Handing Out $32 Billion in Cleantech Stimulus Grants a Slow Process for DOE

A billion-dollar private-public investment partnership for carbon sequestration, a $102 million in loan guarantees for  a geothermal power plant, $29 million for weatherization programs. One by one over the last several months the Department of Energy (DOE) has announced energy projects it is supporting thanks to funding made available from last year's mammoth economic stimulus package.

DOE is in charge of an enormous arsenal of financial firepower. For starters, it is responsible for doling out $32.7 billion in grants made available by the Recovery Act. Then, thanks to $4 billion in additional appropriations, it can leverage $32 billion worth of loan guarantees. There's also the advanced technology vehicle manufacturing program, backed by another $7.5 billion in cash meant to guarantee another $25 billion in loans.

But how have funds actually affected cleantech? Which sectors and companies have been the big winners? Did the funds just keep things moving slowly along, or have they made a real difference?

“Initially the stimulus announcements had a sort of unintended consequence,” said Maurice Gunderson, a senior partner  at CMEA Capital. “About a year ago these programs were announced but they weren’t quite running yet, so VCs [venture capitalists] were waiting to see who would get money and who wouldn’t—so there was the unintended consequence of slowing down private investment for awhile.

That slow-down has extended the wait-and-see mindset of private investors longer than most in the cleantech space would like. In February, smart grid trade group Gridwise Alliance sent formal complaint letters to Secretary of the Treasury Timothy Geithner and DOE General Counsel Scott Harris, stating: “A significant amount of time has passed without substantive progress being made towards the start of projects and the intended creation of jobs.”

The agency appears to have heard and responded to complaints—as of June 4, nearly 90 percent of the $32.7 billion in grant funds had been awarded, which has helped unlock more private capital as well.

“Awards have largely been made and the processes are understood now, so that has freed up a lot of capital from various sources,” Gunderson said.

Grants in Categories

By June 4th, 87 percent of the authorized grant money had been awarded, but still less than 15 percent of the funds (about $4.4 billion) had actually made their way into the hands of grantees.

The loan guarantee program is even further behind. Although announcements seem to be picking up some speed, since the program was launched in 2008, only 10 awards have been made, representing about $11 billion in loan guarantees, $10.3 billion of which is for three nuclear power plants.

DOE spokespeople have blamed growing pains. Since January 2009 the number of people working on the agency’s loan guarantee program has gone from 15 to 120. IRS issues have also intruded, like the question of whether or not to tax smart grid grants to municipal utilities. The decision was made in March that the funds should be tax-free. While the agency insists the kinks have been worked out, companies are still waiting for their checks.

The DOE funding breaks down like this: $16.7 billion for energy efficiency, renewable energy, and transportation; $6 billion for nuclear waste clean-up; $4.5 billion for electric grid modernization (smart grid); $3.4 billion for carbon capture and sequestration; and $2 billion for scientific innovation. 

Most cleantech sectors lie within the largest $16.7 billion piece of the pie, which DOE further divides into 23 different investment areas. It contains everything from geothermal technology to fuel cells to wind energy, with the largest amount of funding—$5 billion —earmarked for weatherization programs. The first weatherization funding announcement was made last week and included awards to 34 projects in 27 states, totaling just $29 million.