New DOE Loan Process Promises Faster Funding
Under the Obama Administration, energy companies can expect a quicker response to loan requests, in stark contrast to a process that tended to bog down in recent years.
As part of the new economic stimulus, Energy Secretary Steven Chu is revamping the Department of Energy’s method for dispersing direct loans, loan guarantees and funding aspects of the recovery plan. Chu wants to expedite disbursement of funds to begin investments in a new energy economy, putting millions of Americans back to work, according to a DOE press release.
Govi Rao, chief executive officer of Lighting Science Group Corp., Westampton, N.J., welcomed the news.
“DOE has been proactive in funding cleantech companies like ours,” Rao said. “But by reducing the bureaucracy and paperwork, the process should be much simpler now.”
In the press release, Chu said, “These changes will bring a new urgency to investments that will put Americans back to work, reduce our dangerous dependence on foreign oil, and improve the environment. We need to start this work in a matter of months, not years – while insisting on the highest standard of accountability.”
As an example of how critics say the loan process is broken, Massachusetts-based Beacon Power Co. has been waiting 25 months for a $50 million loan guarantee toward an electricity-storage plant, according to WSJOnline.com.
As part of the approval process, so far Beacon has supplied DOE with 96 documents, including a draft 87-page environmental-impact study for the proposed two-acre site, according to the article.
By reducing paperwork and processing applications on a “rolling basis,” the Department of Energy aims to emulate the way private industry quickly finances projects. Among other things, according to the release, the department plans to:
- Offer loan guarantees under the Department’s previous loan guarantee program beginning in late April or early May.
- Begin offering loan guarantees under the stimulus by early summer.
- Distribute 70 percent of the stimulus dollars by the end of next year.
Some other aspects of Chu’s approach may appeal to companies, including the department offering applicants the opportunity to pay fees as part of closing, instead of up-front when applying. Additionally, Chu plans to further reduce up-front costs by having credit subsidies paid over the life of the loan.
The Department of Energy is not offering a free ride, however. Companies receiving loans in most cases will have to come up some earnest money on their own.
A spokesman for DOE said it’s too soon to know how much the announcement will affect the number of loan applications.
Rao expects Lighting Science will apply for a loan in connection with a proposed factory in New Jersey, which has been courting the company.
Lighting Science designs, develops and manufactures light engines, plug and play fixtures, screw-based lamps and custom projects. It has operations in Florida, California, New Jersey and Europe. In addition to consumer uses, it specializes in so-called “architainment,” or the mixture of architecture and lighting for entertainment. One of its more famous projects is the Times Square Ball.
While at a previous company, Rao applied for a DOE loan, he said, adding, “It was tedious. It involved extensive documentation and took almost a year. That was understandable to a degree, but I’m looking for it to change.”
Rao said he expects the Obama Administration to deliver more good news for the cleantech sector.
“In general, the Obama administration will result in positive results not only for companies like ours but for the entire energy chain,” he said. “It changes the paradigm for energy production in this country. As we transition to solar, wind and LED lighting, it will take time to overcome the barriers.”
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