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Jigar Shah’s Plan to Manage DOE’s $40B Loan Program

March 11, 2021


The solar PPA pioneer and “infrastructure-as-a-service” investor has been selected to revive the program that boosted Tesla and utility-scale renewables.

Jigar Shah has decades of experience bringing clean energy technologies to commercial scale. As CEO and co-founder of SunEdison, he helped pioneer the solar power-purchase agreement (PPA) model now central to the industry. As president and co-founder of Generate Capital, he’s applied similar expertise to commercializing new generations of clean energy and decarbonization technologies.

Now the clean-energy entrepreneur, well known to Greentech Media fans as a co-host of The Energy Gang podcast, is taking his acumen to the public sector. This week, U.S. Energy Secretary Jennifer Granholm named Shah as the head of DOE’s Loan Programs Office and affirmed that the agency’s more than $40 billion in loan guarantee authority will play an important role in the DOE’s push to commercialize technologies to help meet the Biden administration’s aggressive decarbonization goals.

“I’m not kidding when I say I’m more terrified than excited” at the responsibility of managing the program, Shah said in his final episode of The Energy Gang this week. But he also laid out some of the principles he intends to follow in reviving a program that helped boost now-successful companies like Tesla before it was sidelined by the Trump administration.

“The loan programs office has done about $35 billion of authorizations over its history and has made money for taxpayers” through interest payments on its loans over that time, he said. That’s despite the high-profile failures of some of the companies it backed, notably thin-film solar startup Solyndra.

But, Shah added, “if you want to have the leading electric vehicle manufacturer in the world,” as he described Tesla, “you’ll have to make multiple bets. And some of those bets will lead to losses,” as with loans to bankrupt (and now reviving) EV maker Fisker Automotive and bankrupt lithium-ion battery manufacturer A123.

Beyond the track record of individual loan guarantee recipients, “the Loan Programs Office is this bridge to bankability,” he said. While names like Tesla and Solyndra gather the most media attention, the Obama-administration-era loan program office also made “many, many loan guarantees for wind and solar projects in 2009 [and] 2010, when, frankly, Wall Street did not believe that wind and solar projects were bankable.”

“It wasn’t until 2014 when you started to see that bridge to bankability being created” for a wind and solar sector that now makes up the lowest-cost and fastest-growing share of new generation capacity in the U.S. and around the world, he said. “My sense is that we need to build 100 more of these bridges for technologies we all think are mature but aren’t being treated that way,” he said.

DOE’s role in deploying, not just developing, clean technologies

Shah has long called for shifting the focus of government funding from early-stage research and development to large-scale deployment. Generate Capital has taken a similar approach with its more than $1 billion in financing built around an “infrastructure-as-a-service” model, providing capital to deploy and operate novel technologies as a stepping stone to proving their commercial worth to would-be larger-scale backers.

DOE is best known for its research and development efforts, through its network of national laboratories and programs like ARPA-E, he said. But taking new technologies to market requires a different approach.

“We’ve talked a long time about the role of the private sector and how much the private sector can do to ramp up these solutions,” he said. But given the massive scale of decarbonization needed to forestall the worst impacts of climate change, “the federal government has to have a large and important role.”

“There are many areas that are mature from a technology standpoint but not mature from an access to capital standpoint,” he said. “That’s a nexus where there’s a clear mandate for the office to participate.”

That doesn’t mean that Shah intends to focus DOE’s lending toward a handful of massive projects, he noted — quite the opposite, in fact. The clean-energy provisions in the omnibus spending and COVID-19 relief bill passed by Congress in December, which included $35 billion in energy research and development programs, also set guidance that “makes the loan programs office more accessible to earlier-stage companies,” he said.

“You really needed to hire a lobbyist for $150,000 a month to get through the Loan Programs Office,” he said. That’s led to a preponderance of large-scale transactions, with the smallest loan from the program so far at $43 million and the average around $500 million.

“While I can’t assure that’s going to get changed in the first week, I’d think there have been signals sent by Congress, as well as by Secretary Granholm and by the administration, that they want this office to be able to be a more democratic place, where everyone feels like they have a fair shot of getting access,” he said.

In terms of technologies eligible for loans, roughly half of the more than $40 billion available is earmarked for advanced fossil fuel and nuclear power. But $22 billion can be targeted to direct loans or loan guarantees for renewable energy or advanced vehicle technologies, with another $2 billion for projects on tribal lands.

Shah pointed out several “not controversial” clean-energy technologies that could be recipients, such as offshore wind, geothermal energy and green hydrogen. Electric passenger vehicles are part of the program’s mandate, and Congress may be amenable to expanding that authority to supporting medium- and heavy-duty electric vehicles, he said.

As for the tribal energy programs, “there are tremendous resources available on these lands,” he said.  “I don’t think there has been a concerted effort to figure out how to bring prosperity to many of these tribes via the deployment of renewable energy, and I think there will be a concerted effort to try to figure that out.”

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