Tucked into the Inflation Reduction Act that President Biden signed last week is a major expansion of federal loan programs that could help the fight against climate change by channeling more money to clean energy and converting plants that run on fossil fuels to nuclear or renewable energy.
The law authorizes as much as $350 billion in additional federal loans and loan guarantees for energy and automotive projects and businesses. The money, which will be disbursed by the Energy Department, is in addition to the more well-known provisions of the law that offer incentives for the likes of electric cars, solar panels, batteries and heat pumps.
The aid could breathe life into futuristic technologies that banks might find too risky to lend to or into projects that are just short of the money they need to get going.
Backers of the program have argued that despite defaults like Solyndra, the program has been sustainable overall. Of the $31 billion the department has disbursed, about 40 percent has been repaid and interest payments in the fiscal year that ended on Sept. 30, 2021, totaled $533 million — more money than the failed Solyndra loan.
The Energy Department’s loan programs began in 2005 under the George W. Bush administration but expanded significantly in the Obama era. The department provided a crucial loan that helped Tesla expand when it only sold expensive two-door electric sports cars; the company is now the world’s most valuable automaker.
Under the Trump administration, which played down the risks of climate change, the department’s loan office was much less active. The Biden team has been working to change that. Last month, the department said it planned to loan $2.5 billion to General Motors and LG Energy Solution to build electric-car battery factories in Michigan, Ohio and Tennessee.
The department’s loan program office is currently reviewing 77 applications for $80 billion in loans sought before the new climate law was approved. The Inflation Reduction Act will add $100 billion to existing loan programs for financing production of electric vehicles, for instance, and for projects on tribal lands. It will also add up to $250 billion in new loan guarantees and $5 billion in grants.
“We have established that the private sector wants to use our resources again,” said Jigar Shah, the director of the Energy Department’s loan programs office who is a former solar energy entrepreneur. “We still have to do a lot of work. We have to identify all the areas that qualify.”
One beneficiary of the new loan money could be the Palisades Power Plant, a nuclear facility on Lake Michigan near Kalamazoo, Mich., that closed in May. The plant had struggled to compete in the PJM energy market, which serves homes and businesses in 13 states, including Michigan, New Jersey and Pennsylvania, and Washington, D.C.
The Biden administration has made nuclear power a focal point of its efforts to eliminate carbon dioxide emissions from the power sector by 2035. The administration has offered billions of dollars to help existing facilities like the Diablo Canyon Power Plant — a nuclear operation on California’s coast that is set to close by the end of 2025 — stay open longer. It is also backing new technologies like small modular reactors that the industry has long said would be cheaper, safer and easier to build than conventional large nuclear reactors.
The owner of the Palisades facility, Holtec International, said it was reviewing the loan program and other opportunities for its own small reactors as well as bringing the shuttered plant back online.
“There are a number of hurdles to restarting the facility that would need to be bridged,” the company said in a statement, “but we will work with the state, federal government, and a yet to be identified third-party operator to see if this is a viable option.”
In addition to nuclear projects, the loan money could spur development of other clean energy sources, including converting dams that do not produce electricity into new power facilities like those by Rye Development, a company based in West Palm Beach, Fla., that is working on several projects in the Pacific Northwest.