The loan program itself is not new — it was created with the passage of the Energy Policy Act of 2005. To date, two programs under the Department of Energy Loan Programs Office have funded projects: one that funds advanced vehicle technology made famous recently when Tesla Motors paid back its loan early, and Section 1705, which makes loans for renewable energy, electric transmission, and biofuels (including one of the largest wind farms in the world).
The part of the program that Secretary Moniz is pushing — Section 1703, an all-of-the-above effort to fund risky technologies to reduce carbon emissions — has essentially collected dust since 2005. Between 2008 and 2009, the $8 billion in loan-guarantee authority was first made available to fossil fuel companies, mainly to coal gasification plants and carbon capture and sequestration projects. No projects were funded. In 2010, two nuclear power projects received conditional loan approval. The Energy Department published a draft solicitation and plans to accept applications starting in the fall for loan outlay efforts to fossil fuel programs that reduce carbon emissions.
So what would those be?
- Carbon capture: keeping the carbon emissions as they are burned from escaping into the atmosphere by compressing emissions and storing the carbon permanently. Relying on this technology to cut carbon pollution poses feasibility and safety issues. Additionally, it is unclear if the coal industry is a serious market for the adoption of such technology given the popularity (and cheapness) of natural gas.
- Advanced resource development: improving the efficiency of, or reducing the emissions from, the extraction of fossil fuels. Until we stop all fossil fuel development in favor of renewable sources, makes some sense to make the process as efficient as possible. Dry fracking, coal gasification, and coal-bed methane recovery may reduce air pollution and emissions but would require significant advancements to become viable. “Associated gas production” could enable drillers to capture gas at the wellhead that would otherwise escape into the atmosphere as methane — or otherwise be “flared” or burned off wastefully. Additional technology or practices that prevent methane leakage throughout the transmission and distribution system would further cut down fugitive methane emissions.
- Low-carbon power systems: mitigating carbon emissions at power plants without having to separate the gas first, which is expensive and inefficient. The Energy Department listed several options for projects like this: coal or natural gas oxycombustion, chemical looping processes, hydrogen turbines, and synthesis gas, natural gas, or hydrogen based fuel cells.
- Efficiency improvements: utilizing the waste heat from fossil fuel-based energy production. If power plants can get more usable heat out of the fuel they use, then less emissions will result from the same amount of carbon-based fuel. Cogeneration, or combined heat and power, is already being adopted nationwide but improved technology that makes the process more efficient would be a welcome step to reducing emissions. Capturing the waste heat produced by normal industrial processes or adopting high-efficiency distributed power systems are also possibilities.
If it is mandatory that this money be spent on such fossil fuel project loans (rather than loans supporting cutting-edge renewable energy or battery technology), it does seem there are some options that cut emissions without chaining the future of energy to fossil fuels.
Most importantly, these investments should be applied to newer, already-existing fossil fuel plants, rather than used as an excuse to build additional carbon-fueled power plants. If the technology simply leads to more coal or natural gas plants that replace a possible renewable power plant, then the loan program’s purpose — reducing emissions — is at risk.
Does any of this sound like a “War on Coal”? Secretary Moniz said on Tuesday, “I think the issue is to prepare for the future — a future in which coal is in fact part of the mix.” Republican reaction has been indirect or nonexistent thus far.
Rep. Bill Cassidy (R-LA) told National Journal Daily, “If the administration is trying to ameliorate the negative impacts of the regulatory regime, that’s always good,” when asked about news of more advanced fossil fuel loans. According to National Journal, a spokeswoman for Energy and Commerce Chair Fred Upton (R-MI) was still extremely critical of the Energy Department loan guarantee program, referring to a “history of mismanagement, bankruptcies, and failure.” This is the same overall loan guarantee program contained in a bill passed by a Republican Congress and signed by President Bush, and also supported Tesla Motors, Solyndra, and dozens of other clean energy businesses. If Republicans support loan guarantees for high-risk fossil fuel programs, it makes it harder to explain the doctrinaire opposition to clean energy loans.