Thoughts on the DOE Loan Guarantee Program

The Department of Energy is moving forward with its clean energy Loan Guarantee program. In a press release last week, DOE announced that it had received applications from 17 companies to build 14 nuclear power plants totaling 21 new units and almost 29,000 megawatts of new electrical capacity. In total, the applications seek $122 billion in loan guarantees, while the program is authorized to commit only $18.5 billion to new nuclear plants. Following the DOE announcement, NEI's Richard Myers, Vice President, Policy Development, noted in an interview with Bloomberg that the oversubscription is a sign that $18.5 billion is not adequate to provide the financing support necessary. In a piece on the loan guarantee program and another on the debt ceiling of the Tenessee Valley Authority, Dan Yurman explains why.

In essence, there are some jobs so big they are beyond what the private sector alone can do. Federal support, such as loan guarantees, enables the private sector to attract more capital to the enormous projects needed than would occur otherwise. Without that public-private partnership, the entire cost of these massive projects would be borne entirely by the federal government (i.e., the taxpayers). With federal encouragement, the private sector is willing to bear a fair share of the risk and put its money on the line to contribute to dealing with the nation's energy and environmental needs. That's what we take from the oversubscription in loan guarantee applications last week.