DOE: Loan guarantee applications replete with transmission costs

Well over half of the applications received by the US Department of Energy’s loan guarantee program have included project costs for transmission, the executive director for DOE’s loan program said at a conference last week.

Two-thirds to 75% of the projects the DOE has looked at “from the renewable generation perspective” have included costs related to build some kind of connect to the transmission grid, Jonathan Silver said at the Platts Transmission Planning & Development Forum.

This rate of inclusion speaks to the significant need for analysis of how the transmission system will work as additional renewable capacity comes online, he added.

The DOE has three large transmission projects in the pipeline in various stages of due diligence, Silver said.

For projects to succeed through the loan guarantee program, ideally they would be fully designed, have an engineering, procurement and construction contract in place, and be part of the utility rate base or have a strong offtake agreement.

“Then of course we need to find a mechanism to ensure that the taxpayers can be reimbursed if there’s some reason the project is canceled during the construction period,” Silver added.

The DOE has closed two “transmission-related” transactions: a $343m loan guarantee for the ON Line project, a joint venture between Great Basin Transmission South and NV Energy (NYSE:NVE) to build a 500 kV AC transmission line in northern Nevada, also known as the SWIP, or Southwest Intertie Project; and a $70m loan guarantee to flywheel energy storage company Beacon Power.

“The larger vision is to finance clean, renewable projects and many of the geographies in which those projects are located, particularly large wind and large solar are not always near easy access to the transmission system,” Silver said.

The Energy Department has requested in the FY12 budget funds for a smart grid innovation hub, “which is essentially an opportunity to bring together in one location federal researchers, private sector innovators [and] utilities,” Silver said.

About Rosy Lum 525 Articles
Rosy Lum, Analyst for TransmissionHub, has been covering the U.S. energy industry since 2007. She began her career in energy journalism at SNL Financial, for which she established a New York news desk. She covered topics ranging from energy finance and renewable policies and incentives, to master limited partnerships and ETFs. Thereafter, she honed her energy and utility focus at the Financial Times' dealReporter, where she covered and broke oil and gas and utility mergers and acquisitions.