DOE Loan Guarantee Program Falling Short of Expectations

A major hurdle for developing advanced cellulosic biofuels has been obtaining financing to construct commercial scale biorefineries. Risk-averse investors see too many technological, economic, and policy uncertainties in developing this new industry. Established in Title XVII of the Energy Policy Act of 2005 , the Department of Energy (DOE) Loan Guarantee Program is intended to help new, clean energy industries that use innovative technologies, such as the advanced biofuels industry, cross the “valley of death” from the laboratory to commercial scale production. At a recent EESI briefing , panelists agreed that the loan guarantee program is critical to getting the industry up and running and fulfilling Congress’ renewable fuel mandate, which requires refiners to blend 16 billion gallons per year of advanced biofuels into the nation's fuel supply by 2022.

However, so far the program has fallen short of expectations. As of April, only one loan guarantee had been completed. On July 12, the Government Accounting Office released a report highlighting the need for the Department of Energy (DOE) to clarify the goals of the program and improve its implementation. The report recommends that the DOE: 1) develop relevant performance goals, 2) ensure applicants are treated consistently, 3) develop an administrative appeal process, and 4) develop anonymous feedback from applicants who are rejected.