Dive Brief:
- The Department of Energy’s Loan Programs Office announced Thursday that it is close to finalizing a deal with Sunnova Energy International for a partial loan guarantee of up to $3 billion to make distributed energy resources such as rooftop solar and energy storage available to disadvantaged communities.
- Jigar Shah, director of the Loan Programs Office, or LPO, said in an interview that it’s the first time the office has provided a guarantee to a collection of small assets.
- DOE says that if the deal is finalized, it will enable Sunnova to provide loans for clean energy systems to as many as 115,000 homeowners in the U.S. through its 568-MW Project Hestia program.
Dive Insight:
In a release, Sunnova said that the company anticipates DOE’s guarantee would support up to $5 billion in loan originations. The deal, if finalized, would close in the second quarter of 2023. It would mark the first time that the LPO has guaranteed a collection of small assets, Shah said.
The LPO has provided loan guarantees before, but only to big solar and wind farms around a decade ago, he said. Previously, Shah said, the LPO hasn’t been equipped to help companies sell hundreds of small units, but a “careful reading of the regulations” and realization that the office was “artificially narrowing” its mandate changed the LPO’s approach.
“Congress gave us a pretty broad mandate to help American innovators and entrepreneurs commercialize their technology here in the States,” he said. “And I think we couldn't wrap our brain around that in 2009, so we put in rules for large projects. But today we’re able to broaden that mandate to include the full scope of what Congress intended.”
Shah said the Sunnova deal first took shape after he was appointed in 2021 and began calling energy CEOs to suggest they make use of the LPO.
“Some CEOs were polite and wished me well, but others actually started brainstorming,” he said. “In Sunnova's case, part of the conversation was around the fact that they had made a 10-year commitment to Puerto Rico, and they were getting a lot of pushback by the rating agencies.”
Despite good repayment histories from Sunnova’s Puerto Rico clients and data indicating higher repayment rates for energy-related loans versus credit card receivables and health care receivables, Shah said the ratings agencies had concerns about exposure to Puerto Rico.
“That led us on to this journey of, ‘Could our guarantee make this asset class more inclusive?’” he said.
A release from DOE states that the loan guarantee would support the Biden administration’s Justice40 goal of ensuring that at least 40% of the benefits from grants, programs and initiatives flow to disadvantaged communities by seeking to “increase customer origination in communities identified by DOE as disadvantaged.”
The deal was made possible by the Inflation Reduction Act, Shah said. Prior to the passage of the landmark legislation, the LPO had less than $3 billion of remaining loan authority for renewable and efficient energy programs, he said.
In addition, many programs were passed in the IRA for weatherization and heat pumps, Shah said.
“And what you see is that Sunnova is partnering with a lot of the state energy offices to identify customers who meet the 80% and 150% income thresholds, to make sure that they're getting access to all these new programs and are able to reduce their energy burden,” he said.
