12/7 Event Recap: Discussion with Jigar Shah on Scaling America’s Clean Energy Infrastructure

The aircraft carrier in the center is not the federal government. The aircraft carrier in the center is the private sector. [LPO’s capabilities] are a bunch of tools that are actually like little tugboats that are pushing on the aircraft carrier… We need to know what the tugboats are supposed to do for the [private sector]. What risks are we supposed to mitigate for the private sector to take the kind of risks they want to take?

What we do is let the private sector tell us these are the sectors [they] care about and here are the approaches [they] like. So, the DOE can say ‘we did a big report and we think Betamax is better than VHS’, but if everyone picks VHS, they’re supporting VHS! Me coming to you and arguing about your decision and why you picked VHS and why Betamax is better isn’t a great use of our resources.

Some of the feedback I’m already getting from private sector folks is saying ‘Hey, instead of giving us that money as a 50/50 cost-share, it’d be great for you to give us that money as a floor price for hydrogen… we have an inkling that we can sell low carbon hydrogen for $7 dollars per kilogram, but we can't prove it… But if you guys provided us a floor price… we could actually get commercial debt… we think [LPO has the flexibility to provide this type of agreement].

It was very clear that we rushed the rulemaking process of the Loans Programs Office back in 2009 because we were asked to get the money out the door for shovel ready projects. So, part of what we’re doing at LPO now is getting ourselves setup for another rulemaking so we can do these kind things properly… tell people what your inner voice is saying to you about how we can do things better… this is the time to reflect all of your best ideas and the [changes that need to be made].

We’ve done well. We’ve got $35 billion or so of loans we’ve put out the door and we’ve had about $1 billion of losses, which is something that any commercial bank would be very proud of if that was their mandate.

The Office of Clean Energy Demonstrations (OCED) is really saying there are a lot of places where the underlying technology ‘We think it’s going to work, but we’re not sure it’s going to work’, and in those places, LPO really can’t provide money… the technology works or it doesn’t work, that’s something that has to be demonstrated first, and so that’s really where OCED differentiates itself from LPO.

Because of our process [applicants] are thinking more clearly about what the risks are and putting in place mitigants to make sure that those predictable sources of failure are protected against… as a result, we’re seeing a ton of third-party validation of our approach.