technologies on the grid. 

“We’re really interested in grid connectivity and integration,” said Davidson.

A lot has changed since the department initially ramped up its loan guarantee offerings in 2009.

Starting in 2011, a handful of high-profile companies supported by the 1705 program and the Advanced Technology Vehicles Manufacturing program went bust, creating a political nightmare for the energy department. That caused a two-year frenzy among Republicans, who railed on the DOE for supposedly helping fund “losers” — even though many of them had voted for the original program and asked for money themselves.

In March 2013, Ernest Moniz took the helm at the DOE. Davidson was brought on to manage the DOE’s loan portfolio a couple of months later. Shortly after, his team announced $8 billion in funding for loan guarantees to support advanced fossil fuel projects through the 1703 program. (Interestingly, the same protests about the government “picking winners and losers” were not heard when DOE threw its support behind fossil fuels.)

The biggest change, said Davidson, has been outside of Washington. When DOE first considered recipients in 2009 and 2010, a boom in utility-scale solar was underway due to the rise in state-level renewable energy targets. Eyeing the opportunity, the department supported record-size solar PV, concentrating solar power and wind power plants that could get utility contracts for power. 

In 2014, however, the needs in the energy market are different. Utilities aren’t just looking to build big projects anymore. Rather, they’re getting more interested in procuring the technologies that will help integrate those projects on the grid. Instead of renewable energy standards, storage procurement targets, demand-side management programs and “grid resiliency” initiatives are starting to drive the market.

That means grid-scale and distributed storage, advanced inverters and power conversion technologies, and microgrid projects are top of mind for DOE, said Davidson.

“New and exciting things are happening on the utility side,” said Davidson. “We want to be involved in storage, hybrid fossil and renewable plants, microgrids — anything that will have a catalytic role.”

In other words, the grid edge.

The new solicitation is about much more than just grid balancing and distributed energy integration. DOE said it is willing to consider waste-to-energy technologies, biofuels, and unique approaches to energy efficiency. But figuring out better ways to enable distributed generation is a central focus.

The energy department will be taking public comments for the next 30 days, and the final solicitation will be in June.

Photo Credit: Department of Energy Loan Guarantees/shutterstock

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Engineer- Poet's picture
Engineer- Poet on Apr 19, 2014 6:54 pm GMT

Utilities aren’t just looking to build big projects anymore. Rather, they’re getting more interested in procuring the technologies that will help integrate those projects on the grid. Instead of renewable energy standards, storage procurement targets, demand-side management programs and “grid resiliency” initiatives are starting to drive the market.

In other words, the utilities are finding all the variable generation being put on the grid to be an indigestible lump.  When it was small it could just be passed through, but now it’s forming a blockage.  The diminishing return of fuel savings/carbon reduction as wind power on the grid is increased is part and parcel of this problem.

DSM and storage are key, but deployment is far behind.  I don’t even see sufficient planning (California has a rather small requirement for storage in the future) and the responsibility for dealing with the variability problem has been put on the wrong heads (utilities, not the RE generators).

Whatever is done on the DSM side, it has to account for some major electricity-consuming applications.  “Heat batteries” for space heat and DHW are a possibility and ice storage for A/C has long been out there, but once you’ve taken care of your demand for such things you’re left with applications that need power in real time.  Hand-waving the problem away won’t work unless it generates enough of a breeze to re-start becalmed wind farms.

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