The looming threat of a US government shutdown jeopardizes billions of dollars in federal loans earmarked for clean energy projects. Companies like Rivian Automotive Inc., Plug Power Inc., and PG&E Corp. are among those facing potential delays or cancellations of crucial funding from the Department of Energy’s Loan Programs Office (LPO).
The Biden administration has been working to finalize over $41 billion in conditional financing before the upcoming presidential transition. However, a government shutdown could bring this process to a standstill. Without a congressional agreement on funding, federal employees and contractors would be legally prohibited from working, effectively halting all loan processing, including due diligence and closing procedures.
While an Energy Department spokesperson stated that the LPO would continue to operate using prior year balances, experts warn that a prolonged shutdown could severely impact the office’s ability to close deals. The LPO, empowered by $400 billion in spending authority through recent climate legislation, has been rapidly issuing loan commitments and finalizing agreements. These include a record $15 billion loan to PG&E Corp., $6.6 billion to Rivian Automotive Inc., and nearly $1.7 billion to Plug Power Inc.
Other significant projects awaiting final approval include a $4.9 billion loan guarantee to Invenergy LLC for a high-voltage power line, $1.4 billion for a Calumet Inc. biofuel plant, and $671 million for battery materials company Aspen Aerogels Inc.
Image of Rivian electric vehicles being assembled at a manufacturing facility.
The urgency stems from the potential policy shift under a new administration. The incoming president previously proposed eliminating the LPO, and conservative groups are actively advocating for its termination. Even if the program survives, its focus could shift towards projects favored by the new administration, potentially jeopardizing existing clean energy initiatives.
Former LPO officials acknowledge the possibility of some behind-the-scenes work continuing, funded by applicant fees. However, the interconnectedness of the LPO with other potentially shuttered agencies raises concerns about completing complex loan processes. A sustained shutdown could significantly hinder the ability to finalize conditionally approved deals, especially those facing higher risk under a new administration.
In conclusion, the potential government shutdown poses a serious threat to the timely disbursement of billions of dollars in clean energy loans. The uncertainty surrounding the future of the LPO under a new administration further amplifies the risk for projects currently in the pipeline. Delays or cancellations could significantly impact the progress of these critical initiatives and hinder the transition to a cleaner energy future. The outcome ultimately hinges on a swift resolution to the budget impasse and the subsequent policy decisions of the incoming administration.
