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S. HRG. 111–11 LOAN GUARANTEE PROGRAM HEARING BEFORE THE COMMITTEE ON ENERGY AND NATURAL RESOURCES UNITED STATES SENATE ONE HUNDRED ELEVENTH CONGRESS FIRST SESSION TO RECEIVE TESTIMONY ON THE CURRENT STATE OF THE DEPARTMENT OF ENERGY LOAN GUARANTEE PROGRAM, AUTHORIZED UNDER TITLE 17 OF THE ENERGY POLICY ACT OF 2005, AND HOW THE DE- LIVERY OF SERVICES TO SUPPORT THE DEPLOYMENT OF CLEAN EN- ERGY TECHNOLOGIES MIGHT BE IMPROVED FEBRUARY 12, 2009 ( Printed for the use of the Committee on Energy and Natural Resources U.S. GOVERNMENT PRINTING OFFICE 48–618 PDF WASHINGTON : 2009 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 COMMITTEE ON ENERGY AND NATURAL RESOURCES JEFF BINGAMAN, New Mexico, Chairman BYRON L. DORGAN, North Dakota LISA MURKOWSKI, Alaska RON WYDEN, Oregon RICHARD BURR, North Carolina TIM JOHNSON, South Dakota JOHN BARRASSO, Wyoming MARY L. LANDRIEU, Louisiana SAM BROWNBACK, Kansas MARIA CANTWELL, Washington JAMES E. RISCH, Idaho ROBERT MENENDEZ, New Jersey JOHN MCCAIN, Arizona BLANCHE L. LINCOLN, Arkansas ROBERT F. BENNETT, Utah BERNARD SANDERS, Vermont JIM BUNNING, Kentucky EVAN BAYH, Indiana JEFF SESSIONS, Alabama DEBBIE STABENOW, Michigan BOB CORKER, Tennessee MARK UDALL, Colorado JEANNE SHAHEEN, New Hampshire ROBERT M. SIMON, Staff Director SAM E. FOWLER, Chief Counsel MCKIE CAMPBELL, Republican Staff Director KAREN K. BILLUPS, Republican Chief Counsel (II) C O N T E N T S STATEMENTS Page Asselstine, James K., Managing Director, Barclays Capital ................................ 23 Bingaman, Hon. Jeff, U.S. Senator From New Mexico ........................................ 1 Book, Kevin, Senior Vice President, Energy Policy, Oil & Alternative Energy, Friedman, Billings, Ramsey & Company, Inc. ................................................... 18 Frantz, David G., Director, Loan Guarantee Program, Department of Energy . 4 Karsner, Andy, Distinguished Fellow, Council on Competitiveness, Former Assistant Secretary of Energy Efficiency and Renewable Energy, Depart- ment of Energy ..................................................................................................... 10 Murkowski, Hon. Lisa, U.S. Senator From Alaska ............................................... 2 APPENDIXES APPENDIX I Responses to additional questions .......................................................................... 51 APPENDIX II Additional material submitted for the record ........................................................ 61 (III) LOAN GUARANTEE PROGRAM THURSDAY, FEBRUARY 12, 2009 U.S. SENATE, COMMITTEE ON ENERGY AND NATURAL RESOURCES, Washington, DC. The committee met, pursuant to notice, at 10:03 a.m. in room SD–366, Dirksen Senate Office Building, Hon. Jeff Bingaman, chairman, presiding. OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR FROM NEW MEXICO The CHAIRMAN. Ok, why don’t we get started with the hearing? Thank you all for being here. The purpose of this hearing is to focus on the Department of Energy’s Loan Guarantee Program. This is an exceptionally busy time for all of you. I appreciate you making the effort to be here and help us understand the challenges we face in getting these critical energy related technologies de- ployed and the role that the Loan Guarantee Program may play in that effort. Particularly I’d like to thank David Frantz for coming here today and to give us the views from the Department, particu- larly as those views have shifted in the last month or two. It’s a bit unfair to ask the new administration to address the im- plementation problems of this program since they obviously just came to town and took charge in the last month. But I believe this is a powerful tool for meeting our energy security needs. I think it would be a mistake for us to postpone making needed adjustments any longer than necessary. Senator Murkowski and I had a chance to speak with Secretary Chu yesterday. I believe he shares that view. He indicated that the Department is going to do all it can to move ahead with a genera- tion of green jobs and beginning the re-orienting of the economy to fit our national needs as they see it better. This program is vital to that. It was an encouraging meeting. I’m satisfied that the Secretary understands the difficult task ahead and the urgency that will be required to address it. So we look forward to a constructive part- nership between this committee and the Department of Energy in getting some of these problems resolved. There are a lot of different challenges that we face related to our energy needs. Putting a price on CO2 will help. I believe policy such as renewable electricity standard will help. But we need to ex- plore every possible option. Clearly putting in place an effective Loan Guarantee Program is part of that. (1) 2 We have many professionals in the Department of Energy who have seen any number of potentially world changing technologies both within our laboratories and other affiliated research institu- tions. The gap that seems to exist is in navigating those tech- nologies through the so called Valley of Death to widespread com- mercial deployment. The Loan Guarantee Program we put in law in 2005 was designed to deal squarely with that problem. But somewhere along the way the guiding principle of speed and scale were lost. I believe the President and Secretary Chu are bringing the nec- essary will and sense of urgency to the problem that I would. I think we need to still ask ourselves if the structure of the program is what it should be in order for it to succeed. Can the Department take the necessary risks? The risks that the private sector is un- willing to take or unable to effectively price in order to enable these technologies to get over these initial hurdles and become commercially useful in our economy. Will they be able to act in a sufficient scale to reduce the deploy- ment costs that keep these technologies from effectively competing with entrenched current technologies? So that’s the challenge be- fore us. I think it’s an issue we want to address. If we’re able to do an energy bill here in the next couple months in the Senate we clearly want to be sure that we are doing everything we can iden- tify to do to make this a viable part of the solution. So let me turn to Senator Murkowski for her comments. STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR FROM ALASKA Senator MURKOWSKI. Thank you, Mr. Chairman. I had envi- sioned a standing room only crowd this morning on the topic of the Loan Guarantee Program. Everywhere I go people want to talk about it. They all have their opinions. I think you and I would agree that most of those opinions are not exactly favorable in terms of what has been happening. We recognize the importance of this program. It certainly re- ceived a great deal of attention over this past year from the stand- point of global climate change. The Loan Guarantee Program is an excellent example of the do everything approach. It’s going to help us develop the 21st century energy system that I think we all rec- ognize our country needs. The Loan Guarantee Program has been dismissed by some as merely a Loan Guarantee Program for the nuclear industry. But I don’t believe that is the case. The title 17 program provides support for a broad portfolio of clean energy technologies, everything from energy efficiency, to renewables, to pollution control, vehicle tech- nology, advanced nuclear and carbon capture projects, truly the whole gamut. The Loan Guarantee Program was established 4 years ago. But I think we can see the benefits today as we are trying to rebuild our battered economy. This program supports the projects that promise stable, high paying energy sector jobs. Will help rebuild core infrastructure upon which our future prosperity depends. I would state that we are not risking taxpayer dollars with this program. Instead the fees that are paid by loan guarantee recipi- 3 ents are designed to cover the costs of potential project defaults. The energy sector obviously needs this program as evidenced by just the voluminous number of requests that have been submitted to the Department of Energy. We have got a limitation of $42 billion for the program. Yet DOE has received more than $120 billion in applications. The solicita- tions that have been closed so far have been oversubscribed by two to five times. I think that speaks to the interest to the demand. I am hopeful that the renewable energy solicitation will receive similar interest. I think we have good reason to believe that it will. Certainly the financial crisis that is facing the country at this time will only increase the demand for credit access under this program. We are here today to discuss the deployment of the Loan Guar- antee Program along with the possible ways to improve upon it. As the chairman mentioned in our conversation yesterday with Sec- retary Chu, when the question was asked, ‘‘What would you like to hear from the Loan Guarantee hearing?’’ He wants to hear the suggestions from the consuming perspective out there. Secretary Chu wants to know what it is that we can do better. This is our opportunity. I would hope that the witnesses who have been asked to testify here today will be free with your comments and your suggestions and your criticisms as well. We should let this be a constructive use of everyone’s time here. I think there are two points that we need to keep in mind as we move forward. First, as I mentioned there is an urgent need for these services, particularly in light of the credit crisis as we face. We should en- sure that the current programs proceed as expeditiously as pos- sible.
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