Good News and Bad News for DOE's Loan Guarantee Program
There has been a wave of good and bad news this past week regarding the DOE's Loan Guarantee Program. On the positive side, Secretary Chu announced on Friday that the Department would be adding an additional compliance period for the Innovative Solicitation. The current deadline for the Part I application under the program is August 24th. Secretary Chu announced the applications would be accepted until October 5th thus providing six more weeks of time to applicants. Secretary Chu did not extend the Part II deadline and cannot extend the September 30, 2011 start construction deadline as that deadline was established by the Stimulus Bill itself. Still, the extension was generally viewed as a respite and perhaps an indication of a willingness to further extend the program.
On the bad news side, the Senate approved the FMAP state aid bill to avert teacher layoffs and pay for Medicaid which is to be funded in part by taking $1.5 billion in funds that the Stimulus Bill appropriated to the DOE Loan Guarantee program. Clearly driven by Pay-Go requirements, this is a reminder of the $2.0 billion fleecing that the Loan Guarantee Program suffered when Cash for Clunkers program was passed. While it has been promised that the funds will be restored, the fact that the Cash for Clunkers funding has not yet been restored raises concern about whether the restoration will occur.
Secretary Chu Announces $80M for Biofuels
DOE Secretary Chu's announcement today regarding $80 million of ARRA funding for biofuels is potentially a positive development for the long-term development of the biofuels industry. What is worrisome from a practical perspective is the division of funding. The National Alliance for Advanced Biofuels and Bioproducts, centered in St. Louis, received $44 million to develop a systems approach for the sustainable commercialization of algal biofuel and bioproducts. The National Advanced Biofuels Consortium, based here in the Pacific Northwest, received up to $34 million to develop infrastructure compatible biomass-based fuels. Meanwhile eight infrastructure projects received up to $1.6 million to support expanded fueling infrastructure for ethanol blends. While the Administration is ahead of the curve in recognizing the importance of long-term support for the development of advanced biofuels, it is overlooking the increasingly challenging environment in first generation biofuels. Simply put- and purely in my opinion- there will be no second generation of biofuels if the first generation does not again thrive. The ethanol industry has hit a blend wall that the EPA has not been willing to help them overcome in the short term. Adding $1.6 million in E-85 infrastructure is but a chip in that wall when one considers the massive costs involved in building a national infrastructure. On the biodiesel side, the current industry has not yet received an extension of its tax credit and was already facing severe challenges. The investors who supported the expansion of the first generation biofuels industry are still tracking their investments and the policy support for the industry. While government funding will further the development of the science of advanced biofuels, private sector involvement will be essential to the ultimate commercialization of these fuels. To accomplish its ultimate goals, the Administration will need to begin to address these issues in a systematic manner.
