[Senate Report 112-47]
[From the U.S. Government Publishing Office]


                                                       Calendar No. 127
112th Congress                                                   Report
                                 SENATE
 1st Session                                                     112-47

======================================================================



 
                       CLEAN ENERGY FINANCING ACT

                                _______
                                

  August 30 (legislative day, August 2), 2011.--Ordered to be printed

  Filed, under authority of the order of the Senate of August 2, 2011

                                _______
                                

   Mr. Bingaman, from the Committee on Energy and Natural Resources, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 1510]

    The Committee on Energy and Natural Resources, having 
considered the same, reports favorably thereon, an original 
bill (S. 1510) to promote the domestic developmemt and 
deployment of clean energy technologies, and for other 
purposes, and recommends that the bill do pass.

                         Purpose of the Measure

    The purpose of the measure is to promote the domestic 
development and deployment of clean energy technologies 
required for the 21st century through the improvement of 
existing programs and the establishment of a Clean Energy 
Deployment Administration. The Administration will provide for 
an attractive investment environment through partnership with 
and support of the private capital market in order to promote 
access to affordable financing for accelerated and widespread 
deployment of--
          (1) clean energy technologies, especially 
        breakthrough technologies;
          (2) advanced or enabling energy infrastructure 
        technologies;
          (3) energy efficiency and clean distributed energy 
        technologies in residential, commercial, and industrial 
        applications, including end-use efficiency in 
        buildings; and
          (4) manufacturing technologies for any of the 
        technologies or applications described in this section.

                          Background and Need

    Since the passage of the loan guarantee program in the 
Energy Policy Act of 2005, the Committee has held a number of 
hearings on the challenges of achieving sufficient financing 
for commercial deployment of clean energy technologies. In 
Committee hearings on March 7, 2007, July 15, 2008, and 
February 12, 2009, and May 3, 2011, witnesses involved in 
technology development, venture capital, project finance, and 
banking have pointed to a ``valley of death'' that has 
obstructed the transition from the laboratory or pilot stage to 
commercial deployment for promising new technologies.
    As those witnesses testified, the primary impediment to 
commercial deployment of earlier-stage energy technologies is 
the difficulty in obtaining financing, which results both from 
the high capital cost of commercial-scale energy projects and 
the technological and commercial risk inherent in new 
technologies. Tens or hundreds of millions of dollars are 
required to build even moderate-sized electricity generation or 
to achieve economies of scale in manufacturing of products like 
solar photovoltaics or advanced batteries. These sums are 
unavailable from even the more risk-tolerant investors, leaving 
borrowing as the only option for project developers. According 
to a recent report by Bloomberg New Energy Finance, financing 
at this scale is typically unavailable to borrowers:

          ``While venture capital firms or corporate research & 
        development departments will back initial research 
        through pilot-scale installations, they rarely have the 
        financial resources to deploy a 20 MW solar thermal 
        electric generation demonstration project or a 50 
        million gallon cellulosic ethanol production facility.
          ``Yet project finance capital for plants this size 
        and larger can be routinely secured from major 
        financial institutions for projects that deploy proven 
        technologies. As the old adage among entrepreneurs 
        goes, banks will always be the first in line to finance 
        your second project. This so-called Commercialization 
        `Valley of Death' located somewhere between Silicon 
        Valley VCs [venture capitalists] and Wall Street banks 
        poses a long-standing challenge to the clean energy 
        sector, just as it has to other capital-intensive 
        industries in the past.''

    This gap remains a serious impediment to domestic 
commercialization of new, clean energy technologies. As several 
witnesses testified at a March 17, 2011, hearing on global 
investment trends in clean energy technology, our global 
competitors are striving to address this gap and the lack of 
progress here is potentially leaving the U.S. at a competitive 
disadvantage in this growing global market.

                          Legislative History

    In the 110th Congress, bills were introduced by Chairman 
Bingaman (S. 3233) and then-Ranking Member Domenici (S. 2730) 
to address this deficiency. The bills differed in both 
structure and focus but shared an objective to augment the 
financing for clean energy technology deployment to address the 
competitiveness gap with other countries. In the Committee 
hearing on the bills, conducted July 15, 2008, both bills 
received praise from the witnesses but there was a consistent 
call for developing a unified approach. (S. Hrg. 110-573.)
    As a result, Senators Bingaman and Murkowski introduced a 
bill in the 111th Congress to create a Clean Energy Deployment 
Administration, S. 949, which was cosponsored by Senators 
Dorgan, Shaheen, Voinovich, Stabenow, Lugar, and Burr. 
Following a legislative hearing on April 28, 2009 (S. Hrg. 111-
51), the measure was included as title I, subtitle A, of S. 
1462, the American Clean Energy Leadership Act of 2009, which 
was reported out of Committee on a vote of 15 to 8. However, 
that bill did not receive subsequent floor consideration.
    The Clean Energy Financing Act of 2011 constitutes a 
reintroduction and refinement of the Committee-reported product 
from the 110th Congress. A full Committee hearing on the 
measure as it was incorporated in S. 1462 was conducted on May 
3, 2011. (S. Hrg. 112-21.) Related testimony was also taken in 
a full Committee hearing on global investment in clean energy 
on March 17, 2011. (S. Hrg. 112-52.)
    The Committee marked up the measure in open business 
meetings on May 26 and July 14, 2011, the Committee ordered the 
legislation, as amended, favorably reported as an original 
bill.

                        Committee Recommendation

    The Senate Committee on Energy and Natural Resources, in 
open business session on July 14, by majority voice vote of a 
quorum present, recommends that the Senate pass an original 
bill, as described herein. Senators Barrasso, Coats, Hoeven, 
and Portman asked to be recorded as voting ``no.''

                      Section-by-Section Analysis

    Section 1 provides a short title.
    Section 2 states the purpose of the bill.
    Section 3 defines terms used in the bill. The Committee 
notes that although the three parts of the definition of 
``Clean Energy Technology'' under section 3(6) are disjunctive, 
they are all important components of the definition and should 
all be factored in when comparing the relative merits of 
proposals. So, while the individual components should be read 
broadly--for example, pipelines that replace freight hauling 
may qualify as a ``clean energy technology'' if the pipeline 
reduces the need for additional energy supplies by transporting 
energy with greater effectiveness--determinations to compare 
and prioritize projects should take into account all facets of 
the definition.
    Section 4 establishes the ``Clean Energy Investment Fund'' 
within the Treasury for the use of the Secretary and the 
Administrator to carry out the activities of the Administration 
and title XVII of the Energy Policy Act of 2005 in the period 
before the transfer of functions under section 9. The Fund is 
intended to make the program stable over the long term and 
limit the need for annual appropriations. Subsection (b)(1) 
makes amounts in the Fund available without fiscal year 
limitation. Subsection (b)(2)(A) allows amounts collected that 
are not associated with the cash flows of lending activities, 
as defined under the Federal Credit Reform Act of 1990 (FCRA), 
to be used to support activities defined in the Act. Subsection 
(b)(2)(B) allows up to 1.5 percent of the Fund balances in any 
given fiscal year to be used for program expenses.
    Section 5 makes a number of revisions to the loan guarantee 
program established by title XVII of the Energy Policy Act of 
2005.
    Subsection (a) amends the definition of ``commercial 
technology'' in section 1701(1) of the Energy Policy Act of 
2005 to make it clear that a demonstration project or provision 
of a loan guarantee to a commercial-scale project does not 
foreclose a loan guarantee to another project or a similar 
technology.
    Subsection (b) amends section 1702(b) of the Energy Policy 
Act of 2005 to allow use of balances in the Fund to cover the 
cost of a loan guarantee, and to allow any combination of 
balances in the revolving fund or payments by the borrower to 
cover the cost of a loan guarantee.
    Subsection (c) amends section 1702(h) of the Energy Policy 
Act of 2005 to provide discretion to the Secretary to adjust 
the amount or manner of collection of fees in order to allow 
for broader availability of loan guarantees. Section 1702(h)(4) 
gives the Secretary discretion to waive requirements for an 
initial credit report from an applicant if it will not 
materially aid the process of determining the risks or the 
costs to the applicant of the support. In such a circumstance, 
the credit report may be an unnecessary added cost that would 
only serve to disadvantage smaller companies while not 
providing any material security to the taxpayer.
    Subsection (d) adds a new subsection (k) to section 1702 of 
the Energy Policy Act of 2005. The new subsection instructs the 
Secretary to consolidate internal and interagency reviews, such 
as environmental, credit, or due diligence reviews, to the 
maximum extent consistent with sound business practices, with a 
target completion of processing within 6 months of submission 
of a completed application. It also adds a new subsection (l) 
to give the Secretary additional flexibility in the retention 
of professional advisors to aid in the administration of the 
program, and to require applicants to pay for the expenses of 
those advisors. New subsection (m) is also added to clarify 
that a single project may encompass more than one noncontiguous 
sites, such as in distributed power generation.
    Subsection (e) adds a new subsection (n) to section 1702 of 
the Energy Policy Act of 2005. The subsection creates new 
requirements for documentation of risk estimates in the case of 
a loan guarantee in excess of $1,000,000,000 where the borrower 
is providing a payment for the cost of the guarantee.
    Subsection (f) amends 1703(b)(4) of the Energy Policy Act 
of 2005 to clarify several related activities that may receive 
loan guarantees within the previously authorized category of 
``advanced nuclear energy facilities,'' but only if additional 
loan volume authority is provided in an appropriations act 
enacted after July 1, 2011.
    Subsection (g) amends section 1705(c) of the Energy Policy 
Act of 2005 to expand the application of the wage requirements 
to all of title XVII.
    Section 6 requires the Secretary, after consultation with 
the Energy Technology Advisory Council, to develop goals for 
the deployment of clean energy technologies and translate the 
goals into short and long-term numerical targets for technology 
deployment in order to allow the performance of the agency to 
be judged. Subsection (b) directs the Secretary to revise the 
goals established under subsection (a), from time to time as 
appropriate, to account for advances in technology and changes 
in energy policy.
    Section 7(a)(1) establishes the Clean Energy Deployment 
Administration (Administration) within the Department of 
Energy, under the direction of an administrator and a board of 
directors. Paragraph (2) provides the Administration 
substantial independence within the Department. Paragraph 
(2)(A) exempts the Administration from line reporting authority 
within the Department, and subparagraph (B) exempts it from the 
Secretary reorganization authority under section 643 of the 
Department of Energy Organization Act. Subparagraph (C) creates 
a new Inspector General for the Administration.
    Subsection (b) creates the position of Administrator to 
direct the Administration and sets out the duties of the 
Administrator. Among other things, subsection (b)(2) directs 
the Administrator to enhance, but not displace, private 
markets, and to promote a self-sustaining portfolio of 
investments. Among the duties of the Administrator is to ensure 
supported projects are superior to existing commercial deployed 
technologies on a net greenhouse gas emissions basis. This 
comparison is to the general status quo, as opposed to 
comparing, for example, a new solar manufacturing project to 
deployed solar panels. The Administrator is also directed to 
create a methodology for assessing the technologies to allow 
for a dollar efficiency comparison of proposed projects across 
the three criteria named in the definition of clean energy 
technology.
    Subsection (c) creates a Board of Directors to oversee the 
Administration.
    Subsection (d) creates an Energy Technology Advisory 
Council to advise the Administration on technical matters and 
consult on the goals and project selection methodology.
    Subsection (e) provides the staffing authorities of the 
Administrator.
    Section 8 describes the Administration's functions. 
Subsection (a)(1)(A) creates a direct support unit to issue 
loans, loan guarantees, letters of credit, insurance products, 
or other financial instruments to projects employing clean 
energy technologies. Subparagraph (B) establishes criteria for 
awarding support to projects. Subparagraph (C) establishes how 
the Administration is to account for risk in pursuing 
investments. The expected loan loss reserve provides an 
internal mechanism for balancing risks and returns in the 
portfolio of investments by the Administration. Although all of 
the funds in the Clean Energy Investment Fund are available for 
support activities, the loan loss reserve allows for the 
establishment of lending targets that will meet the statutory 
goals and guide the collection of fees or other compensation in 
order to allow for the long-term financial self-sufficiency of 
the Administration. This subparagraph also mandates the use of 
portfolio investment approach so that support to less proven 
technologies, with more uncertain return profiles, can be 
facilitated by balancing those investments with investments in 
more stable or near-term projects. Subparagraph (D) directs the 
Administration to consolidate internal reviews and to the 
maximum extent practicable avoid subsequent reviews outside of 
the agency, in order to provide a predictable timeline to 
applicants and minimize business uncertainty associated with 
reviews that take longer than is typical in the private sector. 
Subparagraph (E) applies the prevailing wage standards of the 
Davis-Bacon Act to direct support activities.
    Subsection (a)(2) creates an indirect support unit to focus 
on financial products designed to leverage private sector 
participation in providing for widespread deployment of clean 
energy technologies, including related manufacturing and 
distributed energy technologies. This unit will support 
financial products for the deployment of clean energy 
technologies through facilitating development of private debt 
or aggregation of debt into more marketable products. 
Subparagraph (B) gives particular guidance to develop the 
financial support structures necessary to achieve widespread, 
affordable financing for clean energy technology deployments on 
a municipal, industrial, residential, and commercial scale. 
This includes developing products that will facilitate such 
arrangements as property-assessed clean energy bonds or on-bill 
financing through utilities. Subparagraph (D) allows the 
Administrator to establish classifications and pricing 
structures for sellers or services of clean energy technology-
related debt so that transactions through such partners will be 
transparent and efficient. Subparagraph (E) instructs the 
Administrator to establish criteria and guidelines to allow 
private sector debt originators to determine the eligibility of 
new debt for aggregation or support, to the maximum extent 
practicable. Subparagraph (F) allows the Administration to 
issue securities based on the debt it holds, either through 
acquisition or issuance. Subparagraph (G) provides the guiding 
objectives of the operations authorized by subparagraph (F).
    Subsection (b)(1) allows the Secretary to delegate to the 
Administrator the management of other programs authorized by 
law, for administration consistent with the provisions of this 
Act. Subsection (b)(3) creates a low-interest rate program 
(other fees may be charged) for lending to electric and natural 
gas utilities for energy efficiency projects within their 
service area.
    Section 9(a) defines the conditions for a transfer of 
functions of the title XVII loan guarantee program and 
authority over the Clean Energy Investment Fund. Rights and 
obligations of parties to predecessor programs are not affected 
and impacts on applicants to those programs should be 
minimized. Effective upon enactment, the Administrator may use 
up to 1.5 percent of amounts in the Fund for expenses of the 
Administration. It is the sense of the Senate that an initial 
capitalization of $10,000,000,000 in the Fund is necessary and 
that amount should be offset to ensure no net increase in the 
national debt.
    Subsection (b) makes clear that all liabilities incurred by 
the Administration are to be handled in accordance with the 
FCRA and discharged from the appropriate credit account or the 
Fund, as appropriate.
    Subsection (c) sets out the treatment of fees, distinct 
from FCRA-associated costs and cash flows, and allows them to 
be retained in the fund for further use. The Administration is 
to generally seek to collect compensation in accordance with 
commercial rates, in order to avoid competing with private 
capital, and consistent with the objective to supplement, 
rather than supplant private capital. The Administration is to 
reduce, to the extent compatible with sound business practices, 
the fees charged for breakthrough technologies in order to 
encourage the development of those technologies. In order to 
compensate the Fund for reduced fees or initial subsidies of 
technologies, the Administration may use alternative fee 
arrangements as described in (c)(4) in lieu of cash 
transactions in order to sufficiently compensate the fund for 
risks.
    Subsection (d) clarifies further that costs as defined 
under FCRA are treated according to the requirements of FCRA.
    Section 10 contains general authorities governing the 
operation of the Administration, including procurement 
authority, reporting, and third-party oversight.
    Section 11 adds a subsection (o) to 1702 of the Energy 
Policy Act of 2005 to add a special reporting requirement for a 
project where 270 days have passed since the application was 
selected for term sheet negotiation and no final decision has 
been made. The report shall contain information on the current 
status of the application and information on the reason for any 
delay.
    Section 12 adds substitute natural gas produced from a 
solid feedstock as a new technology category eligible for loan 
guarantees under 1703(b) of the Energy Policy Act of 2005.

                   Cost and Budgetary Considerations

    The following estimate of costs of this measure has been 
provided by the Congressional Budget Office:

Clean Energy Financing Act of 2011

    Summary: This legislation would establish the Clean Energy 
Deployment Administration (CEDA) within the Department of 
Energy (DOE) and authorize that new agency to provide various 
forms of financial assistance for clean energy projects 
developed by nonfederal entities. CEDA's financial liabilities 
would be limited to the amounts available in a newly created 
Clean Energy Investment Fund, which would consist of federal 
appropriations and income from certain fees. Finally, the bill 
would modify some of the terms and procedures governing DOE's 
Innovative Technology Loan Guarantee Program, which was 
established by title 17 of the Energy Policy Act of 2005.
    CBO estimates that implementing this bill would cost $1.1 
billion over the 2012-2016 period, assuming appropriation of 
the necessary amounts. Pay-as-you-go procedures apply to this 
legislation because it would affect net direct spending. 
However, CBO estimates that such net spending would be 
negligible over the 2012-2021 period. Enacting this bill would 
not affect revenues.
    The bill contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA).
    Estimated cost to the Federal Government: The estimated 
budgetary impact of this legislation is shown in the following 
table. The cost of this legislation falls within budget 
function 270 (energy).

----------------------------------------------------------------------------------------------------------------
                                                                 By fiscal year, in millions of dollars--
                                                         -------------------------------------------------------
                                                            2012     2013     2014     2015     2016   2012-2016
----------------------------------------------------------------------------------------------------------------
                                  CHANGES IN SPENDING SUBJECT TO APPROPRIATION

Estimated Authorization Level...........................       15      100      475      975      975     2,540
Estimated Outlays.......................................       13       50      150      350      550     1,113
----------------------------------------------------------------------------------------------------------------

    Basis of estimate: For this estimate, CBO assumes that the 
legislation will be enacted near the end of fiscal year 2011 
and the necessary amounts will be appropriated for each year. 
Outlays are estimated to occur at historical rates for similar 
activities.

Clean Energy Deployment Administration

    This bill would expand the scope of federal financial 
assistance for clean energy projects relative to existing law. 
CEDA would be authorized to provide direct loans, loan 
guarantees, letters of credit, insurance, and other forms of 
credit enhancement for clean energy projects. Such assistance 
would be available for investments in the energy, 
transportation, manufacturing, commodities, residential, 
commercial, municipal, and other sectors of the economy. This 
assistance would supplement DOE's existing credit programs for 
energy and automotive projects that use advanced technologies 
and meet certain environmental emissions standards. Although 
the legislation would express a sense of the Senate that the 
initial funding for CEDA's activities should total $10 billion, 
the figures in this analysis reflect CBO's estimate of CEDA's 
likely obligations over the next five years.
    CEDA's debt-related transactions would be subject to the 
Federal Credit Reform Act of 1990 (FCRA), which requires 
appropriations for subsidy costs in advance of commitments for 
direct loans and loan guarantees. Under that act, the subsidy 
cost is the estimated long-term cost to the government of the 
transactions (excluding administrative expenses), calculated on 
a present-value basis. CEDA's noncredit-related transactions 
probably would be recorded in the budget on a cash basis.
    CBO expects that CEDA's activities would ramp up slowly 
because of the time needed to issue guidelines, solicit 
applications, and conduct the necessary financial and 
environmental assessments of potential projects. The amounts 
spent for subsidies and other forms of assistance would depend 
on several factors, including investment decisions made by 
nonfederal entities in response to market conditions. Based on 
federal and industry projections of capital spending over the 
next few years for renewable energy and other eligible sectors, 
CB0 estimates that obligations for CEDA's administrative 
expenses and credit assistance would total about $2.5 billion 
over the 2012-2016 period, with outlays totaling about $1.1 
billion by 2016. That estimate is similar in scale to the 
volume and cost of loans guaranteed by DOE for renewable energy 
and electric transmission projects under a temporary program 
funded by the American Recovery and Reinvestment Act (ARRA).\1\
---------------------------------------------------------------------------
    \1\As of August 11, 2011, DOE's title 17 loan guarantee program had 
given conditional or final approval to guarantees valued at about $19 
billion under a three-year initiative funded by ARRA. According to the 
President's budget request for fiscal year 2012, the subsidy rates for 
most of those projects are projected to range from 10 percent to 15 
percent, indicating that this credit assistance would cost about $2.4 
billion if all of the projects are approved before the guarantee 
authority expires on September 30, 2011.
---------------------------------------------------------------------------
    Finally, the legislation would authorize CEDA to collect 
fees from firms participating in its financial assistance 
efforts to cover costs associated with its operations. Any fees 
collected for loans or loan guarantees would be deposited in 
the appropriate FCRA account and would be contingent on the 
enactment of appropriation laws authorizing that assistance. 
Fees assessed for noncredit activities would affect direct 
spending because they could be collected and spent without 
further appropriation action. CB0 estimates that such fees 
would have a negligible effect on net direct spending over the 
2012-2021 period because the income from the fees would be 
spent for program activities.

DOE's Title 17 Loan Guarantee Program

    Other provisions in this legislation would modify the 
eligibility criteria and administrative procedures governing 
DOE's existing title 17 loan guarantee program.
    CB0 estimates that those changes would increase outlays by 
about $20 million over the 2012-2016 period.
    Under this bill, DOE could guarantee debt for new segments 
of the nuclear power industry. Based on publicly available 
information, CB0 estimates that the types of projects 
authorized by the bill--such as facilities to manufacture 
components of nuclear power plants and modular nuclear power 
plants--would cost hundreds of millions of dollars to build. 
While enacting this bill would significantly increase the 
volume of loans eligible for federal guarantees, CB0 expects 
that most of that increase would occur after 2016 because of 
the long lead times associated with the construction of new 
nuclear power plants and the development of new technologies. 
For this estimate, CB0 assumes that DOE would guarantee an 
additional $500 million over the next five years for newly 
eligible projects and that most of the outlays for the subsidy 
cost of the guarantees would occur after 2016.
    Pay-as-you-go considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. This legislation would affect direct spending, but 
CB0 estimates that such effects would be negligible for each 
year and in total over the 2011-2021 period because fees 
collected under the bill would be spent, producing no net 
impact over time.
    Intergovernmental and private-sector impact: The bill 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would impose no costs on state, local, or 
tribal governments.
    Estimate prepared by: Federal costs: Kathleen Gramp; Impact 
on state, local, and tribal governments: Ryan Miller; Impact on 
the private sector: Amy Petz.
    Estimate approved by: Peter H. Fontaine, Assistant Director 
for Budget Analysis.

                      Regulatory Impact Evaluation

    In compliance with paragraph 11(b) of Rule XXVI of the 
Standing Rules of the Senate, the Committee makes the following 
evaluation of the regulatory impact which would be incurred in 
carrying out the Clean Energy Financing Act of 2011.
    The bill is not a regulatory measure in the sense of 
imposing Government established standards or significant 
economic responsibilities on private individuals and 
businesses, but rather providing financial support to private 
industry that may be voluntarily applied for.
    No personal information would be collected in administering 
programs authorized under the bill. Therefore, there would be 
no impact on personal privacy.
    While an applicant to the programs authorized in the 
measure will have to submit substantial paperwork through the 
application process, no additional paperwork would be required 
of any entity or person that is not an applicant for financial 
assistance under the program.

                   Congressionally Directed Spending

    The bill, as reported, does not contain any congressionally 
directed spending items, limited tax benefits, or limited 
tariff benefits as defined in Rule XLIV of the Standing Rules 
of the Senate.

                        Executive Communications

    The testimony provided by the Department of Energy on May 
3, 2011, at a hearing on lending programs for clean energy 
technologies follows:

 Statement of Jonathan Silver, Executive Director of the Loan Programs 
                      Office, Department of Energy


                              introduction


    Chairman Bingaman, Ranking Member Murkowski, and members of 
the Committee, thank you for the opportunity to testify today. 
My name is Jonathan Silver, and I am the Executive Director of 
the Department of Energy's (DOE) Loan Programs Office (LPO). 
DOE's loan programs provide critical support for the nation's 
commercial deployment of clean energy, and the jobs and 
economic growth that come with it. I welcome the opportunity to 
discuss the programs with you and to highlight the significant 
accomplishments we have made to date.


     global and domestic context in which the loan programs operate


Clean Energy Opportunities
    Clean energy has an important role to play in America's 
future. The extent to which we can successfully deploy new, 
innovative clean energy technologies will have enormous 
implications for our future global competitiveness, energy 
security, economic recovery, and environment.
    America's future prosperity may well depend on our ability 
to play a leading role in the global transition to a clean 
energy future. Yet, to date, the United States has not 
demonstrated the sustained commitment to clean energy 
investment that is needed to remain competitive.
    Global competitiveness is not the only issue we face. The 
U.S. imports a significant portion of the petroleum it consumes 
from foreign sources, and this dependence on oil threatens our 
national security. Investments in domestic clean energy sources 
can help us regain control of our energy future and reduce oil 
consumption.
    Clean energy not only has long-term, strategic benefits, it 
is also an important part of our ongoing national economic 
recovery. Investments in clean energy projects, including power 
generating plants, manufacturing facilities, and energy 
efficiency activities, create new and good jobs--and they 
create them now.
Deployment: Importance, obstacles, and role for Government
    Much of the public discussion around clean energy focuses 
on research and development, which is crucial to reaching our 
long-term national energy goals. But near-term deployment of 
innovative, commercially-ready technologies is critical as 
well. Deploying energy technologies at scale immediately 
creates jobs, drives down unit costs, creates new supply 
chains, and incentivizes future research and development 
efforts. Innovation drives commercialization. But 
commercialization also drives innovation; it is a virtuous 
circle.
    Unfortunately, there are both cyclical and structural 
impediments to the rapid deployment of innovative technologies 
in the United States. The recent economic crisis slowed the 
pace of investment in clean energy projects. Traditional 
lenders pared back their appetite for risk, resulting in 
reduced liquidity in the market. The market for equity 
investments in renewable energy projects based on tax credit 
incentives--one of the principal sources of equity for 
renewables projects--shrank, as well.
    There also is an ongoing, systemic shortage of debt 
financing for certain types of innovative clean energy 
projects, stemming from the relatively high completion risks 
associated with such projects--principally technology risk and 
execution risk. Private sector lenders have limited capacity or 
appetite to underwrite such risks on their own, particularly 
because commercial-scale clean energy projects are capital-
intensive and often require loans with unusually long tenors. 
Thus, there is a ``valley-of-death'' in the clean energy 
technology development cycle, between the pilot-facility stage 
and commercial maturity, where companies find it difficult to 
obtain the financing needed to deploy their technologies at 
commercial scale--the very point at which they begin to have a 
meaningful impact on job-creation and the environment.
    The Department of Energy's loan programs were designed to 
address these impediments and fill this financing gap. Loan 
guarantees lower the cost of capital for projects utilizing 
innovative technologies, making them more competitive with 
conventional technologies, and thus more attractive to lenders 
and equity investors. Moreover, the programs leverage the 
Department's expertise in technical due diligence, which 
private sector lenders are often unwilling or unable to conduct 
themselves.
    Achieving our nation's clean energy goals--including global 
competitiveness and domestic energy security--will require the 
deployment of innovative technologies at a massive scale, and 
the DOE loan programs are an important element of federal 
policy to facilitate that deployment.


                    background on the loan programs


    As you know, the Loan Programs Office actually administers 
three separate programs: the Title XVII Section 1703 and 
Section 1705 loan guarantee programs, and the Advanced 
Technology Vehicles Manufacturing (ATVM) loan program.
    The 1703 program, created as part of the Energy Policy Act 
of 2005, supports the deployment of innovative technologies 
that avoid, reduce, or sequester greenhouse gas emissions. As a 
result of the recently-passed 2011 Continuing Resolution (FY11 
CR), the program currently has $18.5 billion in loan guarantee 
authority for nuclear power projects, $1.5 billion in authority 
for energy efficiency and renewable energy projects, $8 billion 
for advanced fossil projects, $4 billion for front-end nuclear 
projects, and $2 billion in mixed authority. In addition, and 
for the first time, the 1703 program, historically a ``self 
pay'' credit subsidy program, now has $170 million in 
appropriated credit subsidy, which will support a small number 
of loan guarantees for energy efficiency and renewable energy 
projects.
    The Section 1705 program was created as part of the 
American Recovery and Reinvestment Act of 2009 (Recovery Act), 
to jump-start the country's clean energy sector by supporting 
projects that had difficulty securing financing in a tight 
credit market. The 1705 program has different objectives than 
1703 and somewhat different programmatic features. Most 
notably, under 1705, the credit subsidy costs associated with 
the loan guarantees are paid through funds appropriated by 
Congress (though applicants still must pay application and 
other administrative fees). Additionally, to qualify for 1705 
funding, projects must begin construction no later than 
September 30, 2011. DOE's authority to enter into loan 
guarantee agreements under 1705 expires on that date as well.
    The ATVM program issues loans in support of the development 
of advanced vehicle technologies to help achieve higher fuel 
efficiency standards and reduce the nation's dependence on oil. 
Congress funded this program with $7.5 billion in credit 
subsidy appropriations to support a maximum of $25 billion in 
loans.


                      success of the loan programs


    The Loan Programs Office has made great strides since this 
Administration took office two years ago. Between 2005, when 
the program began, and 2009, DOE did not issue a single loan or 
loan guarantee. Since March 2009, the Department has issued 
conditional commitments for loans or loan guarantees to 27 
projects, 16 of which have reached financial close--with more 
to follow soon.
    DOE has provided (or conditionally committed to provide) 
nearly $30 billion in financing to these 27 projects, which 
have total project costs of nearly $47 billion. The projects 
are spread across the country, and reflect an array of clean 
energy and automotive technologies, such as wind, solar, 
advanced biofuels, geothermal, transmission, battery storage, 
and nuclear. These projects include the world's largest wind-
farm; two of the world's largest concentrated solar power 
facilities; the first nuclear power plant to begin construction 
in the United States in the last three decades; the world's 
first flywheel energy storage plant; and a biodiesel refinery 
that will triple the amount of biodiesel produced in the United 
States.
    Project sponsors estimate these 27 projects will create or 
save over 61,000 jobs, including construction and operating 
jobs.\1\ Cumulatively, they will generate nearly 29 million MWh 
of clean energy each year--enough to power over two million 
households, or approximately the same number of households in 
the states of Kentucky and Wyoming combined.\2\ And they will 
avoid over 16 million tons of CO2 annually--more 
than is produced by all of the approximately three million 
registered vehicles in Alaska and Utah.\3\
---------------------------------------------------------------------------
    \1\Breakdown by program is as follows (based on Sponsor estimates): 
1703: 5,210 construction, 1,340 permanent; 1705: 12,900 construction, 
3,470 permanent; ATVM: 5,700 created, 33,000 saved.
    \2\Sources: EIA 2005 Residential Energy Consumption Survey, Table 
US8; U.S. Census Bureau, American FactFinder, 2010.
    \3\Sources: U.S. Environmental Protection Agency, Emission Facts: 
Greenhouse Gas Emissions from a Typical Passenger Vehicle; U.S. 
Department of Transportation, Federal Highway Administration, Highway 
Statistics 2008, Table MV-1 (December 2009).
---------------------------------------------------------------------------
    Under the Section 1703 program, DOE has offered conditional 
commitments for four projects so far, including one nuclear 
power, one front end nuclear, and two energy efficiency 
projects, which amount to just over $10.6 billion in total 
government supported financing, including capitalized interest. 
Under 1705, DOE has issued conditional commitments to 18 
projects representing approximately $10.8 billion in financing, 
including capitalized interest. In addition, a significant 
number of projects are sufficiently far along in the due 
diligence process that we have issued a working draft term 
sheet and are in active negotiations with the applicants. LPO 
estimates that these projects, if they ultimately reach 
financial close, will utilize all of our remaining credit 
subsidy appropriations.
    While there has been significant interest in the 1705 
program, there has been little demand for renewables loan 
guarantees under the 1703 program. This may, in part, reflect 
the ability of certain renewable projects to qualify under both 
programs. But it may also reflect the fact that innovative 
clean energy companies--which tend to be smaller and have less 
capital--consider the 1703 program's self-pay credit subsidy 
cost requirement to be prohibitive. The new credit subsidy 
provided by the 2011 CR will allow the 1703 program to invest 
in a limited number of projects that may not have had the means 
to pay a fee to cover the subsidy cost up front.
    To date, DOE has committed and closed five ATVM loans, 
totaling over $8.3 billion, which will support advanced vehicle 
projects in eight states. We anticipate making a number of 
significant additional ATVM loan commitments in the coming 
months.


                       value of doe loan programs


    It is important to remember that the loan programs are not 
grant programs; LPO expects that the loans it provides or 
guarantees will be repaid. We review projects on a competitive 
basis, and we do not fund every eligible project. We ensure 
that the loans we support meet our statutory requirement of 
having a ``reasonable prospect of repayment.'' Every project 
that receives financing first goes through a rigorous 
financial, legal and technical review process--similar to, and 
in some ways more comprehensive than, what a private sector 
lender would conduct--before a single dollar of taxpayer money 
is put to work.
    Not surprisingly, this type of sophisticated review 
requires thousands of man-hours, which is costly. However, 
administrative costs associated with the Title XII programs, 
including personnel expenses, are required by Title XVII to be 
covered by fees paid by applicants.
    Moreover, the programs can efficiently and effectively 
leverage government resources to spur private-sector 
investment. A relatively small amount of appropriated credit 
subsidy can support a large amount of new private sector 
investment. Moreover, when a loan is fully repaid, the nation 
will have benefited from the incentivized private sector 
investment at relatively little cost to taxpayers.
    The potential benefits are great. The projects supported by 
the loan programs promote economic growth and job creation. 
Clean energy and automotive technology projects can create 
construction and permanent operating jobs. In addition, these 
projects help lower the delivered cost of renewable energy and 
contribute to the build-out of the domestic supply chain and 
manufacturing base that we will need to ``win'' the clean 
energy future.


                               conclusion


    In just two years, the Department's loan programs have 
begun to meet the expectations Congress had in creating and 
funding them. We are making a meaningful contribution to our 
national clean energy goals, and we look forward to continuing 
our progress.
    That said, it is important to recognize that programs such 
as ours represent only one of a variety of potential approaches 
to providing federal support for clean energy. While useful for 
certain types of projects, loan and loan guarantees are not 
appropriate for all types of clean energy projects.
    Moving forward, we must think about clean energy investment 
in a comprehensive manner, ensuring that limited resources are 
deployed in the most effective and efficient manner possible. 
Only then will we be able to create an environment where the 
private sector will invest in clean energy technologies at the 
scale needed to remain globally competitive, help secure our 
energy independence, and protect our environment.
    Thank you again for inviting me here today. I look forward 
to responding to your questions.

                        Changes in Existing Law

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
the bill, as ordered reported, are shown as follows (existing 
law proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                       ENERGY POLICY ACT OF 2005

                     Public Law 109-58, as amended

   AN ACT To ensure jobs for our future with secure, affordable, and 
                            reliable energy.

           TITLE XVII--INCENTIVES FOR INNOVATIVE TECHNOLOGIES

SEC. 1701. DEFINITIONS.

    In this title:
          (1) Commercial technology.--
                  (A) In general.--The term ``commercial 
                technology'' means a technology in general use 
                in the commercial marketplace.
                  [(B) Inclusions.--The term ``commercial 
                technology'' does not include a technology 
                solely by use of the technology in a 
                demonstration project funded by the 
                Department.]
                  (B) Exclusions.--The term ``commercial 
                technology does not include a technology if the 
                sole use of the technology is inconncection 
                with--
                          (i) a demonstration project; or
                          (ii) a project for which the 
                        Secretary approved a loan guarantee.
          (2) Cost.--The term ``cost'' has the meaning given 
        the term ``cost of a loan guarantee'' within the 
        meaning of section 502(5)(C) of the Federal Credit 
        Reform Act of 1990 (2 U.S.C. 661a(5)(C)).
          (3) Eligible project.--The term ``eligible project'' 
        means a project described in section 1703.
          (4) Guarantee.--
                  (A) In general.--The term ``guarantee'' has 
                the meaning given the term ``loan guarantee'' 
                in section 502 of the Federal Credit Reform Act 
                of 1990 (2 U.S.C. 661a).
                  [(B) Inclusion.--The term ``guarantee'' 
                includes a loan guarantee commitment (as 
                defined in section 502 of the Federal Credit 
                Reform Act of 1990 (2 U.S.C. 661a)).]
                  (B) Exclusion.--The term ``commercial 
                technology'' does not include a technology if 
                the sole use of the technology is in connection 
                with--
                          (i) a demonstration project; or
                          (ii) a project for which the 
                        Secretary approved a loan guarantee.
          (5) Obligation.--The term ``obligation'' means the 
        loan or other debt obligation that is guaranteed under 
        this section.

SEC. 1702. TERMS AND CONDITIONS.

    (a) In General.--Except for division C of Public Law 108-
324, the Secretary shall make guarantees under this or any 
other Act for projects on such terms and conditions as the 
Secretary determines, after consultation with the Secretary of 
the Treasury, only in accordance with this section.
    [(b) Specific Appropriation or Contribution.--No guarantee 
shall be made unless--
          [(1) an appropriation for the cost has been made; or
          [(2) the Secretary has received from the borrower a 
        payment in full for the cost of the obligation and 
        deposited the payment into the Treasury.]
    (b) Specific Appropriation or Contribution.--
          (1) In general.--No guarantee shall be made unless 
        sufficient amounts to account for the cost are 
        available--
                  (A) in unobligated balances within the Clean 
                Energy Investment Fund established by section 
                4(a) of the Clean Energy Financing Act of 2011;
                  (B) as a payment from the borrower and the 
                payment is deposited in the Clean Energy 
                Investment Fund; or
                  (C) in any combination of balances and 
                payments described in subparagraphs (A) and 
                (B), respectively.
          (2) Limitation.--The source of payments received from 
        a borrower under paragraph (1)(B) shall not be a loan 
        or other debt obligation that is made or guaranteed by 
        the Federal Government.

           *       *       *       *       *       *       *

    (h) Fees.--
          (1) In general.--The Secretary shall charge and 
        collect fees for guarantees in amounts the Secretary 
        determines are sufficient to cover applicable 
        administrative expenses.
          (2) Availability.--Fees collected under this 
        subsection shall--
                  (A) be deposited by the Secretary into the 
                Treasury; and
                  (B) remain available until expended, subject 
                to such other conditions as are contained in 
                annual appropriations Acts.
          (3) Adjustment.--The Secretary may adjust the amount 
        or manner of collection of fees under this title as the 
        Secretary determines is necessary to promote, to the 
        maximum extent practicable, eligible projects under 
        this title.
          (4) Credit report.--The Secretary may waive any 
        otherwise applicable requirement (including any 
        requirement described in part 609 of title 10, Code of 
        Federal Regulations (or successor regulations)) to 
        provide a third-party credit report if--
                  (A) the Secretary determines that a third-
                party credit rating of the applicant or project 
                is not relevant to the determination of the 
                credit risk of a project;
                  (B) the project costs are not projected to 
                exceed $100,000,000; and
                  (C) the applicant agrees to accept the credit 
                rating assigned to the applicant by the 
                Secretary.

           *       *       *       *       *       *       *

    (j) Full Faith and Credit.--The full faith and credit of 
the United States is pledged to the payment of all guarantees 
issued under this section with respect to principal and 
interest.
    (k) Accelerated Reviews.--To the maximum extent practicable 
and consistent with sound business practices, the Secretary 
shall seek to consolidate internal and interagency reviews of 
projects under this title such that final decisions on 
applications can generally be issued not later than 180 days 
after the date of submission of a completed application.
    (l) Professional Advisors.--The Secretary may--
          (1) retain agents and legal and other professional 
        advisors in connection with guarantees and related 
        activities authorized under this title;
          (2) require applicants for and recipients of loan 
        guarantees to pay all fees and expenses of the agents 
        and advisors; and
          (3) notwithstanding any other provision of law, 
        select such advisors in such manner and using such 
        procedures as the Secretary determines to be 
        appropriate to protect the interests of the United 
        States and achieve the purposes of this title.
    (m) Multiple Sites.--Notwithstanding any other provision of 
law (including section 609.12 of title 10, Code of Federal 
Regulations (or successor regulations)), an eligible project 
may be located on 2 or more noncontiguous sites in the United 
States.
    (n) Cost of Obligation.--If the borrower is providing a 
payment for the cost of a proposed loan guarantee and the 
guarantee amount is greater than $1,000,000,000, the Secretary 
shall determine the cost of the obligation on the basis of a 
project-specific financial risk assessment that--
          (1) includes a written explanation of any differences 
        between--
                  (A) the estimated probability of default, as 
                determined by the Secretary; and
                  (B) the estimated probability of default 
                contained in any credit assessment performed by 
                an independent rating agency;
          (2) includes a written explanation of any differences 
        between--
                  (A) the estimated value of the recovery in 
                the event of default, as determined by the 
                Secretary; and
                  (B) the estimated value of the recovery in 
                the event of default contained in any recovery 
                plan submitted by the borrower; and
          (3) is made available to the borrower for review and 
        comment prior to a final determination.
    (o) Reporting Requirement.--
          (1) In general.--If the Secretary fails to make a 
        final decision by the date that is 270 days after the 
        date on which the Secretary selects an application to 
        proceed to negotiations of terms and conditions for 
        issuance of a conditional commitment for a loan 
        guarantee application under this title, not later than 
        7 days after that date, and for every 90-day period 
        thereafter, the Secretary shall--
                  (A) prepare a status report for the period 
                covered by the report; and
                  (B) submit the status report to--
                          (i) the Committee on Energy and 
                        Natural Resources of the Senate; and
                          (ii) the Committee on Energy and 
                        Commerce of the House of 
                        Representatives.
          (2) Contents.--The status report described in 
        paragraph (1) shall contain--
                  (A) a description of each reason for the 
                delay of the application;
                  (B) the specific office within the loan 
                guarantee program, the Office of Management and 
                Budget, or other office within the 
                Administration that, for the period covering 
                the status report, has reviewed the 
                application; and
                  (C) a detailed schedule for completion of the 
                application review.

SEC. 1703. ELIGIBLE PROJECTS.

    (a) In General.--The Secretary may make guarantees under 
this section only for projects that--
          (1) avoid, reduce, or sequester air pollutants or 
        anthropogenic emissions of greenhouse gases; and
          (2) employ new or significantly improved technologies 
        as compared to commercial technologies in service in 
        the United States at the time the guarantee is issued.
    (b) Categories.--Projects from the following categories 
shall be eligible for a guarantee under this section:
          (1) Renewable energy systems.
          (2) Advanced fossil energy technology (including coal 
        gasification meeting the criteria in subsection (d)).
          (3) Hydrogen fuel cell technology for residential, 
        industrial, or transportation applications.
          (4) Advanced nuclear energy facilities (including 
        nuclear power parts, services, and fuel suppliers, and 
        small modular reactors, if additional loan volume 
        authority is provided for a project described in this 
        parenthetical in an appropriation Act enacted after 
        July 1, 2011).
          (5) Carbon capture and sequestration practices and 
        technologies, including agricultural and forestry 
        practices that store and sequester carbon.
          (6) Efficient electrical generation, transmission, 
        and distribution technologies.
          (7) Efficient end-use energy technologies.
          (8) Production facilities for fuel efficient 
        vehicles, including hybrid and advanced diesel 
        vehicles.
          (9) Pollution control equipment.
          (10) Refineries, meaning facilities at which crude 
        oil is refined into gasoline
          (11) Substitute natural gas production facilities, if 
        the gas is produced--
                  (A) from a solid feedstock through a 
                gasification process; and
                  (B) in a manner that captures, for storage or 
                beneficial use, at least 90 percent of the 
                carbon produced through the gasification 
                process.

           *       *       *       *       *       *       *


SEC. 1705. TEMPORARY PROGRAM FOR RAPID DEPLOYMENT OF RENEWABLE ENERGY 
                    AND ELECTRIC POWER TRANSMISSION PROJECTS.

    (a) In General.--Notwithstanding section 1703, the 
Secretary may make guarantees under this section only for the 
following categories of projects that commence construction not 
later than September 30, 2011:

           *       *       *       *       *       *       *

    (c) Wage Rate Requirements.--The Secretary shall require 
that each recipient of [support under this section] support 
under this title provide reasonable assurance that all laborers 
and mechanics employed in the performance of the project for 
which the assistance is provided, including those employed by 
contractors or subcontractors, will be paid wages at rates not 
less than those prevailing on similar work in the locality as 
determined by the Secretary of Labor in accordance with 
subchapter IV of chapter 31 of part A of subtitle II of title 
40, United States Code (commonly referred to as the ``Davis-
Bacon Act'').

           *       *       *       *       *       *       *


                     INSPECTOR GENERAL ACT OF 1978


                     Public Law 95-452, as amended


(5 U.S.C. App.)

           *       *       *       *       *       *       *



                              DEFINITIONS

    Sec. 12. As used in this Act--
          (1) the term ``head of the establishment'' means the 
        Secretary of Agriculture, Commerce, Defense, Education, 
        Energy, Health and Human Services, Housing and Urban 
        Development, the Interior, Labor, State, 
        Transportation, Homeland Security, or the Treasury; the 
        Attorney General; the Administrator of the Agency for 
        International Development, Environmental Protection, 
        General Services, National Aeronautics and Space, Small 
        Business, or Veterans' Affairs; the Director of the 
        Federal Emergency Management Agency, or the Office of 
        Personnel Management; the Chairman of the Nuclear 
        Regulatory Commission or the Railroad Retirement Board; 
        the Chairperson of the Thrift Depositor Protection 
        Oversight Board; the Chief Executive Officer of the 
        Corporation for National and Community Service; the 
        Administrator of the Community Development Financial 
        Institutions Fund; the chief executive officer of the 
        Resolution Trust Corporation; the Chairperson of the 
        Federal Deposit Insurance Corporation; the Commissioner 
        of Social Security, Social Security Administration; the 
        Director of the Federal Housing Finance Agency; the 
        Board of Directors of the Tennessee Valley Authority; 
        the President of the Export-Import Bank; the 
        Administrator of the Clean Energy Deployment 
        Administration; or the Federal Cochairpersons of the 
        Commissions established under section 15301 of title 
        40, United States Code, as the case may be;
          (2) the term ``establishment'' means the Department 
        of Agriculture, Commerce, Defense, Education, Energy, 
        Health and Human Services, Housing and Urban 
        Development, the Interior, Justice, Labor, State, 
        Transportation, Homeland Security, or the Treasury; the 
        Agency for International Development, the Community 
        Development Financial Institutions Fund, the 
        Environmental Protection Agency, the Federal Emergency 
        Management Agency, the General Services Administration, 
        the National Aeronautics and Space Administration, the 
        Nuclear Regulatory Commission, the Office of Personnel 
        Management, the Railroad Retirement Board, the 
        Resolution Trust Corporation, the Federal Deposit 
        Insurance Corporation, the Small Business 
        Administration, the Corporation for National and 
        Community Service, the Veterans' Administration, the 
        Social Security Administration, the Federal Housing 
        Finance Agency, the Tennessee Valley Authority, the 
        Export-Import Bank, the Clean Energy Deployment 
        Administration, or the Commissions established under 
        section 15301 of title 40, United States Code, as the 
        case may be;

           *       *       *       *       *       *       *


                                  
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