Bipartisan US Senate bill sets up new financing agency for risky green energy technologies
The Clean Energy Deployment Administration is encouraged to back riskier technologies with a higher potential to address climate and energy security needs, the US Senate energy committee said. STOCKXPERT
US Senate Committee on Energy and Natural Resources senior leaders Sen. Jeff Bingaman (D-New Mexico) and Lisa Murkowski (R-Alaska) last week introduced a bipartisan bill that will create a new financial agency under the Energy department for funding “risky” green technologies.
In a statement, Bingaman, who chairs the committee, and Murkowski said the “21st Century Energy Technology Deployment Act” will address the “underinvestment” in new energy technologies.
“A leading cause of this underinvestment is the difficulty promising technologies face in securing sufficient financing to build projects, due to the risks lenders perceive in new and unfamiliar technologies. This results in high interest rates and a prohibitively high need for equity financing,” the statement read.
Under the introduced bill, a new financially-focused agency will be formed to perform and expand upon the existing loan guarantee program of the Department of Energy (DOE). It will be called the Clean Energy Deployment Administration or CEDA.
CEDA will manage a Clean Energy Investment Fund through which it will provide loans, loan guarantees, and other credit enhancements to support clean energy technologies. It will also provide secondary market support to develop products, such as clean energy-backed bonds that would allow less expensive lending in the private sector.
“The agency would also seek to accommodate riskier debt and thus provide a mechanism for deployment of the most innovative technologies,” the committee said.
In April, the New Energy Finance reported that new investment in clean energy in the first quarter of 2009 dropped 44% from the previous quarter, and 54% from the first quarter of 2008, at $13.3 billion. The financial crisis has also reportedly caused investors to be more selective in their portfolio, which is expected to weed out what are seen as less viable green technological applications.
On the other hand, in February, Energy Sec. Steven Chu admitted that the DOE’s loan application process for energy projects had taken too long, and that the department had not yet approved a single loan under the scheme since the Energy Policy Act of 2005 was passed. The Senate energy committee said the bill seeks to improve the DOE’s loan guarantee program.
“The agency is to use a portfolio investment approach in order to mitigate risk and is to try and become self-sustaining over the long term by balancing riskier investments with revenues from other services and less risky investments,” it added.
CEDA is seen to be an independent administration within DOE, like the Federal Energy Regulatory Commission. It would be governed by a board of directors and an administrator, all of whom would be appointed with the consent of the Senate.
“This bill will allow innovators to pursue promising new technologies by facilitating access to much-needed capital. It provides an opportunity to aggressively reduce our greenhouse gas emissions without imposing new mandates or regulatory burdens,” Sen. Murkowski said.
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Eric Dorente
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