DOE RELEASES FINAL SOLICITATION FOR FOSSIL ENERGY PROJECTS

Karen Frantz
GHG Monitor
12/13/13

The Department of Energy this week released a final $8 billion loan guarantee solicitation for projects that “support innovative advanced fossil energy projects that avoid, reduce or sequester greenhouse gases”—including carbon capture and storage—which largely mirrors the draft version but for the inclusions of “new provisions intended to facilitate applications, ensure quick review and foster successful public-private partnerships,” according to the DOE. The solicitation, released this week, focuses on backing fossil technologies that are new or “significantly improved,” but not yet commercial, and said it expects to receive the initial applications by the end of February. The draft solicitation was published earlier this year in July with a 60-day comment period, and the DOE incorporated the feedback into the final solicitation. DOE said in a fact sheet it would focus its efforts on four technology areas that include:

1. Advanced Resource Development—“Novel oil and gas drilling, stimulation, and completion technologies that avoid, reduce or sequester greenhouse gases; use of associated gas production to reduce flaring; coal-bed methane recovery to reduce methane emissions into the atmosphere associated with coal mining; underground coal gasification; and methane emissions capture from energy production, transmission, or distribution.”
2. Carbon Capture—“CO2 capture from synthesis gases in fuel reforming or gasification processes; CO2 capture from flue gases in traditional coal or natural gas electricity generation; and CO2 capture from effluent streams of industrial processing facilities.”
3. Low-Carbon Power Systems—“Coal or natural gas oxycombustion; chemical looping processes; hydrogen turbines; and synthetic gas, natural gas, or hydrogen-based fuel cells.”
4. Efficiency Improvements—“Combined heat and power; waste heat recovery; novel oil refining technologies high-efficiency distributed fossil power systems.” In addition, new language was added to the final solicitation that included “high temperature materials for fossil-based systems” in this category.

Secretary of Energy Ernest Moniz lauded the solicitation in a statement. “Under the Obama Administration, the Energy Department is taking an all-of-the-above approach to American energy to ensure we develop all our abundant energy resources responsibly and sustainably,” he said. “Currently providing 80 percent of our energy, coal and other fossil fuels will continue to be a critical part of our energy portfolio as we move toward a low-carbon future. By helping to accelerate the introduction of innovative, clean fossil energy technologies ready for deployment at commercial-scale today, investments under this solicitation will help ensure we continue to have access to affordable, clean energy from all our domestic energy resources tomorrow.”

Updates in the Final Solicitation

Although a handful of the final solicitation have been changed from the draft version, various deadlines and application fees have been listed anew or updated. For instance, the application fee for Part I submission is now listed as $75,000, down from $250,000, and the fee for Part II submission is now listed as $925,000, up from $750,000. The final solicitation also assigns weight to various application consideration criteria in Part II, including 45 percent for creditworthiness, 35 percent for technical factors and 20 percent for programmatic factors. “Policy considerations” were removed from the weighting criteria, although language remained regarding DOE evaluation of whether a project achieves policy objectives. And lists of due dates for Part I and Part II of the application have been assigned in the final version.

Other updates as to how applications would be evaluated appeared in the final solicitation. The final version includes new language saying that applications for loan guarantees for projects that could be fully financed through commercial banks will be “viewed unfavorably” and that “mandatory criteria” DOE will use during each round to determine which projects will go to the next stage are “(1) whether the project provides a reasonable prospect of repayment of the principal and interest on the guaranteed obligation and other project debt, and (2) whether the guaranteed obligation, when combined with amounts available from other sources, will be sufficient to carry out the project.” Eligibility requirements are also expanded to include stipulations that the project “is located in the United States,” that it “provides a reasonable prospect of repayment of the principal and interest on the guaranteed obligation and other project debt,” that it “has sufficient funds to carry out the project,” and that it “is not benefiting from other federal assistance.”

In the policy section, language that said a project would be evaluated based on its potential to be employed in other commercial projects in the U.S. was removed, although language that said a project would also be evaluated based on whether it “is or will be available for further commercial use in the United States” remained. In addition, language was added to the policy section saying projects would be evaluated based on whether an application relies upon a “smaller percentage of guaranteed funds” and whether an applicant and project sponsor “are prepared to proceed more expeditiously than other applicants and project sponsors” to conditional commitment and closing.

In addition, some aspects of the application are loosened in the final version, including allowing applicants that do not have examples of successful implementation of similar project plans for projects of similar scale to demonstrate “that they have the expertise that would be evidenced in examples of successful implementation of similar project plans for projects of this scale.” Language is also added explaining how applicants can opt to restrict disclosure and use of certain data.