Jigar Shah, overseeing $400 billion in DOE lending, discusses financing EV factories, geothermal wells, and more. Exploring cash flow, tech innovation, and risk in new projects. Analyzing investment risks in cutting-edge tech and the bridge to bankability. Evolution of clean energy technologies and challenges in the energy and automotive sectors. State initiatives for clean energy financing and local entrepreneurship support.
The Department of Energy's Loan Programs Office has expanded lending authority to $400 billion to support innovative projects in solar, mining, EVs, and battery assembly, crucial for advancing climate change initiatives.
Industrial growth in the US via policies like the Inflation Reduction Act has led to the establishment of 500 new factories, aiming to revive communities with sustainable jobs and boost manufacturing and heavy industries.
The Loan Programs Office manages risks associated with funding innovative projects, focusing on execution, management, and fundraising capabilities, supporting cutting-edge technologies and companies through stages of innovation, deployment, and commercialization.
Deep dives
The Transformation of the Department of Energy's Loan Programs Office
The Department of Energy's Loan Programs Office, under the Inflation Reduction Act and the Bipartisan Infrastructure Law, has significantly expanded its lending authority, enabling it to support projects focused on solar, mining, EVs, and battery assembly. With a tenfold increase in lending authority to $400 billion, the office provides funding for projects that face challenges in obtaining commercial loans due to new technology or extensive timelines for returns. This support is crucial for advancing climate change initiatives and decarbonization efforts.
Industrial Policy and Job Creation in the United States
The United States has witnessed significant success in driving industrial growth through policies like the Inflation Reduction Act, resulting in the announcement of 500 new factories. These initiatives aim to revive communities by providing family-sustaining jobs and reestablishing manufacturing and heavy industries in the country. While progress has been made, challenges remain, such as overcoming traditional beliefs about manufacturing vulnerabilities to foreign competition and ensuring sufficient workforce availability through training programs and community engagement.
Risk Management and Innovation at the Loan Programs Office
The Loan Programs Office acknowledges and manages various risks associated with funding innovative projects, focusing on execution, management, and fundraising capabilities. While some projects face perceived technology risks, the office relies on feedback and expertise from national labs to assess the potential of these technologies. By strategically planning loan loss reserves and guiding companies through best practices, the office aims to mitigate risks and support successful ventures.
Bridge to Bankability and Technological Innovation in the United States
The concept of a 'bridge to bankability' serves as a framework to support cutting-edge technologies and companies through stages of innovation, deployment, and commercialization. By facilitating loans and investments in state energy projects and initiatives, the U.S. is fostering innovation across sectors like EV charging, solar, and microgrid technology. This approach not only propels technological advancements but also strengthens the U.S. market competitiveness and drives a gigaton of carbon reduction initiatives.
State Energy Financing Initiatives and Local Innovation
State energy financing institutions, in alignment with federal programs, are empowering local innovators and entrepreneurs to access resources and funding for clean energy projects. By leveraging state-level expertise and creativity, collaborations with state financing entities are unlocking opportunities for diverse projects aimed at sustainability and energy efficiency. Initiatives like the State Energy Financing Institution program are reshaping the landscape for clean energy investments and fostering a culture of innovation at the local level.
Jigar Shah might have more control over America’s new wave of industrial policy — not to mention its climate policy — than anyone not named Joe Biden. And he’s not even a Cabinet-level official. As director of the Department of Energy’s Loan Programs Office, which is akin to its in-house bank, Shah oversees how roughly $400 billion in lending authority will be spent. That money will help finance new EV factories, geothermal wells, carbon capture sites, and more.
On this week’s episode, Rob sits down with Shah to discuss the philosophy that he brings to his role. When financing new projects — many of which are the first of their kind — how does he think about cash flow, about technological innovation, about risk? Robinson Meyer is executive editor of Heatmap News; Jesse Jenkins, an energy systems engineering professor at Princeton, is off this week.
Rob on the questions swirling at one-time LPO beneficiary Tesla
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