Proposal for a New "Energy Bank" Gathers Steam

March 12, 2009
Peter Behr, E&E reporter
The Senate Energy and Natural Resources Committee will propose creating a new federal "clean energy" bank to channel billions of dollars in federally guaranteed loans for new energy and power transmission technologies, as part of broad new energy legislation now being drafted, committee sources said yesterday.
"As a concept, it has a lot of support," a Senate staff member said. "It looks very viable at this point."
Congress included $60 billion in new loan guarantee authority for energy projects in this year's financial stimulus bill, adding to the $51 billion authorized in previous years for energy project loans. But congressional leaders have been frustrated with the Energy Department's inability to process energy loan guarantees approved in 2005.
"We tried, as many people know, to put a loan guarantee program in place in 2005," said Sen. Jeff Bingaman (D-N.M.), chairman of the Senate energy panel, in an interview this month on E&ETV. "It hasn't worked as we had hoped." The question, he said, is "whether something more substantial is required than just the loan guarantee program that's currently in law."
Bingaman and former New Mexico Sen. Pete Dominici, the committee's ranking Republican last year, introduced versions of a clean energy bank bill, and Bingaman is prepared to push the concept now. Reps. Jay Inslee (D-Wash.) and Steve Israel (D-N.Y.) sponsored the Bingaman bill in the House last year, and Inslee continues to support the concept, his staff said.
The size of the proposed new bank's loan-making authority has not been settled. It also has not been determined whether the bank will be part of a broad new Senate energy bill being drafted now or will be introduced separately, a Senate staff aide said.
The models for the proposed new bank are the government's Overseas Private Investment Corp. (OPIC) and the U.S. Export-Import Bank (Ex-Im Bank).
Like the Federal Energy Regulatory Agency and the Nuclear Regulatory Commission, the Ex-Im Bank has a five-member, presidentially appointed board of directors divided between Republican and Democratic appointees. OPIC's 15-member board includes private citizens appointed by the president and senior administration executives.
Bingaman's proposal from last year would have created a new bank headed by the Energy secretary, drawing on the department's technical expertise but staffed with loan specialists.
DOE not equipped to handle loan guarantees, says Bush official
Andy Karsner, the Bush administration's assistant Energy secretary for renewable energy, said last month that the department was not equipped to handle the loan guarantee program. "A quasi-governmental agency focused on clean energy financing, rather than energy research and development, would be a transformational change," he told members of Congress.
The idea understandably has wide support in the energy industry. The Solar Energy Industries Association endorsed an energy bank last year and is lobbying for it now. The Nuclear Energy Institute is strongly promoting a separate bank to process the federal loan guarantees that are essential to financing new nuclear power plant designs, said Richard Myers, the institute's vice president for policy.
"I think the outlook is pretty good. I believe there is a broad consensus emerging [for a bank approach]," he said, given an estimated $2 trillion in investment required by the electric power industry by 2030 as it meets new climate policy requirements.
But major political and policy issues must be resolved, congressional staff and industry representatives said. One question is whether the bank's funding would be tilted toward current-technology power plant and transmission investments that are "shovel-ready" or would aim at new, potential breakthrough energy developments.
Another issue is whether to include new nuclear power plant designs.
'There are a lot of questions'
Alaska Sen. Lisa Murkowski, the Senate energy committee's ranking Republican, is interested in the clean energy bank concept, but has not signed on. "There are a lot of questions," said a Senate GOP aide. "What would the loan guarantees cover? What would the bank's mission be, what energy sources would be eligible? It's a lot of money."
The Senate-passed stimulus bill included $50 billion in new loan guarantee authority for advanced low-carbon emission technologies, including nuclear power. But House leaders opposed to nuclear power cut that amount before the bill's final passage.
The $18.5 billion currently authorized for nuclear plant loan guarantees is "clearly inadequate," said Nuclear Energy Institute CEO Marvin Fertel. New nuclear plants are projected to cost $8 billion or more, and companies want as much as 80 percent of that to come as federally guaranteed loans. An initial group of nuclear plant developers is seeking $122 billion in loan guarantees.
While the nuclear industry is trying to present new reactors as a key part of a carbon-free electric power industry, opponents have seized on the loan guarantee issue as a counter-argument. The Union of Concerned Scientists said last week, "The federal loan guarantees and additional subsidies for the nuclear industry ... merely transfer risks from the companies that want to build the plants to the federal government and its taxpayers." Funding the nuclear guarantees diverts funds that could be committed to renewable energy and energy efficiency, it said.
Energy Secretary Steven Chu supports deployment of new nuclear plants, but the industry's political standing in Congress has yet to be tested this year.