Chu to overhaul Green Energy Loans System. Fast-tracks Green Energy Solutions
WASHINGTON, D.C.–A day after President Obama signed the $787 billion economic stimulus package with $58 billion set aside for energy-related spending and tax incentives, his new secretary of energy, Steven Chu, vowed to overhaul the government’s notoriously slow process for funding new electric grid projects.
In one of his first speeches as energy secretary, Chu told a meeting of the nation’s regional utility commissioners in Washington, D.C., that he would immediately reverse what he characterized as years of inaction during the Bush years for using federal loan guarantees to finance new renewable power generation. Chu, a 60-year-old Nobel prize winning physicist from Stanford University, came to Washington with a mandate from the president to increase the nation’s production of clean, renewable power, make the electric grid more intelligent and improve overall energy efficiency.
The stimulus law supports him with billions of dollars on all three fronts. Chu has long been on record as a staunch advocate of reducing the nation’s carbon emissions by vastly expanding generation from wind and solar power. One example he points to is the Bonneville Power Authority in the Pacific Northwest, which he said could increase the wind share of its generation portfolio from 20% to 40% within several years. Doing so, however, would require every bit of the $3.25 billion of the new borrowing authority the stimulus directed to the BPA, as well as some heroic measures to use giant water pumps to store power and release it back onto the grid when the winds stop blowing.
Utilities and regulators are under pressure to tap the stimulus quickly, as only renewable energy projects begun in 2009 and 2010 are eligible for the $6 billion set aside by the stimulus package to cover the cost of federal loan guarantees. That could buy a lot of wind turbines. Many people misinterpret the $6 billion as the amount being loaned to build capacity. But the $6 billion is only to cover the government’s losses on the loan guarantees. Losses on federal loan guarantees typically run between 3% and 12%, meaning that the amount being unleashed by the stimulus is more like $60 billion.
Assuming that wind power gets most of the money (turbines accounted for 95% of new renewable capacity from 2002 to 2007) that’s enough to underwrite the construction of 30,000 MW of wind power, according to Hugh Wynne, an analyst at Bernstein Research. That’s more wind capacity added in the U.S. in two years than exists worldwide.
Speed is not a word commonly associated with the Department of Energy. In his remarks Wednesday morning, Chu said that when he arrived in Washington he was surprised to find out that the energy department had not issued a single loan guarantee for two years. And the few loans on the books were for projects that wouldn’t be launched for another 18 months or so.
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