Obama to Streamline the Loan Guarantee Program


"Officials recommended moving program funds to the renewable energy grant program."

The Obama administration is working on streamlining the Department of Energy's loan guarantee program, a spokesperson for the Office of Management and Budget (OMB) commented this morning. The move follows a leaked memo dated October 25, reported by Biofuels Digest, from White House officials to the President.

But instead of "reprogramming" the loan guarantee program, the Obama administration and the DOE have decided to remain committed to the improving the program.

Loan guarantees essentially serve as a promise by the government to make good on a loan if the company can't, and typically enable better interest rates and lower costs than would otherwise be availablefor project financing. Greentech startups have been building businesses around these loan guarantees. Pulling the plug on the project would probably have a ripple effect across the industry.

But it's clear to many that the DOE loan guarantee program hasn't been working as well as it should. White House officials have been concerned about three risks: the potential loss of non-obligated funds, fear of criticism of slow implementation of the program and the risk of making commitments to projects that would have happened anyway.

White House officials recommended reprogramming the loan guarantee funds over to the renewable energy grant program, because the typical length of review for the loan guarantee program is six months, compared to the four to six weeks for the grant program. In addition, just 8 companies have received loan guarantee commitments (with four closed), while 3,851 projects have received renewable energy grant funds.

While the OMB wouldn't go into many details of how the program will be streamlined going forward, the spokesperson said that the White House and DOE are looking to make the program run "more smoothly," "take less time," but also "protect tax payer interest."

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